DBRS Confirms Ratings of Morgan Stanley Bank of America Merrill Lynch Trust 2015-C20

DBRS Limited (DBRS) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C20 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C20:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class PST at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. At issuance, the collateral consisted of 88 fixed-rate loans secured by 102 commercial properties, with a trust balance of approximately $1.14 billion. Per the November 2018 remittance, 87 of the original 88 loans remain in the pool with a current trust balance of $1.10 million, representing a collateral reduction of 4.3%. To date, two loans (1.1% of the pool) have been fully defeased. Approximately 96.6% of the pool has reported year-end (YE) 2017 financials, and based on the most recent reporting, the pool reported a weighted-average (WA) debt-service coverage ratio (DSCR) and debt yield of 1.60x times (x) and 9.9%, respectively, compared with the DBRS Term DSCR and DBRS Debt Yield figures of 1.42x and 8.5% at issuance. Based on the same reporting, the top 15 loans (49.5% of the pool) reported a WA DSCR of 1.61x, compared to the WA DBRS Term DSCR of 1.40x, reflecting a 13.8% net cash flow growth over the DBRS issuance figures.

As of the November 2018 remittance, there are six loans (11.7% of the pool) on the servicer’s watchlist, four of which (7.2% of the pool) were flagged for cash flow declines. The largest of these loans, VA Office Portfolio (Prospectus ID#3, 4.3% of the pool) was flagged for a low DSCR, driven by increased vacancy. The collateral is secured by three Class B office properties located throughout Fairfax County, Virginia, all within 25 miles of Washington, D.C. As of October 2018, the portfolio’s overall occupancy rate had fallen from 84.1% at issuance to 69.9%, primarily stemming from a 26.4% increase in vacancy at the Reston Sunrise Plaza property. As of Q2 2018, the loan reported an annualized DSCR of 0.96x, compared to the DBRS Term DSCR of 1.12x. DBRS assumed a stressed cash flow scenario for the loan as part of this review to increase the probability of default and loss give default significantly and will continue to monitor the loan closely for developments. For further information, please see the DBRS loan commentary on the DBRS Viewpoint platform, for which information has been provided below.

There is also one loan in special servicing, representing 0.7% of the pool. The Holiday Inn Express – Syracuse (Prospectus ID#53) was transferred to special servicing in September 2017 for payment default. The loan is outstanding for all payments due since January 2018 and the servicer reports the borrower has not offered a viable workout solution since the loan’s transfer to special servicing. The servicer’s current strategy is to proceed with foreclosure and sell the asset once stabilized. Based on the as-is value of approximately $4.5 million for the property as shown in the May 2018 appraisal, DBRS expects the loss severity will be in excess of 65% at resolution.

Classes X-A, X-B, X-C, X-D, X-E and X-F are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#3 – VA Office Portfolio (4.3% of the pool balance)
-- Prospectus ID#6 – DoubleTree – Santa Ana (2.8% of the pool balance)
-- Prospectus ID#12 – 33 West 46th Street (1.7% of the pool balance)
-- Prospectus ID#15 – Acadia Apartments (1.6% of the pool balance)
-- Prospectus ID#53 – Holiday Inn Express Syracuse (0.7% of the pool balance)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance, which can be found on dbrs.com under Methodologies & Criteria. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.