DBRS Confirms All Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2015-C21

DBRS Limited (DBRS) confirmed all classes of the Commercial Mortgage Pass-Through Certificates, Series 2015-C21 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C21 as follows:

-- 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 AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (sf)
-- Class PST at A (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class X-FG at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall performance of the transaction, which has generally remained in line with DBRS expectations since issuance. The collateral consists of 64 fixed-rate loans secured by 99 commercial properties, and as of the January 2019 remittance, there has been a collateral reduction of 2.8% since issuance. In addition, there are two loans, representing 2.7% of the pool, that are fully defeased. Of the 62 non-defeased loans remaining in the pool, 60 loans, representing 84.5% of the pool, are reporting year-end (YE) 2017 financials, with a weighted-average (WA) debt-service coverage ratio (DSCR) and debt yield of 1.89 times (x) and 10.5%, respectively, compared with the DBRS Term DSCR and Debt Yield derived at issuance of 1.70x and 9.0%, respectively. The 13 largest non-defeased or specially serviced loans reported a WA DSCR and debt yield of 2.03x and 10.6%, respectively, at YE2017, representing a WA NCF growth of 13.1% over the DBRS issuance figures.

As of the January 2019 remittance, there are 11 loans, representing 16.7% of the pool, on the servicer’s watchlist and one loan, representing 5.8% of the pool, in special servicing. Fontainebleau Park Plaza (Prospectus ID#5, 5.8% of the pool), was transferred to special servicing in January 2017 because of a dispute with the borrower regarding the administration of the lockbox and reimbursement of tenant improvement expenses for the property. As of the most recent rent roll on file with DBRS, dated January 2018, the property was 100% occupied, anchored by Walmart (48.0% of net rentable area (NRA)) through September 2034. The remaining tenant mix is largely composed of national chains. There are no tenants scheduled to roll until 2020 and the majority of tenants are in place on long term leases. Given the strength of the tenancy in place, as well as the most recent DSCR reported by the servicer of 1.94x, DBRS believes the overall risk to the trust for a loss with this loan is relatively minor. However, given the existence of a default that has been in place for two years, DBRS assumed a stressed scenario for this loan to increase the probability of default (POD) as part of this review. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

Of the 11 loans on the servicer’s watchlist, six loans (7.2% of the pool) were flagged for tenant rollover and performance-related issues. The largest of these loans, Briarwood Office (Prospectus ID#9, 3.0% of the pool), has been monitored for increased risk as the former second largest tenant, United Healthcare (22.2% of the NRA), vacated the property at the October 2017 lease expiry date. The space remained fully vacant until August 2018, when the servicer reported that a replacement tenant had been for a portion of the space. Based on an internet search, DBRS has confirmed that Novus Biologicals (14.0% of the NRA) officially took occupancy in November 2018. Lease terms are unknown and have been requested of the servicer. Although this development improves the near-term outlook for the property, the longer-term outlook remains strained as two tenants, representing 25.2% of the NRA, including the second largest tenant, recently announced plans to vacate the property in 2019, suggesting an occupancy rate for the property of 65.2%. As such, DBRS assumed a stressed cash flow scenario for this loan as part of this review, significantly increasing the POD. The loan has also been placed on the DBRS Hotlist.

Although not yet added to the servicer’s watchlist, the Stone Ridge Plaza (Prospectus ID#12, 2.2% of the pool) loan is being monitored on the DBRS Hotlist given the loan’s exposure to the Toys “R” Us (TRU) bankruptcy filing in 2018 that has resulted in a period of extended occupancy declines for the collateral property. The collateral for the loan is an anchored retail center located in Greece, New York, within the Rochester metropolitan statistical area. TRU previously occupied 26.4% of the NRA before vacating in April 2018, and its space remains unfilled. As of the July 2018 rent roll, the property was 68.0% occupied with an average rental rate of $16.57 per square foot. The property suffers from a below average configuration and the former TRU box is somewhat hidden from the main entrance to the property. Additionally, the property suffers from a mediocre tenant mix, particularly when compared with the Mall at Greece Ridge, which is just a mile west of the subject. The largest tenants at the collateral property are now RAC For Women (11.8% of the NRA, lease expires June 2025), Dollar Tree (7.3% of the NRA, lease expires June 2022) and Goodwill (5.6% of the NRA, lease expires December 2021). When the TRU store was closed at the subject, DBRS estimated an implied DSCR without TRU’s rent of approximately 1.05x, roughly in line with the annualized Q2 2018 DSCR of 1.09x. Based on the in-place coverage for this loan, the POD is significantly elevated from issuance levels.

Classes X-A, X-B, X-E and X-FG 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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Westfield Palm Desert Mall (7.4% of the pool)
-- Prospectus ID#5 – Fontainebleau Park Plaza (5.8% of the pool)
-- Prospectus ID#9 – Briarwood Office (3.0% of the pool) (DBRS Hotlist)
-- Prospectus ID#12 – Stone Ridge Plaza (2.2% of the pool) (DBRS Hotlist)
-- Prospectus ID#13 – WM Retail Portfolio (1.9% of the pool)

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 most outstanding CMBS transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on www.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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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.

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