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

DBRS Limited (DBRS Morningstar) 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 as follows:

-- 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 performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since issuance. As of the February 2020 remittance, there had been a collateral reduction of 7.5% since issuance, with 85 of the original 88 loans remaining in the pool. Seven loans, representing 3.9% of the pool, were fully defeased. To date, there have been no losses to the pool.

Loans representing 95.5% of the pool reported YE2018 financials with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.67 times (x) and 10.5%, respectively. Fourteen out of the largest 15 loans reported YE2018 financials with a WA DSCR and WA debt yield of 1.60x and 10.0%, respectively, representing a WA cash flow improvement of 12.4% over the DBRS Morningstar net cash flow figures derived at issuance.

There are 18 loans, representing 20.3% of the pool, secured by hotel properties, including four loans in the top 15 in DoubleTree – Santa Ana, CA (Prospectus ID #6, 2.8% of the pool); One & Only Ocean Club (Prospectus ID #8, 2.7% of the pool); Ashford Portfolio – Palm Desert, CA (Prospectus ID #10, 2.1% of the pool); and Ashford Portfolio – Charlotte/Durham, NC (Prospectus ID #11, 1.8% of the pool). This concentration is particularly noteworthy given the recent impacts to lodging properties and the hospitality industry in general amid the ongoing Coronavirus Disease (COVID-19) outbreak that has halted both leisure and business travel around the globe. Hotel owners and industry data providers alike are reporting significant immediate impacts, with many properties fully empty as events and spring break plans were cancelled. DBRS Morningstar has requested specific information with regard to the collateral hotels backing the larger loans in this and other CMBS transactions and will be monitoring closely for developments. As information is received at the loan level, updated commentary will be provided on the DBRS Viewpoint platform, for which information has been provided, below.

As of the February 2020 remittance, five loans, representing 6.5% of the pool (including two loans in the top 15), were on the servicer’s watchlist and five loans, representing 6.8% of the pool, were in special servicing. There are two loans in the top 15 on the servicer’s watchlist in Summerhill Pointe Apartments (Prospectus ID #5, 3.3% of the pool) and 33 West 46th Street (Prospectus ID #12, 1.8% of the pool). The larger loan, Summerhill Pointe Apartments, is secured by a multifamily property in Las Vegas, Nevada. Cash flows have been stable from issuance, but the loan has been placed on the watchlist while the servicer resolves an outstanding issue with the insurance. The 33 West 46th Street loan is secured by an office property in Midtown Manhattan and is being monitored for occupancy and cash flow declines from issuance. As applicable, a probability of default multiplier was applied to watchlist and other loans exhibiting increased risks from issuance.

The largest loan in special servicing, VA Office Portfolio (Prospectus ID#3, 4.3% of the pool), is secured by three cross-collateralized and cross-defaulted office properties throughout Fairfax County, Virginia. The loan transferred to special servicing in December 2019 for maturity default, after its scheduled loan maturity date of November 2019. As of October 2018, the portfolio’s 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. Recent leasing across the portfolio has been moderately successful, increasing the portfolio’s leased rate to 78.5%. According to February 2020 servicer commentary, a refinance is in process. An updated appraisal has not been finalized to date. It is noteworthy that the loan amount as of February 2020 results in a trust exposure to the portfolio of $134 per square foot (psf), with recent sales reported at levels near $200 psf, suggesting the overall leverage is reasonable.

Two of the smaller loans in special servicing are secured by limited-service hotel properties in the Holiday Inn Express – Syracuse (Prospectus ID #53, 0.7% of the pool) and Homewood Suites Mobile (Prospectus ID #58, 0.6% of the pool). The Mobile property is performing in line with issuance expectations, with the servicer’s February 2020 commentary suggesting a full payoff is expected in the near term. For the Syracuse property, cash flows fell sharply in 2017, with the loan transferred to special servicing in September of that year and the servicer’s most-recent appraised value of $4.0 million as of January 2019 suggesting a significant loss severity can be expected at disposition.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

DBRS Morningstar provides 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)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
The principal methodology is the North American CMBS Surveillance Methodology, which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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