DBRS Morningstar Confirms All Ratings on MSJP 2015-HAUL Mortgage Trust, Removes Under Review with Developing Implications Status

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the following classes of the Commercial Mortgage Pass-Through Certificates issued by MSJP 2015-HAUL Mortgage Trust (the Issuer):

-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class B at AA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)

All trends are Stable. The ratings have been removed from Under Review with Developing Implications, where they were placed on November 14, 2019.

On March 1, 2020, DBRS Morningstar finalized its “North American Single-Asset/Single-Borrower Ratings Methodology” (the NA SASB Methodology), which presents the criteria for which ratings are assigned to and/or monitored for North American single-asset/single-borrower (NA SASB) transactions, large concentrated pools, rake certificates, ground lease transactions, and credit tenant lease transactions. For further information on the NA SASB Methodology, please see the press release dated March 1, 2020, on the DBRS Morningstar website at www.dbrsmorningstar.com.

Prior to the finalization of the NA SASB Methodology, the DBRS Morningstar ratings for the subject transaction and all other DBRS Morningstar-rated transactions subject to the methodology in question were previously placed Under Review with Developing Implications, as the proposed methodology changes were material.

The subject rating actions are the result of the application of the NA SASB Methodology in conjunction with the “North American CMBS Surveillance Methodology,” as applicable. Qualitative adjustments were made to the final loan-to-value (LTV) sizing benchmarks used for this rating analysis.

The loan is secured by the fee simple interest in a portfolio of 105 self-storage properties totaling 32,519 units and 2.7 million rentable square feet (sf). On a weighted-average (WA) basis across the portfolio, approximately 40.9% of the units are climate controlled. Owned and branded by U-Haul, the assets were constructed between 1902 and 2003 and have an average age of 47.8 years. The portfolio is well diversified and situated across 35 states. Texas holds the largest concentration in the portfolio, representing 11.5% of the total net rentable area (NRA), with larger properties in Austin, San Antonio, Spring, and Kingwood. New York has the second-largest concentration, representing 6.9% of the NRA, with larger properties in Queens, the Bronx, and Brooklyn. Pennsylvania, Ohio, and California round out the states with the largest concentration, representing 7.6%, 6.5%, and 4.3% of the NRA, respectively.

At issuance, the loan consisted of a $270.0 million senior loan, $170.0 million of which was securitized in this transaction and $100.0 million of which were pari passu notes held outside this trust and included in other multiborrower commercial mortgage-backed security (CMBS) transactions. The subject loan has a 20-year term and amortizes on a 20-year schedule. Principal will be applied to the nontrust companion loans before the trust notes. As such, the trust notes are interest only (IO) for the first 10 years of the loan term whereas the companion loans are scheduled to amortize to zero for the first 10 years of the loan term. In the next 10 years of the loan term, the trust notes are scheduled to amortize down to zero. Although the amortization will not initially pay down the trust-related notes and thus the trust certificates, the whole loan remains subject to a 20-year amortization schedule throughout the term and the trust notes and trust certificates benefit from the deleveraging.

The DBRS Morningstar net cash flow (NCF) derived at issuance was reanalyzed for the subject rating action to confirm its consistency with the “DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria.” The resulting NCF figure was $24.9 million and a cap rate of 8.5% was applied, resulting in a DBRS Morningstar Value of $293.0 million, a variance of -36.0% from the appraised value at issuance of $458.0 million. The DBRS Morningstar Value implies an LTV of 78.2% compared with the LTV of 50.0% on the appraised value at issuance. The NCF figure applied as part of the analysis represents a -14.6% variance from the Issuer’s NCF, primarily driven by storage income, other income, and operating expenses.

DBRS Morningstar applied a cap rate at the middle of the DBRS Morningstar Cap Rate Ranges for storage properties, reflecting the property ages, markets, and quality. In addition, the 8.5% cap rate DBRS Morningstar applied is above the implied cap rate of 6.3% based on the Issuer’s underwritten NCF and appraised value.

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.

Class X-A and Class X-B are 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 this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level 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:
All figures are in U.S. dollars unless otherwise noted.

The principal methodologies are the North American Single-Asset/Single-Borrower Ratings Methodology and 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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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