DBRS Morningstar Confirms Ratings on CSAIL 2015-C4 Commercial Mortgage Trust, Discontinues Two Classes

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C4 issued by CSAIL 2015-C4 Commercial Mortgage Trust as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S 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 X-D at BBB (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (sf)
-- Class F at BB (low) (sf)
-- Class X-G at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

DBRS Morningstar also discontinued the ratings on Classes A-1 and A-2 as the classes have been fully repaid.

At issuance, the transaction consisted of 87 fixed-rate loans secured by 101 commercial and multifamily properties with a total trust balance of $939.6 million. Per the October 2020 remittance report, the trust balance totaled $870.4 million consisting of 84 loans secured by 98 commercial and multifamily properties, representing a 7.4% collateral reduction. Two loans were repaid at their respective loan maturity dates. One loan, Shoppes at Center Street, was liquidated from the trust in October 2020, resulting in a $1.6 million loss. DBRS Morningstar had projected the loan to liquidate from the trust at last review in December 2019, and the ultimate realized loss was in line with expectations.

The trust benefits from eight loans, representing 7.6% of the trust balance, being fully defeased. The remaining pool is relatively granular as the top 15 nondefeased loans represent 47.9% of the trust balance. The nondefeased loans had relatively low leverage at issuance with a weighted-average (WA) loan-to-value ratio (LTV) of 65.0% based on the appraised values. Additionally, the loans demonstrated strong cash flows based on the preceding year-end WA debt service coverage ratio (DSCR) of 1.94 times (x). The pool exhibits no near-term maturity risk as all loans mature in 2025. Hospitality and retail property types comprise 55.1% of the pool balance. While these property types have experienced the greatest immediate impact from the Coronavirus Disease (COVID-19) pandemic, the properties had a low WA LTV of 62.2% at issuance and a strong preceding year-end WA DSCR of 2.39x.

One loan, 120 NE 39th Street Miami (Prospectus ID#14–2.0% of the pool balance), is in special servicing after the single tenant defaulted on its lease. The subject loan is secured by a freestanding two-story 4,079-square-foot retail building in the Design District of Miami. The loan transferred to the special servicer in August 2020 for imminent monetary default after the single tenant, Sefano Ricci, missed its June 2020 lease payment. Per the October 2020 remittance report, the loan payments are more than 90 days delinquent and the borrower requested escrow reserves be used to bring the loan current. Stefano Ricci is a private family-owned Italian luxury lifestyle brand with four retail locations in the United States. A Real Deal article dated August 2020 noted the sponsor, Thor Equities, filed an eviction notice, which the tenant is contesting. The sponsor is marketing the property for lease with immediate availability. It should be noted the September 2020 rent roll showed the tenant paid an average base rent of $296 per square foot, and it could be a challenge to find a replacement tenant willing to pay a comparable rent. The loan was liquidated from the trust as part of the subject review with a modeled loss severity in excess of 25.0%.

DBRS Morningstar analyzed the larger loans secured by hospitality and retail property types given the greater impact on these properties from the coronavirus pandemic. The largest trust loan, Fairmont Orchid (Prospectus ID#1–12.9% of the pool balance), is secured by a full-service beach resort hotel totaling 540 keys on Big Island in Hawaii. Hotel operations ceased in March 2020 in response to the coronavirus pandemic but the borrower has been keeping loan payments current as of October 2020. The hotel has since reopened for business. DBRS Morningstar believes the sponsor is deeply committed to the collateral given the strong cash flow growth since issuance and the $122.5 million of equity injected at issuance. The second-largest loan, Arizona Grand Resort & Spa (Prospectus ID#2 –5.0% of the pool balance), is secured by a full-service resort with 643 guestroom suites and 52 private villas located in Phoenix. The trust holds a $45.0 million pari passu note while the controlling $50.0 million pari passu note was securitized in the CSAIL 2015-C3 transaction (also rated by DBRS Morningstar). The loan was briefly on the servicer’s watchlist after the sponsor requested relief as a result of the coronavirus pandemic but was later removed from the servicer’s watchlist and no relief was provided. Loan payments remained current as of October 2020 as the property has been operating with limited demand throughout the pandemic. DBRS Morningstar also believes the sponsor is committed to the collateral given the considerable amount of capital expenditures into the property since issuance and the strong cash flow growth prior to the coronavirus pandemic.

Per the October 2020 remittance report, there were 17 loans, representing 14.7% of the pool balance, on the servicer’s watchlist. While DBRS Morningstar believes there are some watchlist loans exhibiting increased risk, the watchlist loans are generally in good standing and continue to perform. A model run was not completed for the subject review given the lack of material changes to the transaction since the last surveillance review in December 2019.

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-F, and X-G 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#1–Fairmont Orchid (12.9% of the pool)
-- Prospectus ID#2–Arizona Grand Resort & Spa (5.0% of the pool)
-- Prospectus ID#3–Marumsco Plaza (3.9% of the pool)
-- Prospectus ID#6–Aloft Hotel – Downtown Denver (2.5% of the pool)
-- Prospectus ID#14–120 NE 39th Street Miami (2.0% of the pool)
-- Prospectus ID#20–Berkely Commons Shopping Center (1.5% 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:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), 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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