DBRS Morningstar Confirms All Ratings of COMM 2015-LC19 Mortgage Trust, Removes Three Classes from Under Review with Negative Implications
CMBSDBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-LC19 issued by COMM 2015-LC19 Mortgage Trust as follows:
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class G at B (low) (sf)
All trends are Stable. Classes E, F, and G were removed from Under Review with Negative Implications where they were placed on August 6, 2020.
The rating confirmations reflect the overall stable performance of the transaction since issuance, when the collateral consisted of 59 fixed-rate loans secured by 139 commercial and multifamily properties with a trust balance of $1.4 billion. According to the November 2020 remittance, 55 of the original 59 loans remain in the pool, with a collateral reduction of 7.3% since issuance. The transaction is concentrated by property type as nine loans, representing 28.3% of the current trust balance, are secured by office properties; the second-largest concentration comprises 18 loans, representing 25.7% of the current trust balance, which are secured by retail collateral. In addition, loans secured by lodging properties represent 16.7% of the current trust balance. There are four loans, representing 4.7% of the pool, in special servicing and nine loans, representing 17.7% of the pool, on the servicer’s watchlist. The watchlisted loans are being monitored for various reasons, including low debt service coverage ratios (DSCR) or occupancy, deferred maintenance, tenant rollover risk, and/or Coronavirus Disease (COVID-19) pandemic-related forbearance requests.
Although there are four loans in special servicing along with a concentration of loans secured by retail collateral in the transaction, the larger retail loans in the pool are reporting stable cash flows as they are generally located in stronger markets. Overall, approximately 29.8% of the pool is located in primary urban markets, including the two largest office loans in the transaction which have historically exhibited stable credit metrics. For loans that are reporting quarterly 2020 cash flows, the weighted-average DSCR was 2.59 times (x) compared with 2.25x at YE2019. In addition, there are six loans, representing 4.6% of the current trust balance, that are fully defeased.
The largest loan in special servicing, DoubleTree Arctic Club (Prospectus ID#16, 1.8% of the pool), secured by a 120-room full-service hotel in downtown Seattle, transferred to the special servicer in June 2020 for imminent default when the borrower requested coronavirus-related relief. According to the servicer, the hotel temporarily closed in March 2020, shortly after the pandemic was declared, and remains closed to date. However, based on its website as of December 2020, the hotel appears to be accepting reservations for January 2021. The loan was more than 60 days delinquent as of November 2020 and the borrower requested debt service relief pending the reopening of the hotel, with the servicer reviewing strategies to cure the default. According to the August 2020 appraisal, the property value was reported at $24.1 million, a 47.1% decline compared with the issuance value of $45.6 million. Given the increased risks in the extended closure and the value decline from issuance, DBRS Morningstar analyzed this loan with an elevated probability of default to significantly increase the expected loss for this review. However, the sponsor had historically kept the loan current and the loan had exhibited stable performance trends prior to the transfer with the DSCR ranging from 1.28x to 1.46x.
The second-largest loan in special servicing, Enclave West (Prospectus ID#21, 1.5% of the pool) is secured by a 552-bed student housing property located in Edwardsville, Illinois, serving the students of Southern Illinois University Edwardsville. The loan transferred to special servicing in July 2019 after the servicer reported issues with both the borrower and the property management. A receiver was appointed in August 2019 and the servicer was reportedly working on a strategy to improve leasing traction for the school year, as the property had experienced pandemic-driven challenges with the university. According to the November 2019 appraisal, the property value was reported at $27.5 million, a 15.1% decline compared with the issuance value of $32.4 million. The as-is value may have fallen since that time given the impact of the pandemic. Given these challenges, DBRS Morningstar analyzed this loan with an increased probability of default to significantly increase the expected loss for this review.
The other two loans in special servicing are relatively small, including Hampden Villa (Prospectus ID#33, 0.7% of the pool) and 56-15 Northern Boulevard (Prospectus ID#34, 0.6% of the pool), which transferred to special servicing in October 2019 and January 2020, respectively. DBRS Morningstar analyzed both loans with a stressed expected loss figure to reflect the current risk level to the trust.
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, and X-C 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#16 – DoubleTree Arctic Club (1.8% of the pool)
-- Prospectus ID#21 – Enclave West (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 the 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 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@dbrsmorningstar.com.
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 info@dbrsmorningstar.com.
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