DBRS Morningstar Downgrades Two Classes of COMM 2015-PC1 Mortgage Trust; Removes Four Classes from UR-Neg.

DBRS, Inc. (DBRS Morningstar) downgraded the ratings on two classes of Commercial Mortgage Pass-Through Certificates, Series 2015-PC1 issued by COMM 2015-PC1 Mortgage Trust as follows:

-- Class X-E to B (low) (sf) from B (sf)
-- Class F to CCC (sf) from B (low) (sf)

DBRS Morningstar also confirmed the ratings on the following classes:

-- Class A-4 at AAA (sf)
-- Class A-5 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 X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-D at BB (sf)
-- Class E at BB (low) (sf)

DBRS Morningstar also removed Classes E, F, X-D, and X-E from Under Review with Negative Implications, where they were placed on August 6, 2020. All trends are Stable with the exception of Class F, which does not carry a trend. DBRS Morningstar also designated Class F as having Interest in Arrears.

The rating downgrades reflect increased risk to the pool from the high volume of specially serviced loans and the interest shortfalls affecting Class F, which began with the January 2021 remittance and are anticipated to remain in the near term. At issuance, the trust consisted of 80 loans secured by 147 commercial and multifamily properties with a total trust balance of $1.46 billion. Per the February 2021 remittance report, 71 loans secured by 135 properties remained in the trust with a total trust balance of $1.20 billion, representing an 18.3% collateral reduction. Since the last review in March 2020, three loans, totaling $154.3 million, were repaid in full, including Princeton GSA Portfolio (Prospectus ID#2—$114.0 million). Additionally, one loan, Hampton Inn—Sunbury (Prospectus ID#71), was liquidated from the trust with a realized loss of $436,565 in December 2020. In addition, six loans, totaling 4.3% of the trust balance, are fully defeased.

The pool is relatively diverse based on loan size, with the largest 15 loans totaling 48.5% of the trust balance. Loans secured by office properties represent the largest property type concentration, with 15 loans totaling 32.4% of the trust balance. The trust is also relatively concentrated by hotel and retail property types, which represent 22.4% and 19.6% of the trust balance, respectively. Eleven loans, representing 18.0% of the trust balance, are in special servicing, including three of the largest seven loans. An additional 15 loans, representing 20.0% of the trust balance, are on the servicer’s watchlist. Most watchlisted loans are on the servicer’s watchlist because of a debt service coverage ratio decline.

The Plaza at Harmon Meadow (Prospectus ID#4, 4.1% of the trust balance) is secured by a mixed-use retail and office property seven miles west of Manhattan in Secaucus, New Jersey. The loan transferred to the special servicer in April 2020 for loan maturity default after the April 2020 loan maturity date. The borrower was unable to secure financing and communicated its unwillingness to contribute additional capital to the project. The collateral was reappraised in October 2020 for a value of $66.3 million, up 1.2% from the $65.5 million appraised value at issuance. The property continues to perform at a satisfactory level, with a 90.6% occupancy rate as of June 2020 and modestly higher rents compared with issuance. The servicer has commenced foreclosure proceedings, although DBRS Morningstar does not anticipate a loss to the trust in the near term based on the increased appraised value since issuance and stable operating history.

Riverview Center (Prospectus ID#6, 2.5% of the trust balance) is secured by a mixed-use office-industrial warehouse property in Menands, New York, approximately three miles north of downtown Albany. The loan transferred to the special servicer in December 2019 after the borrower requested a short-term extension for the April 2020 loan maturity date. The loan was unable to be refinanced and attempts to negotiate a forbearance agreement were unsuccessful. The special servicer appointed a receiver and is waiting on a foreclosure sale date. The property’s occupancy rate has gradually declined since issuance and the Albany office market remains stagnant. The loan is overleveraged as the property was reappraised in October 2020 for a value of $19.0 million, down 66.1% from the $56.0 million appraised value at issuance. As part of this analysis, the loan was liquidated from the trust based on the October 2020 appraised value, resulting in an implied loss severity in excess of 50.0% to the trust.

DBRS Morningstar continues to closely monitor the 100 Pearl Street loan (Prospectus ID#11, 2.3% of the trust), as a loan modification agreement was executed in July 2019 that allows a discounted payoff option (DPO) to the borrower in July 2023. The loan is secured by the fee interest in an office building in the central business district of Hartford, Connecticut. The property’s primary tenant vacated upon lease expiration in December 2018, and the loan was subsequently modified. The modification included a conversion of the loan to interest-only (IO) payments, a reduction of the interest rate (which increases over time), and a provision granting the borrower a $20.25 million DPO option which, if executed, would result in a loss to the trust. The borrower has since executed a new lease for a primary tenant, Hartford Health Corporation, that commenced occupancy in Q2 2020. However, DBRS Morningstar believes the loan remains overleveraged and, given the structure of the modification, will continue to add to the deal’s interest shortfalls.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, X-C, X-D, and X-E 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 the following loans in the transaction:

-- Prospectus ID#4 – The Plaza at Harmon Meadow (4.1% of the pool)
-- Prospectus ID#6 – Riverview Center (2.5% of the pool)
-- Prospectus ID#7 – 760 & 800 Westchester Avenue (2.7% of the pool)
-- Prospectus ID#8 – Sentinel Hotel (2.5% of the pool)
-- Prospectus ID#11 – 100 Pearl Street (2.3% 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:
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 info@dbrsmorningstar.com.

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