DBRS Morningstar Confirms Ratings on MAD 2015-11MD Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of MAD 2015-11MD Mortgage Trust, Commercial Mortgage Pass-Through Certificates issued by MAD 2015-11MD Mortgage Trust:

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

All trends are Stable.

The rating confirmations reflect the stable overall performance of the transaction, which remains in line with DBRS Morningstar’s expectations at the time ratings were assigned. This transaction is secured by the borrower’s fee, leasehold, and reversionary interest in the condominium units for 11 Madison Avenue, a Class A, 29-story, 2.3 million- square-foot (sf) office tower in Manhattan’s Midtown South submarket. The building is between 24th and 25th Streets, occupying an entire city block that overlooks Madison Square Park.

The borrower used the 10-year, $1.08 billion interest-only loan to acquire the property. The trust debt totals $708.2 million, which is split between senior debt totaling $397.5 million and junior subordinate debt totaling $310.7 million. The whole-loan balance includes a $366.8 million senior companion loan that is pari passu with senior trust debt notes. There is also a $325 million mezzanine loan that is co-terminous with the mortgage trust. The sponsor and guarantor, SL Green Realty Corp., is one of Manhattan’s largest office landlords and has substantial experience in ownership and management, reporting interests in 88 buildings totaling 38.2 million sf as of December 2020.

The top three tenants occupy more than 85.0% of the total leasable space in the property with minimal near-term lease rollover. The largest tenant at the property is Credit Suisse, occupying 52.0% of the space, which serves as one of its regional headquarters. Credit Suisse’s lease at the property expires in May 2037 with termination options that the company may exercise to vacate a single full floor in each of 2022, 2027, and 2032. While the tenant must give at least 15 months’ advance notice and pay an associated termination fee, the tenant maintains the right to terminate its lease obligations across a total of three floors during the loan term. For more information on DBRS Morningstar’s ratings on Credit Suisse AG (rated “A” with a Negative trend by DBRS Morningstar) and Credit Suisse Group AG (the top-level holding company; rated A (low) with a Negative trend by DBRS Morningstar), please see the following press release: https://www.dbrsmorningstar.com/research/376576.

The second-largest tenant is Sony Corporation of America (Sony Corporation), accounting for 25.0% of the space, which serves as its U.S. headquarters and as the global headquarters of Sony Music Entertainment. Sony Corporation’s lease expires in January 2031. The third-largest tenant is Yelp, accounting for 8.4% of the space. Yelp’s lease expires in April 2025, five months prior to maturity. Yelp expanded its space by 39,565 sf in 2017 and has invested more than $20.0 million in capital expenditures since 2014.

The DBRS Morningstar net cash flow (NCF) derived when assigning ratings was $102.0 million. As of year-end 2020, the servicer reported a NCF of $114.3 million, in line with previous reporting and expectations. The June 2020 rent roll showed an occupancy rate of 96.0% for the property.

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.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

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 26, 2021), 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 [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.

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

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