DBRS Morningstar Confirms Ratings of COMM 2015-3BP Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following Commercial Mortgage Pass-Through Certificates, Series 2015-3BP issued by COMM 2015-3BP Mortgage Trust:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The 10-year interest-only (IO) loan provided whole-loan proceeds of $1.1 billion to facilitate the $2.2 billion acquisition of the property known as Three Bryant Park, a 1.2 million-square-foot (sf), 41-story, Class A office building in Midtown Manhattan. A $215.0 million mezzanine loan with a coterminous maturity date and $878.7 million of sponsor equity also supported the acquisition. The loan is sponsored by SITQ US Investments Inc., which is the United States subsidiary of Ivanhoe Cambridge Inc., a Canadian real estate company with assets around the world.

The 41-story collateral building, which was originally built in 1974 and redeveloped from 2007 to 2008, is located across 6th Avenue from Bryant Park at the corner of West 42nd Street and Avenue of the Americas (6th Avenue). The property comprises multiple condominium units, of which the borrower owns all of the retail space and most of the office space, excluding floors seven through 12. The building is a high-quality asset that has received more than $400 million in capital improvements between 2007 and 2014. As of the December 2020 rent roll, the property was 95.0% occupied, with an average annual lease rate of $105.75 per square foot (psf) for the office tenants. According to the Reis Q4 2020 Midtown West submarket report, the average vacancy rate for the submarket was 7.5%, with average annual asking rents for Class A office space of $78.55 psf.

The property’s largest tenant, MetLife, Inc. (MetLife), leases 35.4% of the net rentable area (NRA) through April 2029 with no termination options; however, in late 2015, MetLife vacated and subleased the space to various tenants including the building's new namesake, Salesforce.com, Inc., which houses its regional headquarters at the subject property. Dechert LLP (Dechert), the second-largest tenant with 20.1% of the NRA, has a lease expiration date in July 2023, two years prior to loan maturity. The Dechert lease renewal option requires an 18-month notice period, giving the borrower time to market the space if Dechert chooses not to renew its lease. Failure to renew during this time period will trigger a cash flow sweep. Other large tenants include Standard Chartered Bank, accounting for 9.3% of the NRA through March 2026, and Stifel, Nicolaus & Company, Incorporated, accounting for 6.2% of the NRA on a lease that commenced in September 2020 to back-fill a portion of the space vacated by Instinet Group LLC, which had occupied 8.8% of the NRA at issuance. The Steifel lease runs through April 2031. The retail space is anchored by a 42,818-sf Whole Foods, which has a lease expiry in 2037 and provides an attractive amenity to the property and drives pedestrian traffic to the building.

As of year-end (YE) 2020, the servicer reported a net cash flow (NCF) figure of $84.9 million, with a debt service coverage ratio (DSCR) of 2.29 times (x). This remains in line with the YE2019 NCF of $83.7 and DSCR of 2.26x, but cash flow has remained below the Issuer’s expectations of $93.9 million and 2.54x respectively since issuance, with the driver the last three years being increased expenses as compared with the Issuer’s estimates. The in-place DSCR remains generally healthy, and the overall desirability of the location and building, even amid the challenges of the Coronavirus Disease (COVID-19) pandemic, as well as the strong sponsorship and significant equity contribution at issuance, all should continue to support the stable performance of the loan through the remaining term.

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

Class X-A is an interest-only (IO) certificate that references 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.

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 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 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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577