DBRS Morningstar Downgrades Five Classes of COMM 2015-CCRE24 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) downgraded its ratings on five classes of the Commercial Mortgage Pass-Through Certificates, Series 2015-CCRE24 (the Certificates) issued by COMM 2015-CCRE24 Commercial Mortgage Trust as follows:

-- Class E to B (sf) from BB (sf)
-- Class F to B (low) (sf) from B (high) (sf)
-- Class G to CCC (sf) from B (low) (sf)
-- Class X-D to B (high) (sf) from BB (high) (sf)
-- Class X-E to B (low) (sf) from B (sf)

DBRS Morningstar confirmed its ratings on the remaining classes as follows:

-- 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)

All trends are Stable with the exception of Classes D, E, F, X-C, X-D, and X-E, which have Negative trends, and Class G, which does not carry a trend.

The rating downgrades and Negative trends generally reflect the overall weakened performance of the collateral and the increased likelihood of losses to the trust upon the resolution of several of the specially serviced loans, particularly the Crowne Plaza Houston Katy Freeway and DoubleTree Beachwood loans. These loans showed significant performance declines prior to the onset of the Coronavirus Disease (COVID-19) pandemic, although other loans in the pool have seen their performance more directly affected by the pandemic. The pool has a high concentration of retail and hospitality properties (43.2% of the pool) that have been hit particularly hard by the effects of the pandemic.

At issuance, the transaction consisted of 81 loans with an original trust balance of $1.4 billion. As of the June 2021 remittance report, 77 loans remained in the transaction with a trust balance of $1.3 billion, representing a collateral reduction of approximately 9.3% since issuance resulting from amortization and the payoff of four loans. In addition, five loans, totaling $46.9 million, have defeased. Twenty-three loans, representing 31.% of the pool, are on the servicer’s watchlist, primarily because of cash flow declines or coronavirus-related relief. The watchlist also contains three of the largest 10 loans in the pool.

Per the June 2021 remittance, five loans are in special servicing, totaling 11.6% of the trust balance. Of particular concern is Palazzo Verdi (Prospectus ID#4; 5.76% of the pool balance), which is secured by a Class A 15-story office building totaling 302,245 square feet in Greenwood Village, Colorado, approximately 15 miles southeast of the Denver central business district (CBD). The loan transferred to special servicing in November 2020 for delinquency after the property’s largest tenant, Newmont Mining (59.8% net rentable area), vacated upon expiration of its October 2020 lease, decreasing the occupancy rate to 36.8% as of April 2021. Backfilling the vacant space could present a challenge to the sponsor, given the amount of space available in the submarket where Reis reported a vacancy rate of 18% as of Q1 2021. Mitigating these concerns somewhat was a cash sweep triggered nine months prior to the Newmont Mining lease expiration date that resulted in $3.6 million in the cash flow sweep reserve and $5.5 million in tenant improvement/leasing commission reserves as of June 2021.The borrower recently submitted a discounted payoff offer, based on a $60 million purchase price, that was denied by the special servicer. The servicer is dual-tracking foreclosure as it continues to negotiate possible workout alternatives. The property was reappraised in January 2021 at $80 million, which reflects a 29.6% decrease from the at-issuance appraisal of $113.6 million. DBRS Morningstar liquidated this loan as part of this analysis and assumed a loss to the trust.

The Westin Portland loan (Prospectus ID#8; 4.2% of the pool balance) is secured by a 19-story, full-service, 205-key luxury hotel in the CBD of Portland, Oregon. The hotel has been closed since March 2020 because of the disruption in demand drivers resulting from the pandemic. The loan transferred to the special servicer in June 2020 after failing to remit payments for several months. The special servicer was previously limited in terms of enforcement options because of the State of Oregon’s moratorium on foreclosures, which expired in September 2020. The special servicer is dual-tracking foreclosure as it continues to negotiate possible modification terms. The hotel’s performance has been subpar since 2016 as a significant number of new hospitality properties have been delivered to the submarket since issuance and the sponsor converted the hotel to the Dossier boutique brand from the original Westin flag in 2018. The property was reappraised in August 2020 at $40.8 million, which reflects a 51.2% decrease from the at-issuance appraisal of $83.6 million. DBRS Morningstar liquidated this loan as part of this analysis and assumed a loss to the trust.

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 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.

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 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 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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