DBRS Morningstar Confirms All Classes of COMM 2015-CCRE26 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2015-CCRE26 issued by COMM 2015-CCRE26 Mortgage Trust as follows:

-- 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 X-C at BBB (sf)
-- Class D at BBB (low) (sf)

Classes X-C and D have Negative trends. All other trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. The Negative trends on Classes X-C and D reflect DBRS Morningstar’s concerns with select loans experiencing performance issues, specifically those secured by hotel and retail properties, in addition to the six loans that are specially serviced.

As of July 2021, the transaction comprised 57 loans totalling $996.3 million, representing a collateral reduction of 8.7% since issuance from scheduled loan amortization and the payoff of three loans. There are six loans, representing 13.3% of the pool, in special servicing and 13 loans, representing 13.3% of the pool, on the servicer’s watchlist. Although the pool has experienced an increase in specially serviced collateral so far in 2021, it is expected that both the Hotel Lucia (Prospectus ID#11, 3.0% of the pool) and Hotel Max (Prospectus ID#12, 2.9% of the pool) loans will be returned to the master service in the near future because a loan modification, which included cross-collateralizing the loans, was executed.

Hotel Lucia and Hotel Max, secured by boutique hotels in Portland, Oregon, and Seattle, respectively, transferred to special servicing in June 2020 for payment default as a result of the Coronavirus Disease (COVID-19) pandemic. The owner for both properties is Aspen Lodging Group, which operates its boutique hotel portfolio under the Provenance Hotels umbrella. Each property received an updated appraisal in 2021, valuing the Hotel Lucia at $34.4 million (-29.4% variance from issuance) and Hotel Max at $50.8 million (+6.5% variance from issuance). Both loans were modified in July 2021, which included the aforementioned cross-collateralization of the loans with a 120% release provision. Other modification terms include a borrower contribution of $1.0 million to the excess cash reserve, deferment of principal and interest payments through to March 2021, interest-only (IO) payments through to March 2022, and the waiver of capital expenditure reserve payments through to March 2022 with deferred interest to be paid back in 18 equal payments beginning in April 2022.

The largest and most recent transfer to special servicing is the RoseTree Corporate Center loan (Prospectus ID#6, 4.3% of the pool), which is secured by two Class B office buildings in Media, Pennsylvania. The loan was previously being monitored on the servicer’s watchlist for a low debt service coverage ratio (DSCR) and occupancy after the subject’s largest tenant, FXI Inc. (15.9% of the net rentable area (NRA)), vacated at its lease expiry in September 2019. Occupancy fell to 69.4% as of March 2021 from 84.7% in 2019, and the DSCR fell to 0.86 times (x) as of YE2020 from 1.19x in 2019. The loan ultimately transferred to special servicing in June 2021 for imminent monetary default, yet the loan has remained current on debt service payments. There could be additional downward pressure on occupancy as tenants representing 18.4% of the NRA have leases expiring in the next 12 months, including the second- and third-largest tenants that collectively make up 7.9% of the NRA and have leases expiring in December 2021 and January 2022, respectively. The loan is fully cash managed and, as of July 2021, the loan reported $788,000 in tenant reserves. The special servicer is in the process of reviewing the loan to determine a workout strategy.

Hilton Garden Inn El Paso (Prospectus ID#20, 1.3% of the pool), secured by a full-service hotel in El Paso, Texas, transferred to special servicing in March 2021 for monetary default. The loan was previously on the watchlist for low cash flow and a coronavirus relief request which was granted in the form of utilization of furniture, fixtures, and equipment and property improvement plan reserve funds to cover three months of debt service from May 2020 to July 2020. The borrower had continued to pay out of pocket to cover debt service payments and keep the loan current; however, in December 2020 the loan fell delinquent before its eventual special servicing transfer in March 2021. The loan most recently reported a trailing 12-month (T-12) ended Q3 2020 DSCR of 0.55x with an occupancy rate of 54%. Per the May 2021 Smith Travel Research report, the property reported T-12 occupancy, average daily rate, and revenue per available room of 48.1%, $94.73, and $45.59, respectively, slightly below its competitive set. While the depressed T-12 metrics are not surprising, it is noteworthy that occupancy has been trending closer to pre-pandemic levels, increasing to 80.7% in May 2021 from 57.6% in March 2021. A workout strategy is yet to be determined. DBRS Morningstar analyzed both loans with an elevated probability of default to increase the expected loss in the analysis for this review.

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, and X-C 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.

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 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. 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

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