DBRS Morningstar Downgrades Two Classes and Confirms All Other Classes of COMM 2015-LC21 Mortgage Trust, Changes Trends on Three Classes to Negative

DBRS, Inc. (DBRS Morningstar) downgraded two classes of the Commercial Mortgage Pass-Through Certificates, Series 2015-LC21 issued by COMM 2015-LC21 Mortgage Trust as follows:

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

DBRS Morningstar also confirmed the remaining classes as follows:

-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 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 F at CCC (sf)

DBRS Morningstar changed the trends on Classes D, E, and X-D to Negative from Stable. The trends on all other classes are Stable. The downgrades and Negative trends are reflective of a loss incurred by the trust since the last rating action, as well as increased projected losses for several specially serviced loans. In May 2021, the $17.3 million 350 East Fordham Road (Prospectus ID#28, 1.7% of pool) was liquidated from the pool at a loss of $8.6 million. Although the loan was resolved with a greater than expected loss, the loss was still absorbed by the non-rated Class G.

As of the January 2022 remittance, 93 of the original 104 loans remain in the pool, with a collateral reduction of 21.1% since issuance as a result of loan amortization, loan repayments, and the liquidation of one loan. Four loans, representing 4.0% of the current trust balance, have been fully defeased.

There are nine loans in special servicing (8.5% of the current pool balance). Since DBRS Morningstar’s last rating action, the $17.1 million Honeywell Building loan (Prospectus ID#27; 1.6% of pool), which is secured by a 156,784-square-foot (sf) Class B office property within the Westchase submarket of downtown Houston, transferred to special servicing due to imminent monetary default. Occupancy decreased to the current level of 7% after the property’s former largest tenant, Honeywell, representing 84.8% the net rentable area, vacated upon its lease expiration. The special servicer is reportedly pursuing foreclosure.

The largest loan in special servicing, Anchorage Business Park (Prospectus ID#11, 2.1% of the pool), is secured by a 176,799 sf Class C office property in Anchorage, Alaska. Performance of the underlying property has declined, as has occupancy, which decreased to its current level of 59.4% as of year-end 2021. The asset was foreclosed in October 2021 and is now real estate owned. A June 2021 appraisal valued the property at $14.5 million, which reflects a 51.1% decrease from the at-issuance appraisal of $33.8 million. DBRS Morningstar’s stressed valuation is indicative of a loss severity in excess of 50% upon liquidation.

There are 24 loans, representing 31.0% of the pool, on the servicer’s watchlist. The largest watchlist loan, Courtyard by Marriott Pasadena (Prospectus ID#2, 6.3% of the pool), is secured by a 314-room limited-service hotel in Pasadena, California. The loan was transferred to the special servicing in April 2020 due to Coronavirus Disease (COVID-19) pandemic-related default and was later returned to the master servicer as a corrected loan following the approval of a forbearance agreement.
The pool’s second-largest loan, 155 Mercer Street Pasadena (Prospectus ID#4, 3.9% of the pool), is being monitored on the servicer’s watchlist for vacancy concerns after the property’s single tenant, Dolce & Gabbana, vacated prior its November 2022 lease expiration. The loan is secured by a 14,589 sf single tenant retail property within the SoHo submarket of Lower Manhattan. The previous tenant, which continues to pay rent through its lease expiration, vacated during the initial shut down of the pandemic.

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, and X-D 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#2 - Courtyard by Marriott Pasadena (6.3% of the pool)
-- Prospectus ID#4 – 155 Mercer Street (3.9% of the pool)
-- Prospectus ID#27 – Honeywell Building (1.64% 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, 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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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