DBRS Morningstar Confirms All Ratings on Morgan Stanley Bank of America Merrill Lynch Trust 2015-C23

DBRS, Inc. (DBRS Morningstar) confirmed the following ratings of the Commercial Mortgage Pass-Through Certificates, Series 2015-C23 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C23:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class PST at A (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at BB (low) (sf)
-- Class X-FG at B (sf)
-- Class G at B (low) (sf)

The rating confirmations reflect the steady performance of the majority of the underlying collateral. Classes F, G, and X-FG continue to carry Negative trends, reflecting the uncertainty of resolution for the pool’s five specially serviced loans. All other trends are Stable.

Five loans, representing 9.2% of the current pool balance, are in special servicing. In addition to two hotels that were in special servicing at the time of the last review, two multifamily properties—Aviare Place Apartments (Prospectus ID#16, 2.3% of the pool) and Hawthorne House Apartments (Prospectus ID#24, 1.4% of the pool)—and one unanchored retail property—Country Corners Shopping Center (Prospectus ID#52, 0.5% of the pool) —transferred to special servicing since the prior review. Nine loans, representing 15.4% of the current trust balance, are on the servicer’s watchlist and are being monitored for a variety of reasons, including low debt service coverage ratios (DSCR), low occupancy, and declining performance due to the Coronavirus Disease (COVID-19) pandemic.

As of the February 2022 remittance, 67 of the original 75 loans remain in the trust, with an aggregate trust balance of $874.7 million, representing a collateral reduction of approximately 18.5% since issuance due to loan amortizations and repayments. Eight loans, representing 4.6% of the current pool balance, are fully defeased. There have been no losses incurred to date and the generally stable performance of the underlying loans supports the rating confirmations.

The largest specially serviced loan is secured by Hilton Garden Inn W 54th Street (Prospectus ID#7, 4.6% of the pool). The property was closed in the spring and summer of 2020 due to New York's coronavirus restrictions and the loan transferred to special servicing in June 2020. Despite the hotel’s reopening in September 2020, the loan remains in special servicing. As of January 2022, the loan was brought current and, while all parties continue to negotiate reinstatement terms, no agreement has been reached to date, and a foreclosure option is being tracked should those negotiations deteriorate. DBRS Morningstar believes an updated appraisal would likely show a value decline from issuance. However, there is some cushion provided given the 61.8% loan-to-value ratio based on the issuance appraisal of $251.0 million and the senior debt. Despite the loan’s long spell in special servicing, traffic has begun to rebound based on the metrics reported by the December 2021 STR report, which could incentivize the sponsor to continue negotiating with the special servicer and keep the loan current.

The Country Corners Shopping Center transferred to special servicing in March 2021 due to imminent monetary default, as a result of poor performance and occupancy. The loan is secured by a 69,927-square-foot unanchored retail property in Howell, Michigan. According to the April 2021 appraisal, the property was valued at $4.3 million, down 40.0% from the issuance figure of $7.2 million. This loan was liquidated from the pool with a 30% loss severity as part of the analysis.

The other two loans that transferred in 2021 are secured by multifamily properties that are located near the Permian Basin in Midland, Texas. The Aviare Place Apartments and Hawthorne House Apartments loans were transferred to special servicing in December 2021 due to delinquency. The borrower has noted coronavirus as the reason for performance decline, specifically high loss to lease, vacancy, and concessions. Additionally, the property is in the Permian Basin and performance is therefore also subject to fluctuations in oil prices/production. These loans were analyzed with increased probabilities of default.

The remaining loan in special servicing, Holiday Inn Express & Suites Plainview (Prospectus ID#61, 0.4% of the pool), was recently modified and is pending a return to the master servicer.

At issuance, DBRS Morningstar assigned investment-grade shadow ratings to 32 Old Slip Fee loan (Prospectus ID#2; 7.1% of the pool). With this review, DBRS Morningstar confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

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-FG 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#5 – Georgian Terrace (4.7% of the pool)
-- Prospectus ID#7 – Hilton Garden Inn W 54th Street (4.6% 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 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.

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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