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

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the following classes of 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 since the last review. The transaction benefits from the loan collateral in a high-quality, Class-A office asset situated in a prime location within a desirable submarket, with strong, longer-term tenancy in place. 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), 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 building is a high-quality asset that received more than $400 million in capital improvements between 2007 and 2014.

According to the December 2021 rent roll, the property was 93.9% occupied, with minimal near-term rollover risk. According to the Reis Q4 2021 Midtown West submarket report, the average vacancy rate for the submarket was 11.5%, the average rental rate was $68.95 per sf (psf), and the effective rent was $56.60 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, subleasing 17.7% of the total building’s NRA from MetLife through April 2029. Dechert LLP, the second-largest tenant, previously had a lease expiration date in July 2023, but the December 2021 rent roll provided to DBRS Morningstar shows an extension to 2035 with slight increases in both NRA (from 19.8% of the NRA to 20.4% of the NRA) and rental rates. 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.

As of year-end (YE) 2021, the servicer reported a net cash flow (NCF) figure of $78.9 million, with a debt service coverage ratio (DSCR) of 2.13 times (x), compared with the YE2020 NCF of $84.9 and DSCR of 2.29x, respectively. The cash flow has remained below the issuer’s expectations of $93.9 million and 2.54x respectively since issuance, with increases in expenses (with real estate taxes showing the most noteworthy increase by category) and revenues below the issuer’s expectations driving the bulk of the variance over the last few years. The YE2021 operating expenses were up 44.1% from issuance, driven by real estate taxes that have increased 102.1% since issuance. The increase in billed taxes is primarily related to a real estate tax abatement that has burned off since issuance. When DBRS Morningstar ratings were assigned to the transaction in 2020, the YE2019 NCF was analyzed, which represented a delta of approximately -$10 million from the issuer’s NCF figure. The YE2021 NCF figure shows real estate taxes increased by 7.7% from YE2019, with revenues down by 1.6% due to declines in reimubursements and other income.

The in-place DSCR remains generally healthy. 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 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 this transaction.

The DBRS Morningstar 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 the North American CMBS Surveillance Methodology (March 4, 2022), 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.

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].

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