DBRS Morningstar Confirms Ratings on COMM 2015-CCRE26 Mortgage Trust, Changes Trends on Two Ratings to Stable From Negative

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-CCRE26 issued by COMM 2015-CCRE26 Mortgage Trust:

-- 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)

DBRS Morningstar changed the trends on Classes X-C and D to Stable from Negative. All other trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. The trend changes reflect the improved performance exhibited by driver loans for the Negative trends that were maintained with the last review. In addition, there have been recent developments for two specially serviced loans. Spruce Creek Shops (Prospectus ID#23) was resolved with a full payoff. Homewood Suites by Hilton Scottsdale (Prospectus ID#30) was recently paid down with a payment of $6.5 million, reducing the loan’s outstanding balance to approximately $732,000, and now represents just 0.1% of the pool.

As of the June 2022 remittance, 55 of the original 60 loans remained in the pool, representing a collateral reduction of 11.7% since issuance as a result of scheduled and early payoffs of five loans (including two in the preceding 12 months) and scheduled amortization. There were two loans, representing 1.4% of the pool, in special servicing, compared with July 2021 when there were six loans, representing 13.3% of the pool, in special servicing. Both of the specially serviced loans are secured by hotel properties. There were also 11 loans, representing 20.2% of the pool, on the servicer’s watchlist, including five of the largest 15 loans, representing 16.4% of the pool balance. Five loans, representing 3.7% of the pool, have defeased.

The largest loan on the servicer’s watchlist is Rosetree Corporate Center (Prospectus ID#6, 4.4% of the pool), which is secured by two Class B office buildings in Media, Pennsylvania. The loan was previously in special servicing but was returned to the master servicer as a corrected mortgage in January 2022, and continues to be monitored for low debt service coverage ratio (DSCR) and occupancy. The subject’s largest tenant at issuance, FXI Inc. (15.9% of the net rentable area (NRA)), vacated at lease expiry in September 2019. The occupancy rate was at 68% in December 2020 compared with 92% in December 2018. The servicer reported Q1 2022 financials, which showed an annualized net cash flow of $2.0 million, a DSCR of 0.67 times (x), and an occupancy rate of 70% with an average rental rate of $15.76 per square foot. According to the December 2021 rent roll, existing tenants, United States of America, Erie Insurance Exchange, and Delaware County Regional Realty (together representing 10.7% of the total NRA) had signed renewals, while three smaller tenants had signed new leases, representing 6.7% of the vacant square footage, with commencement dates in early 2022 and expiration dates through at least 2027.

The cross-collateralized Hotel Lucia (Prospectus ID#11, 3.1% of the pool) and Hotel Max (Prospectus ID#12, 3.1%) are the third- and fourth-largest loans on the servicer’s watchlist. The two loans are secured by boutique hotels in Portland, Oregon, and Seattle, respectively, and both loans were previously in special servicing because of cash flow declines caused by the Coronavirus Disease (COVID-19) pandemic. Both loans were returned to the master servicer in December 2021 after modifications were approved to cross collateralize the loans and establish an excess cash reserve with an initial deposit of $1.0 million, paid by the borrower. In addition, the loans were modified to allow for an interest-only (IO) structure through March 2022, with deferred interest to be repaid over 18 months beginning in April 2022.

The most recent year-end (YE) financials reported by the servicer for Hotel Lucia and Hotel Max are as of YE2020 and YE2021, respectively, which showed in-place DSCRs of -0.54x and 0.33x, respectively. Each property received an updated appraisal in 2021, with the as-is value for Hotel Lucia at $34.4 million (-29.4% variance from issuance) and the as-is value for Hotel Max at $50.8 million (+6.5% variance from issuance), both of which remain above the respective loan balances. The sponsor appears committed to both properties, and DBRS Morningstar expects the DSCR will significantly improve over 2022 as leisure travel continues to increase.

There were no Environmental/ Social/ Governance factor(s) that had a significant or relevant effect on the credit analysis

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is 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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