DBRS Morningstar Changes Trends on Four Classes, Confirms Ratings on All Classes of COMM 2015-CCRE23 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-CCRE23 issued by COMM 2015-CCRE23 Mortgage Trust as follows:

-- Class A-2 at AAA (sf)
-- 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 (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 X-D at B (sf)
-- Class E at B (high) (sf)
-- Class F at CCC (sf)

With this review, DBRS Morningstar changed the trends on Classes X-C, D, X-D, and E to Stable from Negative. All other trends are Stable, excluding Class F, which has a rating that does not carry a trend.

The trend changes reflect DBRS Morningstar’s improved outlook on the transaction since last review, driven by a number of compounding factors, including an updated appraised value for the Champaign Portfolio (Prospectus ID#21, 1.6% of the pool), the resolution of one loan previously in special servicing and the better-than-anticipated recovery of another, increased defeasance of $52.1 million (4.6% of the pool), and loan repayments totaling $30.6 million. While four loans (5.3% of the pool) remain in special servicing with a cumulative loss projection in excess of $33.0 million, these losses are expected to be contained to the non-rated Class G. DBRS Morningstar previously downgraded Class F to CCC (sf) given the anticipated credit erosion resulting from these loan dispositions. The rating confirmations and Stable trends otherwise reflect the overall stable performance of the majority of the underlying loans.

As of the October 2022 remittance, 76 of the original 83 loans remain in the trust, with an aggregate principal balance of $1.1 billion, representing a collateral reduction of 17.7% since issuance as a result of a scheduled loan amortization, loan repayments, and the proceeds from one liquidated loan. The Holiday Inn Express Pauls Valley (Prospectus ID#54) was disposed through a discounted payoff with the September 2022 reporting, incurring a realized loss to the trust of $2.9 million, representing a loss severity of 48.9%. Nineteen loans, representing 30.8% of the pool, are secured by defeased collateral, including three loans in the Top 10. Another 19 loans, representing 19.1% of the pool, are on the servicer’s watchlist; however, three of these loans, representing 3.6% of the pool, are listed as defeased.

Four loans, representing 5.3% of the pool, are in special servicing. DBRS Morningstar assumed a liquidation scenario for all four loans resulting in a cumulative loss forecast in excess of $33.0 million. As noted above, the Champaign Portfolio, the second-largest loan in special servicing, has received an updated appraised value since the last rating action. The Champaign Portfolio is secured by a portfolio of 10 properties comprising eight office properties and two unanchored retail properties. The loan was transferred to special servicing in April 2021 for imminent monetary default, with a foreclosure complaint filed in June 2021 and a receiver installed shortly thereafter. The most recent consolidated rent roll available is dated August 2021 and indicates a 58.6% occupancy rate at the properties. According to the servicer, the receiver is working to address items of deferred maintenance and re-lease the portfolio; however, the properties are situated in a tertiary market in southern Illinois where the local economy is primarily driven by the University of Illinois. The portfolio was reappraised in July 2021 for $21.0 million. While the updated value reflects a 26.4% decline over the issuance value of $27.5 million, it is significantly higher than DBRS Morningstar’s analyzed value at the time of the last rating action. With this review, DBRS Morningstar liquidated the loan from the trust, resulting in an implied loss of $3.1 million, or a loss severity of 17.6%.

The largest loan on the servicer’s watchlist is Sherman Plaza (Prospectus ID #6; 4.0% of the pool). The collateral is an office building in Van Nuys, California. Occupancy and revenues have been in decline since 2018 following the unexpected loss of the primary tenant, Brightwood College (previously 16.2% of portfolio net rentable area (NRA)), and U.S. GSA (previously 10% of portfolio NRA), which vacated upon lease expiration in 2019. As of June 2022, the property was 52.9% occupied. The YE2021 debt service coverage ratio (DSCR) was reported to be 0.57 times (x), up slightly from 0.40x at YE2020, but down from 0.67x at YE2019 and 1.41x at YE2018. The current largest tenant, Loan Mart (8.8% of NRA), has an upcoming lease expiration in June 2023. DBRS Morningstar has requested a leasing update from the servicer. As of a Q2 2022 Reis report, the San Fernando Valley Central submarket reported an average vacancy rate of 17.9%, compared with its pre-pandemic vacancy rate of 15.2% at YE2019. The loan has never been delinquent.

The second-largest loan on the servicer’s watchlist is DoubleTree San Diego (Prospectus ID#8; 2.8% of the pool), which is secured by a 219-key full-service hotel located in San Diego, approximately five miles from the central business district. Cash flow has been in year-over-year decline since issuance, and this was exacerbated by renovations in 2019 that were delayed because of high occupancy and ran over budget. The loan reported a YE2021 DSCR of 0.32x, compared with the June 2019 DSCR of 1.00x and the YE2018 and YE2017 DSCR figures of 0.90x and 1.07x, respectively. Revenue rebounded in 2021; however, the operating expenses ratio increased to 85.4% above the pre-pandemic level primarily as a result of franchise and management expenses and marketing costs, which may have been inflated because of the ongoing renovations of the hotel. According to the December 2021 financial statement, the occupancy rate, average daily rate, and revenue per available room for the trailing 12-month period, were reported at 51.95%, $141.66, and $73.59, respectively, an improvement over the 2020 figures but indicative of continued decline since issuance.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) factors 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 (May 17, 2022).

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.

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 the North American CMBS Surveillance Methodology (October 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 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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577