DBRS Morningstar Confirms All Ratings on COMM 2015-CCRE24 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-CCRE24 issued by COMM 2015-CCRE24 Mortgage Trust as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 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)
-- Class X-D at B (high) (sf)
-- Class E at B (sf)
-- Class F at B (low) (sf)
-- Class G at CCC (sf)

All trends are Stable with the exception of Class G, which has a rating that does not typically carry a trend in commercial mortgage-backed securities (CMBS) ratings. The rating confirmations reflect the overall stable performance of the underlying collateral, which remains in line with DBRS Morningstar’s expectations since the last review.

As of the May 2023 remittance report, 72 of the original 81 loans remain in the pool, representing a collateral reduction of 19.9% since issuance as a result of scheduled loan amortization, loan repayments, and one loan liquidation. There are 14 loans, representing 13.4% of the pool, that are fully defeased. Excluding collateral that has been defeased, the pool is most concentrated by retail, hotel, and office properties, with loans representing 23.4%, 22.1%, and 12.7% of the pool, respectively. There are currently 12 loans, representing 27.3% of the pool, on the servicer’s watchlist, generally being monitored for low debt service coverage ratios (DSCR).

While there is only one loan that is currently in special servicing, representing 0.7% of the pool, the borrower for the Westin Portland loan (Prospectus ID#8, 4.6% of the pool) has recently requested the loan be transferred back to the special servicer as it is unable to cover operational shortfalls, according to the servicer commentary. DBRS Morningstar’s analysis includes liquidation scenarios for both of these loans. The implied losses total more than $22.0 million, which would partially erode the balance of the first loss piece, Class H.

The Westin Portland loan is secured by a 19-story, full-service, 205-key luxury hotel in the central business district of Portland, Oregon. The loan was transferred to the special servicer in June 2020 for payment default following sustained performance declines, which were exacerbated by the Coronavirus Disease (COVID-19) pandemic. A loan modification was executed in September 2022, including $5.0 million of new borrower equity to cure the loan. While the loan was reinstated in December 2022, performance has continued to struggle, and the borrower has requested the loan be returned to the special servicer.

The hotel’s performance initially declined in 2017 because of a combination of new hospitality properties delivered to the submarket and the sponsor’s conversion of the hotel to the Dossier boutique brand from the original Westin flag, which was completed in 2018. Despite a rebranding of the hotel, performance did not stabilize prior to the onset of the pandemic, when the hotel was closed for most of the time between March 2020 and October 2021. The property’s restaurant tenant remains closed and is not expected to reopen. For the period ended January 31, 2023, the property reported trailing 12-month (T-12) occupancy, average daily rate, and revenue per available room (RevPAR) figures of 37.8%, $142, and $54, respectively. The RevPAR penetration rate for the T-12 period was 59.6%, indicating the property continues to underperform relative to its competitive set.

According to the September 30, 2022, T-12 financials, the loan reported a net cash flow of -$1.9 million (reflecting a DSCR of -0.51 times (x)), a substantial decline from both the YE2019 and issuance figures of $2.3 million (a DSCR of 0.63x) and $6.2 million (a DSCR of 1.69x), respectively. The most recent appraisal is dated August 2022 and valued the property at $44.9 million, below the December 2021 value of $50.2 million and the issuance value of $83.6 million. DBRS Morningstar’s analysis, which includes a liquidation scenario based on a stress to the most recent appraisal, indicates a loss severity of nearly 40.0%.

While the concentration of office properties is relatively low, it is notable that these loans exhibited weaker performance than the pool as a whole. Given the cautious outlook DBRS Morningstar has on office assets, the analysis for this review included a further stress of these loans to test the durability of the ratings, resulting in a weighted-average expected loss that is nearly three times the pool average expected loss.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance 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.

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912/north-american-cmbs-surveillance-methodology).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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.

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

Rating North American CMBS Interest-Only Certificates (December 19, 2022; https://www.dbrsmorningstar.com/research/407577)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022; https://www.dbrsmorningstar.com/research/402646)

North American Commercial Mortgage Servicer Rankings (September 8, 2022; https://www.dbrsmorningstar.com/research/402499)

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022; https://www.dbrsmorningstar.com/research/402153)

Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008)

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].