DBRS Morningstar Confirms Ratings on All Classes of CSAIL 2015-C1 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C1 issued by CSAIL 2015-C1 Commercial Mortgage Trust as follows:

-- 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 AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)

All trends are Stable. The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since last review.

As of the May 2023 remittance, 73 of the original 82 loans remain in the pool, representing a collateral reduction of 15.4% since issuance, with a current balance of approximately $1.0 billion. The pool benefits from 26 loans, representing 24.1% of the current pool balance, that are fully defeased. There are 16 loans on the servicer’s watchlist and one loan in special servicing, representing 27.0% and 2.6% of the pool balance, respectively. The watchlisted loans are primarily being monitored for performance-related concerns as well as servicing trigger events. The transaction is concentrated by property type, with retail and lodging properties accounting for approximately 25.0% and 24.0% of the pool balance, respectively, while office properties account for only approximately 11.0% of the pool balance. Since last review, the 2000 Bering loan (Prospectus ID#15) was liquidated from the trust with a $11.5 million loss, representing a loss severity of 53.1%, generally in line with DBRS Morningstar’s expectations at last review.

The only specially serviced loan in the pool, 777 East 10th Street (Prospectus ID#8; 2.6% of the pool), is secured by a mixed-use property in the Fashion District of downtown Los Angeles. The loan initially transferred to the special servicer in May 2020 after the borrower requested a forbearance as a result of the challenges stemming from the Coronavirus Disease pandemic. The borrower ultimately rejected the proposed forbearance terms offered by the special servicer and a notice of default was sent in March 2021. The loan became real estate owned in February 2022 and based on the most recent servicer comments, the sale of the property is currently under consideration. The ground-floor space consists primarily of wholesale showrooms with glass storefronts while the upper floors consist of a combination of office, showroom, and storage space. As of the July 2022 appraisal, the subject was valued at $27.1 million, which is a decline from the August 2020 appraisal value of $33.6 million and well below the issuance value of $47.7 million. With this review, DBRS Morningstar liquidated the loan from the trust with an implied loss severity in excess of 40.0%.

The Westfield Trumbull loan (Prospectus ID#4; 7.5% of the pool balance) is secured by a 462,869 square foot (sf) portion of a 1.1 million sf regional mall in Trumbull, Connecticut. The collateral includes the Macy’s anchor pad (18.8% of the net rentable area (NRA), lease expired April 2023) and all in-line space. The other anchors—JCPenney, Target, and one pad that was previously occupied by Lord & Taylor but is now vacant—do not act as collateral for the loan. DBRS Morningstar inquired about the status of the Macy’s lease but has not been provided an update from the servicer; however, the tenant is reportedly open, according to the mall’s website. The loan was added to the watchlist in March 2022 for a declining debt service coverage ratio (DSCR) and a cash sweep initiation. DSCR was reported at 1.39 times (x) with an occupancy rate of 93.2% as of September 2022, in line with the YE2021 DSCR of 1.36x and occupancy rate of 96.6% but well below the DBRS Morningstar DSCR of 2.47x. A lockbox was established after the loan’s debt yield fell below 7.5% and, according to servicer commentary, approximately $775,000 had been trapped as of January 2023. According to various news articles, the subject property and another mall owned by Unibail-Rodamco-Westfield (URW) were sold in December 2022 to Mason Asset Management and Namdar Realty Group for a combined sale price of $196.0 million. As part of that transaction, the subject debt was assumed. This loan had previously been flagged by DBRS Morningstar as a loan of concern because of its exposure to Lord & Taylor (which has since closed), JCPenney, weakened sales, declining cash flow performance, and URW’s April 2022 announcement that it would sell all of its U.S. malls by 2024. Given this, DBRS Morningstar expects that the individual sale price for the subject property represents a significant discount from the issuance appraised value. To reflect the elevated refinance risk ahead of the loan’s March 2025 maturity, DBRS Morningstar analyzed this loan with an elevated probability of default and increased the loan’s loan-to-value ratio to 100.0%, resulting in an expected loss more than four times greater than the pool’s weighted-average (WA) expected loss.

The Courtyard Midtown East loan (Prospectus ID#3; 7.4% of the pool) is secured by a 321-room select-service hotel in New York City. The loan was in special servicing for a brief period of time in April 2020 but was returned to the master servicer and has been on the servicer’s watchlist since because of a low DSCR, thereby triggering a cash flow sweep. The loan reported negative net cash flows (NCFs) since 2020 but performance has rebounded with the YE2022 financials reporting an NCF of $7.7 million and a DSCR of 1.49x. Despite the improvement, performance still lags behind issuance expectations with the issuer’s NCF and DSCR reported at $9.4 million and 1.82x, respectively. According to the most recent STR report, the property reported an occupancy rate, average daily rate (ADR), and revenue per available room (RevPAR) of 83.8%, $328.22, and $275.05, respectively, for the trailing 12-months (T-12) ended December 31, 2022, resulting in a RevPAR penetration rate of 129.5%. This compares favorably with the RevPAR of $251.59 for the T-12 ended February 28, 2020. DBRS Morningstar analyzed this loan with a stressed probability of default, resulting in an expected loss that is slightly above the WA expected loss for the pool.

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-D, X-E, and X-F 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.

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.

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 (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

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].