Morningstar DBRS Confirms All Credit Ratings of CSAIL 2015-C4 Commercial Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed all credit ratings on the classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C4 issued by CSAIL 2015-C4 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 B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class X-D at BBB (sf)
-- Class X-F at BB (sf)
-- Class X-G at B (sf)

All trends are Stable.

The credit rating confirmations reflect the stable performance of the transaction, which remains in line with Morningstar DBRS’ expectations. The pool benefits from its low exposure to loans secured by office collateral, with just seven loans representing 7.6% of the pool as of the April 2024 remittance. Additionally, there are 26 loans, representing 24.7% of the pool, that are fully defeased, an increase from 21.3% at the time of the last rating action in June 2023. As of the April 2024 remittance, there are no loans in special servicing and eight loans, representing 7.9% of the pool, being monitored on the servicer’s watchlist, of which, four are being monitored for performance issues. Since Morningstar DBRS’ last review, two loans previously in special servicing were liquidated with a combined loss of $5.7 million, in line with Morningstar DBRS’ loss expectations.

As of the April 2024 remittance, 82 of the original 87 loans remain in the pool, representing a collateral reduction of 13.9% as a result of loan amortization, repayments, and liquidations. All 56 non-defeased loans are scheduled to mature by November 2025. The maturity profile for a majority of the remaining loans remains healthy, as evidenced by the pools weighted-average (WA) debt service coverage ratio (DSCR) of 2.61 times (x) based on the most recent year-end financials available. For loans that are currently exhibiting stressed performance and increased refinance risk, Morningstar DBRS increased the probability of default or loan-to-value (LTV) ratio to reflect their current risk profile.

The 324 South Service Road loan (Prospectus ID#4, 3.4% of the pool), secured by a 117,800 square foot (sf) office building in Long Island, New York, is the largest loan in the pool secured by office collateral. Although the loan is not currently being monitored on the servicer’s watchlist, Morningstar DBRS is concerned about the loan’s refinance prospects given the lack of investor appetite for office properties and the decline in cash flow from issuance. The property’s largest tenant, TD Bank (29.3% of net rentable area (NRA)) extended its lease through January 2030; however, the second and third-largest tenants, collectively comprising 11.4% of NRA, have lease expirations in Q4 2025, coinciding with the loan’s maturity date. Both occupancy and DSCR have trended lower each year since 2020, most recently being reported at 84.0% and 1.26x, respectively, as of YE2023. According to online leasing brochures, approximately 21.5% of NRA is currently available for lease with an asking rental rate of $33.95 psf, suggesting occupancy has declined through Q1 2024. Per Reis, the Western Suffolk office market reports a vacancy rate of 14.2% and average effective rents of $22.08 psf as of Q1 2024. In the event that the sponsor is unable to backfill the vacant space or additional tenants vacate ahead of the loan’s November 2025 maturity date, the loan may prove difficult to refinance. To account for this risk, Morningstar DBRS analyzed the loan using a stressed LTV by applying an elevated cap rate to the YE2023 net cash flow, resulting in an expected loss that is over 100.0% greater than the pool’s weighted average.

The largest loan on the servicer’s watchlist, Aloft Hotel – Downtown Denver (Prospectus ID#6, 2.4% of the pool), is secured by a select-service hotel in downtown Denver. The loan is being monitored for a low DSCR, most recently being reported at 0.69x for the trailing 12-month period ended September 30, 2023, as compared to the YE2022 DSCR of 1.73x. The decline in DSCR is mainly attributed to property wide renovations that were completed from May 2023 to August 2023, which resulted in the temporary closure of the subject property. According to online news articles, the renovations to the lobby, food and beverage spaces, fitness center, and social lounge totalled approximately $3.0 million. Morningstar DBRS expects cash flow to increase closer to the YE2022 level once operations stabilize. Given that recent performance in 2022 and 2021 significantly lagged behind issuance levels, Morningstar DBRS opted to analyze this loan with an elevated probability of default, resulting in an expected loss approximately 80.0% greater than the pool’s weighted average.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) https://dbrs.morningstar.com/research/427030

Classes X-A, X-B, X-D, X-F, and X-G are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO credit rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798).

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

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 credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

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

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

-- North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model v 1.2.0.0, (https://dbrs.morningstar.com/research/428797)

-- Rating North American CMBS Interest-Only Certificates (December 13, 2023), https://dbrs.morningstar.com/research/425261

-- DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023), https://dbrs.morningstar.com/research/420982

-- North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592

-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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