Morningstar DBRS Confirms Credit Ratings on All Classes of CSAIL 2015-C1, Changes Trends on Six Classes to Negative from Stable

DBRS, Inc. (Morningstar DBRS) confirmed the credit 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)

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

The credit rating confirmations reflect the continued overall stable performance of a majority of the loans in the pool, which remain in line with expectations at issuance. The transaction benefits from high defeasance, as 29 loans, representing 28.3% of the pool, have been fully defeased. The pool is well diversified by property type with lodging, retail, and office properties comprising 24.4%, 24.4%, and 11.4% of the pool, respectively. As of the May 2024 remittance, 72 of the original 82 loans remain in the pool, representing a collateral reduction of 19.0% since issuance. Since the last credit rating action, one loan was liquidated from the trust. Although this loan was liquidated with a slightly higher than expected loss, the trust loss was fully contained to the unrated Class NR.

As of the May 2024 remittance, approximately 56.3% of the original Class NR balance has been eroded. The Negative trends on Classes F and X-F reflect the deterioration of credit support as a result of the $32.5 million in realized trust losses to date, in addition to Morningstar DBRS' projected losses on the only loan in special servicing, Bayshore Mall (Prospectus ID#14, 2.1% of the pool).

In addition to this credit erosion, the Negative trends on Classes D, E, X-D, and X-E reflect Morningstar DBRS' concerns regarding increased refinance risk for a moderately high concentration of loans. All of the outstanding loans in the pool are schedule to mature within the next 12 months. While Morningstar DBRS expects the majority of these loans will repay, 10 loans representing 26.4% of the pool were identified as being at increased risk of maturity default given declines in performance and/or weak credit metrics. To reflect the increased risk, Morningstar DBRS analyzed these loans with stressed loan-to-value ratios (LTV) and/or probabilities of default (PODs) to increase their expected losses (ELs) as applicable. Should these or other loans default, or should performance for distressed assets deteriorate further, Morningstar DBRS' projected losses for the pool may increase, and Classes with Negative trends may be subject to downgrades.

The only loan in special servicing is Bayshore Mall (Prospectus ID#14, 2.1% of the pool), which is secured by a 515,912-sf regional mall in Eureka, California. The loan transferred to the special servicer in October 2020; however, the loan was subsequently brought current in July 2022 and remains current as of the May 2024 remittance. Occupancy has declined since issuance following the departure of several tenants, including collateral anchor Sears, which vacated in November 2019. As of the December 2023 rent roll, the property was reported 62.9% occupied. The largest collateral tenants include anchors Walmart (14.2% of the net rentable area (NRA), lease expiry in June 2027) and Sportsman Warehouse (5.5% of the NRA, lease expiry in June 2027). There is also a noncollateral Kohl's at the property on a lease through February 2028. There is a large concentration of rollover over the next 12 months, with leases representing 24.9% of the NRA scheduled to expire. According to the servicer, renewals totaling 4.3% of the NRA have been approved.

In addition to the negative trends in occupancy, the net cash flow (NCF) and tenant sales have also declined over the past several years. Since the loan's initial transfer to the special servicer, several updated appraisals have been completed, with the most recent appraisal, dated February 2022, valuing the property at $39.4 million, representing a -42.9% variance from the $69.0 million appraised valuation at issuance. As a result of the prolonged Sears vacancy, declines in occupancy, high rollover, and low operating performance, Morningstar DBRS liquidated the loan from the pool, based on a haircut to the February 2020 appraised value, resulting in a loss severity approaching 30%.

Two loans that Morningstar DBRS has identified at risk of maturity default are Westfield Trumbull (Prospectus ID#4, 7.9% of the current pool balance) and Westfield Wheaton (Prospectus ID#5, 4.3% of the current pool balance). Both loans are pari passu with notes securitized in the CSAIL 2015-C2 and CSAIL 2015-C3 transactions, which are also rated by Morningstar DBRS.

Westfield Trumbull is secured by 462,869 sf of a 1.1 million-sf regional mall in Trumbull, Connecticut. The collateral includes the Macy's (18.8% of NRA, lease expired in April 2023¿the store remains open and the servicer's commentary has stated a five-year renewal is in process) anchor pad and all in-line space. While the loan is not on the servicer's watchlist in this transaction as with CSAIL 2015-C2, the controlling piece securitized in the CSAIL 2015-C3 transaction reported that this loan was added to the servicer's watchlist in March 2022 for cash management as a result of a low debt service coverage ratio (DSCR). A lockbox was established after the loan's debt yield fell below 7.5% and, according to servicer commentary, approximately $845,500 had been trapped as of May 2024. As noted in previous credit rating actions, the sponsor, Unibail-Rodamco-Westfield (URW), had indicated its intention to dispose all its retail assets within the U.S. by the end of 2023, as per various media articles. In December 2022, the subject and another mall owned by URW were sold to Mason Asset Management and Namdar Realty Group for a combined sale price of $196.0 million. As part of that transaction, the subject's debt was assumed. According to the servicer, the subject's sale price was reportedly $153.3 million, a 41.5% decline from the issuance value of $262.0 million, resulting in an implied LTV of just under 100.0%.

As per the December 2023 rent roll, occupancy was reported at 93.7%, with all collateral tenants, excluding Macy's, representing less than 4.0% of the NRA. Additional noncollateral anchors in JCPenney and Target are open, and one noncollateral pad that was previously occupied by Lord & Taylor is now vacant. As per the most recent financial reporting, the loan reported a YE2023 DSCR of 2.23 times (x) (NCF of $13.1 million). While performance has shown improvement since the acquisition, Morningstar DBRS notes the precipitous decline in cash flows from issuance and the significant deterioration in value, suggesting elevated refinance risk at the loan's maturity in March 2025. In the analysis for this loan, Morningstar DBRS used a stressed value that indicated an LTV approaching 200.0% and a POD penalty, resulting in an EL that is more than 3x the pool's average EL.

Westfield Wheaton is secured by a 1.6 million-sf super-regional mall in Wheaton, Maryland. The loan was previously on the servicer's watchlist due to delinquent taxes; however, the master servicer has confirmed that the tax payments have been fulfilled as of March 2024, and the loan has since been removed. Performance remains generally insulated; however, as of December 2023, the subject was 84.0% occupied, representing a moderate decline from the 97.3% occupancy rate at YE2022 and 92.6% occupancy rate at issuance. The DSCR during the same time periods was reported at 2.02x, 2.28x, and 2.43x, respectively. While the subject loan remains a part of URW's portfolio as of May 2024, Morningstar DBRS notes the increased uncertainty surrounding this loan's refinancing prospects, given the sponsor's lack of commitment for the future as evidenced by its sale of the Westfield Trumbull loan. Although Westfield Wheaton poses no imminent monetary concerns, the subject may face a value decline from issuance when it is ultimately paid out from the trust. In its analysis for this loan, Morningstar DBRS used a stressed value that indicated an LTV ratio of approximately 150.0% and a POD penalty, resulting in an EL more than 2x the pool's average EL.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS  
There were no Environmental, Social, or Governance factors 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-E, and X-F are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO ratings mirror 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 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit 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.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

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