Morningstar DBRS Confirms Credit Ratings on All Classes of MSCCG Trust 2015-ALDR

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2015-ALDR issued by MSCCG Trust 2015-ALDR as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)

All trends are Stable.

The credit rating confirmations reflect the transaction's overall stable performance, given the strong tenant sales, healthy in-place cash flows, and the sponsor's continued investment in the collateral property. These factors combined suggest that the loan should be able to successfully secure refinancing at maturity in June 2025 (or relatively soon thereafter), as further outlined below.

The underlying fixed-rate first-mortgage loan, which has a 10-year term and a scheduled maturity date in June 2025, is secured by the fee-simple interest in a 575,700-square-foot (sf) portion of Alderwood Mall, a super-regional mall in Lynnwood, Washington, approximately 18 miles north of Seattle. The mall is anchored by collateral tenant AMC (formerly operated as Loews Cineplex Entertainment; 13.8% of the net rentable area (NRA), lease expiry in December 2025) and noncollateral tenants JCPenney, Macy's, and Nordstrom. The loan is sponsored by a joint venture between Brookfield Property Partners L.P. (Brookfield; rated BBB (low) with a Stable trend by Morningstar DBRS as of May 2024) and the New York State Common Retirement Fund (doing business as Homart II LLC). A Brookfield affiliate manages the property. Whole-loan proceeds of $355.0 million consisted of six separate notes at issuance, with the subject trust holding a total of $225.6 million of the pari passu balance and the remainder contributed to three multi-borrower conduit transactions, one of which (Morgan Stanley Capital I Trust 2015-MS1) is rated by Morningstar DBRS. As of the August 2024 remittance, the subject trust's balance was $215.8 million, with collateral reduction of 15.6% since issuance. Given the amortizing structure, the loan benefits from the mall's continued deleveraging by approximately 22% amortization before loan maturity.

A department store anchor in place at issuance, Sears, closed in 2017. Sears owned its own improvements, which were purchased by the sponsor as part of a $179.0 million expansion and redevelopment plan for the mall. The project was completed in November 2021, and as of August 2023, the residential towers were 93% leased. Morningstar DBRS inquired about the current occupancy but did not receive a response as of this review. Although the redevelopment space does not serve as collateral for this loan, Morningstar DBRS notes that the significant investment suggests strong commitment by the loan sponsors, as well as demand for the subject property within the market.

As per the March 2024 rent roll, the collateral portion of the property was 84.5% occupied, representing a decline from the June 2023 figure of 93.2%. AMC is the largest collateral tenant, followed by Zara (5.1% of the NRA, lease expiry in October 2024); Recreational Equipment, Inc. (4.4% of the NRA, lease expiry in January 2025); and Forever 21 (4.2% of the NRA, lease expiry in January 2027). Tenants representing 26.7% of the NRA are scheduled to roll by loan maturity, including the second- and third-largest tenants. Morningstar DBRS inquired about the status of these tenants' leases upon expiry but did not receive a response from the servicer as of this review. Based on the most recent financials, the servicer reported a YE2023 net cash flow (NCF) of $31.6 million, compared with the YE2022 NCF of $31.0 million and the Morningstar DBRS NCF of $25.6 million derived in 2020.

According to the tenant sales report for the trailing 12-month (T-12) period ended March 31, 2024, in-line tenants reported sales of $868 per sf (psf), inclusive of Apple. Excluding Apple's sales, in-line tenants averaged sales of $729 psf, marking an increase from the sales figure of $681 psf for the T-12 period ended June 30, 2023. During the same time period, the 16-screen AMC theater reported sales of more than $717,000 per screen, as compared with the previous figure of $712,000 per screen.

At last review, Morningstar DBRS updated the loan-to-value ratio (LTV) sizing in its analysis to reflect the most recently reported financials, which exhibited an improvement from the pandemic. Morningstar DBRS derived a value of $405.1 million using an NCF of $30.4 million and a capitalization rate of 7.5%. The implied Morningstar DBRS LTV is 71.1%. Morningstar DBRS maintained the positive qualitative adjustments totaling 4.0% to account for the property quality and market fundamentals. Although the increase in interest rates could affect proceeds for a replacement loan at its maturity in June 2025, the sponsor's investment and the strong tenant sales should contribute to an increase in the appraised value for the owned portion of the mall, cushioning against significant challenges in repaying the loan at or close to maturity.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/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 Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

Class X-A is an interest-only (IO) certificate that references 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 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 info-DBRS@morningstar.com.

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
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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 Single-Asset/Single-Borrower Ratings Methodology (July 11, 2024), https://dbrs.morningstar.com/research/436004
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293
-- 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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.