Morningstar DBRS Changes Trends on Seven Classes of COMM 2015-CCRE27 Mortgage Trust to Negative from Stable, Confirms Credit Ratings on All Classes

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2015-CCRE27 issued by COMM 2015-CCRE27 Mortgage Trust as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 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 (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class X-D at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class X-E at B (sf)
-- Class G at B (low) (sf)

The trends on Classes D, E, F, G, X-C, X-D, and X-E were changed to Negative from Stable. The trends on the remaining classes are Stable.

The Negative trends reflect Morningstar DBRS' concerns about the increased maturity default risk for several loans as the pool enters its maturity year in 2025, and the moderate increase in expected losses to the trust, stemming from the four specially serviced loans, which represent 9.6% of the pool. Morningstar DBRS analyzed liquidation scenarios for each of the specially serviced loans, resulting in implied losses of approximately $13.5 million, which would be contained to the non-rated Class H Certificate. While the majority of the maturing loans are expected to repay, Morningstar DBRS identified 16 loans, representing 32.4% of the pool, displaying elevated refinance risk because of deteriorating credit metrics and/or tenant rollover risk. Four of these loans , representing 16.9% of the pool, are secured by office collateral. Where applicable, Morningstar DBRS increased the probability of default (POD) penalties and, in certain cases, applied stressed loan-to-value ratios (LTVs) for loans exhibiting performance concerns. The weighted-average (WA) expected loss (EL) for these loans was more than 25% higher than the pool's WA EL. Based on a recoverability analysis, which considered the likelihood of repayment and value deficiency for the pool as a whole, the four lowest-rated classes were most exposed to loss, supporting the Negative trends.

The credit rating confirmations reflect the otherwise stable performance of the remainder of the transaction, which remains in line with Morningstar DBRS' expectations as exhibited by the pool's WA debt service coverage ratio (DSCR) of 2.03 times (x) and a WA debt yield of 12.5% based on the most recent year-end financials. As of the August 2024 remittance, 59 of the original 65 loans remain in the trust, with an aggregate balance of $758.9 million, representing a collateral reduction of 18.5% since issuance. The pool benefits from 18 loans, representing 34.0% of the pool balance, that have been fully defeased. Ten loans, representing 15.7% of the pool balance, are on the servicer's watchlist, primarily for declines in occupancy, low DSCRs, and/or deferred maintenance.

Of the four loans in special servicing, Hotel Deluxe (Prospectus ID#8;, 3.6% of the pool), which is secured by a 130-key full-service luxury boutique hotel in Portland, Oregon, is the primary driver of losses. Performance has declined significantly since the loan transferred to special servicing for imminent monetary default at the borrower's request in June 2020 as a result of reduced foot traffic stemming from travel restrictions related to the COVID-19 pandemic. The revenue per available room (RevPAR) and occupancy rates for the trailing 12 months (T-12) ended May 31, 2024, were $57 and 45.4%, respectively, are depressed when compared with the YE2019 pre-pandemic figures of $126 and 80.7%, respectively. Most recently, the servicer reported a below breakeven DSCR of -0.71 times (x) as of the year-to-date March 2024. The most recent appraisal value of $25.0 million as of July 2024 represents a 20.6% decline from the April 2023 appraisal value of $31.5 million and a 47.0% decline from the issuance appraisal value of $47.2 million. As previously mentioned, Morningstar DBRS' analysis of this loan included a liquidation scenario based on a haircut to the July 2024 appraised value resulting in a loss severity approaching 35%.

Morningstar DBRS' expected losses have markedly increased for the Chase Park loan (Prospectus ID#10; 3.3% of the pool), which is secured by a five-building, 288,382 square foot office property built between 1969 and 1975 in Austin, Texas. The servicer reported the DSCR fell to 0.59x as of YE2023, following a year-over-year decline in occupancy rate to 47% from 64%. According to Reis, office properties in the Austin submarket reported a Q2 2024 vacancy rate of 18.1%. The softness in the market, combined with the lack of demand for older vintage properties similar to the that of the collateral, suggests the property will face significant challenges with leasing traction and improving performance in the near to medium term. Morningstar DBRS further notes that additional headwinds are expected, given the third-largest tenant (4.7% of net rentable area (NRA)) has an upcoming lease expiration date in March 2025 ahead of the loan's September 2025 maturity and the largest tenant (16.9% of NRA) has a lease expiration in October 2026, but has already vacated their space resulting in the loan's elevated risk of maturity default. For this review, Morningstar DBRS applied a stressed LTV and increased the POD, resulting in a loan-level loss that was more than triple the pool average.

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 at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

Classes X-A, X-B, X-C, X-D, and X-E 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 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 01, 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.

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.
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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.

-- 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, 2024); https://dbrs.morningstar.com/research/438283

-- 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 (July 17, 2023).

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.