Morningstar DBRS Changes Trends on Four Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2015-C24 to Negative from Stable, Confirms Credit Ratings on All Classes

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C24 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C24 as follows:

-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (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 E at B (high) (sf)
-- Class F at B (low) (sf)

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

The trend changes reflect Morningstar DBRS' concerns about the refinance prospects for select loans, including moderately increased risks for the largest loan in the pool, 535-545 Fifth Avenue (Prospectus ID#1, 13.9% of the current pool balance), which has a high concentration of tenants with leases rolling close to the 2025 maturity date. Morningstar DBRS' analysis included consideration of a wind-down scenario in which only defaulted or underperforming assets remained in the pool, and that analysis showed that the three lowest-rated principal classes in the capital stack would be the most exposed to these increased risks, further supporting the Negative trends. Excluding the defeased loans, the pool is most concentrated by loans backed by retail and multifamily properties, which represent 22.6% and 20.0% of the pool balance, respectively. This factor, as well as the pool's overall healthy credit metrics, as further detailed below, supported the credit rating confirmations with this review.

All of the remaining loans in the pool are scheduled to mature by August 2025. Morningstar DBRS expects most of the loans will successfully repay at their respective maturity dates based on the performance of the underlying collateral. This is exhibited by a weighted-average (WA) debt service coverage ratio (DSCR) of 1.79 times (x) and WA debt yield of 11.9% as of YE2023 financials. However, in addition to the aforementioned 535-545 Fifth Avenue loan, there are eight loans, representing 11.1% of the pool balance, that were identified as having increased refinance risk given performance declines and rollover concerns for the collateral properties. Morningstar DBRS increased probability of default, and, in certain cases, applied stressed loan-to-value ratios for loans that have exhibited increased default risks. The resulting WA expected loss (EL) for these loans is more than 40% higher than the pool average EL.

As of the October 2024 remittance, 63 of the original 74 loans remain in the trust, with an aggregate balance of $783.5 million, representing a collateral reduction of 16.2% since issuance. The pool also benefits from 16 fully defeased loans, representing 15.8% of the current pool balance. There are no specially serviced loans or delinquent loans. Fifteen loans, representing 44.8% of the pool balance, are being monitored on the servicer's watchlist primarily for performance-related concerns and deferred maintenance items.

The largest loan in the pool is the 535-545 Fifth Avenue loan, which is secured by a mixed-use property comprising 415,440 square feet (sf) of office space and 91,247 sf of retail space in midtown Manhattan. The subject loan of $110 million represents a portion of the $310 million senior whole loan amount, with the remaining balance securitized within the MSBAM 2015-C26 transaction and the MSBAM 2015-C27 transaction (which is also rated by Morningstar DBRS). As per the most recent servicer commentary, discussions surrounding a maturity extension on a non-transfer basis remain ongoing. Though occupancy declined to a low of 65.3% in 2022, occupancy has since improved to 92.8% as of August 2024. The property's tenancy is granular, with the two largest tenants combining for 12.6% of the net rentable area (NRA). However, leases totaling 23.3% of the NRA (17.3% of the total annual rent) are scheduled to rollover by YE2025. The loan reported a DSCR of 1.88x for the trailing six months ended June 30, 2024, compared with the Issuer's DSCR of 1.32x at issuance. As per Reis, office properties in the Grand Central submarket reported an average vacancy rate of 12.8% and an average asking rental rate of $75.70 per sf (psf) in Q2 2024, which is below the subject's average rental rate of $88.15 psf. The asset is generally well positioned near Grand Central Station, and, given the strong leasing momentum over the past two years as well as the tenants' above-market rental rates, Morningstar DBRS expects the sponsor will remain well incentivized to work with the servicer to come to terms on an extension of the upcoming maturity. Given the concentration of rolling tenants in the maturity year, a stressed analysis was considered to increase the EL in the analysis for this review; however, Morningstar DBRS considers the overall risks for this loan to be relatively low given the mitigating factors outlined above.

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.

Classes X-A, X-B, and X-D 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 Multi-Borrower Rating Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428797.

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.

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 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 CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model version 1.2.0.0, https://dbrs.morningstar.com/research/428797
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- 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.