Morningstar DBRS Confirms Credit Ratings of Morgan Stanley Bank of America Merrill Lynch Trust 2015-C23

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C23 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C23 as follows:

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

The trends on Classes E, F, G, and X-FG remain Negative. All other trends are Stable.

The credit rating confirmations reflect the continued stable performance of the pool, supported by a healthy weighted-average (WA) pool debt service coverage ratio (DSCR) of 1.72 times (x) and minimal exposure (5.3% of the outstanding pool amount) to loans secured by office properties. The Negative trends on Classes E, F, G, and X-FG are the result of the transaction's exposure to 10 loans, representing 22.5% of the pool, about which Morningstar DBRS has concerns because of increased refinance risk as a result of performance concerns, increased rollover risk prior to maturity, and/or general market issues as a majority of the remaining loans are scheduled to mature in the next three months. The WA expected loss (EL) for these loans is over 60% greater than the WA pool EL.

Since the transaction's last review in April 2024, 20 loans have successfully repaid from the trust, and the majority of the remaining loans in the pool have upcoming scheduled maturities within the next three months. As of the April 2025 remittance, 46 of the original 75 loans remain in the pool, representing a collateral reduction of 34.9% since issuance. The pool also benefits from six loans, representing 9.1% of the pool, that have been fully defeased. Only one loan, Hilton Garden Inn W 54th Street (Prospectus ID#7, 5.7% of the pool) is in special servicing, and Morningstar DBRS analyzed it under a liquidation scenario with this review. There are 35 loans, representing 68.4% of the pool, on the servicer's watchlist; however, the majority of these loans are flagged for upcoming maturity with only seven loans (totaling 9.3%) flagged for occupancy or performance-related concerns.

Hilton Garden Inn W 54th Street is secured by a 401-room select-service hotel in Manhattan, New York. The loan is pari passu with the MSC 2015-MS1 (Morningstar DBRS-rated) and MSBAM 2015-C22 transactions. The subject transferred to special servicing in February 2025 for imminent monetary default after the borrower was unable repay the loan at the scheduled maturity on March 1, 2025. According to the servicer commentary, the borrower's ability to refinance the loan was exacerbated by an unresolved civil litigation. According to news sources, the case stems from an injury suffered by a hotel guest in September 2015. As a result of the original trial, Hilton and the sponsor were ordered to pay the plaintiff $30.0 million in punitive damages, which is currently being disputed. Outside of the ongoing litigation, performance at the subject property remains stable. According to the YE2024 financials, the subject reported a net cash flow and DSCR of $15.6 million and 2.46x, respectively, which is generally in line with the YE2023 and pre-pandemic figures, but slightly below issuance figures. Furthermore, the December 2024 STR, Inc. report noted occupancy, average daily rate, and revenue per available room (RevPAR) figures of 92.6%, $263.33, and $243.77, respectively. The RevPAR penetration at December 2024 was reported at 101.3%, which was a decline of 114.0% from the prior year. Given the below-issuance performance, the borrower's inability to refinance or repay the loan, and the ongoing litigation, Morningstar DBRS analyzed the loan through a liquidation. Morningstar DBRS' analysis for this loan included a 50.0% haircut to the issuance appraised value, in addition to including the outstanding advances and expected servicer expenses, which totaled nearly $2.9 million. This analysis suggested a loss severity in excess of 25.0%, or approximately $10.5 million.

The largest of the loans with elevated refinance risk is the Fairfax Corner loan (Prospectus ID#3; 7.3% of the pool), which is secured by a 182,331-square-foot (sf) open-air mixed-use retail/office space across 10 buildings in Fairfax, Virginia. The collateral is situated in a larger development (noncollateral) of outdoor retail and office space that totals approximately 900,000 sf, with the office component comprising nearly 15% of the net rentable area (NRA). At last review, Morningstar DBRS highlighted concerns regarding rollover and low performance metrics, with the YE2023 DSCR reported at 1.09x. As of the YE2024 financials, the subject reported a DSCR of 1.42x and was able to retain a large portion of rolling tenants, with occupancy decreasing only to 90% compared with 92% the prior year. The largest tenant is REI (12.5% of the NRA, lease expiry in September 2033), and three of the top five tenants are restaurants that each occupy between 4.0% and 5.0% of the NRA and have lease expiries beyond the loan's scheduled maturity. While the performance improvements are positive, performance remains below issuance and, according to the December 2024 rent roll, there is still 8.4% rollover prior to the loan's scheduled maturity in June 2025. Furthermore, the office vacancy in the Fair Oaks submarket remains elevated with Reis, Inc. reporting 28.1% vacancy as of Q4 2024. Given the office exposure, below-issuance performance, and upcoming maturity, Morningstar DBRS maintained an elevated probability of default (POD) adjustment for this loan, resulting in an EL that is approximately 10% higher than the pool's WA EL.

At issuance, Morningstar DBRS shadow-rated the 32 Old Slip Fee loan (Prospectus ID#2; 9.4% of the pool) as investment grade. With this review, Morningstar DBRS confirmed that the performance of this loan remains consistent with investment-grade loan characteristics. Despite concerns surrounding the office sector, the loan continues to benefit from the property owner's substantial investment of $69.0 million prior to issuance to improve the property, which has maintained its high quality. The loan benefits from the structure of the ground lease; in the event of a default, the improvements can revert to the borrower if the ground lessee were to stop making ground-rent payments.

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 transaction's 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 credit 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): https://dbrs.morningstar.com/research/437781

Classes X-A, X-B, and X-FG 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 (February 28, 2025): https://dbrs.morningstar.com/research/448963

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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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.
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 (April 9, 2025)/North American CMBS Insight Model v 1.3.0.0: https://dbrs.morningstar.com/research/451739

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024): https://dbrs.morningstar.com/research/439702

-- Legal Criteria for U.S. Structured Finance (December 3, 2024): https://dbrs.morningstar.com/research/444064

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024): https://dbrs.morningstar.com/research/438283

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