Morningstar DBRS Changes Trends on Six Classes of CSAIL 2015-C3 Commercial Mortgage Trust to Negative From Stable; Confirms All Credit Ratings

DBRS Limited (Morningstar DBRS) confirmed the credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C3 issued by CSAIL 2015-C3 Commercial Mortgage Trust as follows:

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

Morningstar DBRS changed the trends on Classes D, E, F, X-D, X-E, and X-F to Negative from Stable. The remaining classes have Stable trends.

The Negative trends on Classes D, E, F, X-D, X-E, and X-F reflect Morningstar DBRS' concerns about the refinance prospects for some of the remaining loans in the pool, all of which are scheduled to mature within the next 12 months. While loan-level performance changes have been relatively minimal since Morningstar DBRS' previous credit rating action in April 2024 when all classes were confirmed with Stable trends, Morningstar DBRS notes there continues to be uncertainty around the availability of financing for commercial real estate property types, particularly office properties, which back almost a quarter of the underlying debt in the pool. These factors, as well as the risk of further performance and/or value deterioration to the underlying collateral, are exacerbated by the relatively skinny class structure at the bottom of the capital stack that results in a relatively low cushion against losses over the remainder of the deal term.

With this review, Morningstar DBRS considered liquidation scenarios for three of the five loans in special servicing (representing 5.4% of the pool), resulting in liquidated loss projections exceeding $16.3 million, which would be contained in the non-rated Class NR. Morningstar DBRS did not liquidate the Westfield Wheaton (Prospectus ID#4; 12.7% of the pool) or the Westfield Trumbull (Prospectus ID#7; 5.4% of the pool) loans that transferred to special servicing earlier this year for maturity defaults, as the performance of both loans has remained relatively stable year over year, reporting debt service coverage ratios (DSCRs) that are well above breakeven, per the most recent financials.

In addition to the estimated liquidated losses on the three specially serviced loans, Morningstar DBRS stressed the loan-to-value ratios (LTVs) and/or elevated probabilities of defaults (PODs) to increase the expected losses (ELs) for 10 loans (representing approximately 27.4% of the pool) that exhibited elevated refinance risk because of declining performance, submarket concerns, and/or decreased investor demand for the collateral property type, specifically office properties.

As of the April 2025 remittance, 52 of the original 89 loans remain in the pool with a current trust balance of $766.6 million, representing a collateral reduction of 46.0% since issuance. Seven loans, representing 5.0% of the pool, are fully defeased and 24 loans, representing 44.3% of the pool, are being monitored on the servicer's watchlist, predominantly for upcoming maturity and deferred maintenance. Five loans, representing 23.4% of the current pool, are in special servicing, with most of that concentration represented by the two largest loans in special servicing, as further detailed below. The office loans in the pool represent 24.8% of the overall balance and, although the collateral property type suggests some level of baseline concern about the refinance prospects, it is noteworthy that the largest office loans in the pool are performing overall in line with expectations. This is partly the result of the higher concentration of medical office in the pool, including the second-largest loan in Charles River Plaza - North (Prospectus ID #1; 12.7% of the pool), which is secured by a medical office condominium property in Boston that is fully occupied by a single medical tenant on a lease that runs through May 2029. Where merited, LTV and/or POD adjustments were made to increase the ELs for those loans in the analysis for this review.

The largest loan in special servicing is the Westfield Wheaton loan, which is secured by a mixed-use property located in Wheaton, Maryland. The collateral consists of a super-regional mall, inclusive of four retail anchors, two retail/commercial strip buildings, two Class B office buildings, two parking garages, and various single-tenanted outparcels. The subject loan of $97.0 million represents a pari passu portion of $234.6 million whole loan, with the additional senior notes secured in the Morningstar DBRS-rated CSAIL 2015-C1 and CSAIL 2015-C2 transactions. The loan transferred to special servicing after the borrower failed to repay at the March 2025 maturity date and discussions regarding workout strategies remain ongoing. As per the most recent financial reporting, the collateral reported an occupancy rate of 99.0% and a net cash flow (NCF) of $19.4 million, reflecting a DSCR of 2.22 times (x), as of YE2024, an improvement over the YE2023 figures of 93.0% and $18.2 million (DSCR of 2.02x), respectively, but below the issuance NCF of $22.0 million (DSCR of 2.43x). In the analysis for this review, Morningstar DBRS maintained a stressed LTV of 140% and an elevated POD penalty, resulting in an EL of nearly 8.8% which is more than one and a half times the pool's weight-average (WA) EL.

The second-largest loan in special servicing, Westfield Trumbull, is secured by a 462,869 square feet (sf) portion of a 1.1 million-sf super-regional mall in Trumbull, Connecticut. The collateral includes the Macy's anchor pad (18.8% of the net rentable area (NRA)), which recently renewed its lease, extending the expiration date beyond the loan maturity in April 2029) and all in-line space. Additional noncollateral anchors in JCPenney and Target are open, and one noncollateral pad that was previously occupied by Lord & Taylor has been vacant since 2021. The loan also has pari passu pieces secured in CSAIL 2015-C1 and CSAIL 2015-C2, and transferred to special servicing in March 2025 for maturity default. According to the servicer's most recent commentary, the borrower has been negotiating a potential loan modification. The annualized NCF for the trailing nine months ended September 30, 2024, was reported at $10.8 million, reflecting a DSCR of 1.83x. According to the December 2024 rent roll, the collateral was 97.0% occupied, with the minimal rollover risk through the next 12 months representing 6.4% of the NRA. Given the maturity default and declined performance from issuance, in the analysis for this review, Morningstar DBRS maintained the stressed LTV and elevated POD adjustment from the previous credit rating action, resulting in an EL that is more than twice the pool's WA EL.

The largest loan on the servicer's watchlist (and the largest loan in the pool), Mall of New Hampshire (Prospectus ID#3; 13.0% of the pool), is secured by a 405,723 sf portion of in-line space in an 811,573-sf class B regional mall in Manchester, New Hampshire. Although the loan continues to report a healthy a DSCR of 1.86x for the trailing 12 months ended June 30, 2024, performance remains down from issuance. As of December 2024, the collateral was 88.2% occupied, an increase from 84.0% as of YE2023. The largest collateral tenants include Best Buy (10.4% of NRA, lease expiration in January 2034), Old Navy (4.6% of NRA, lease expiration in January 2027), and Ulta (2.9% of NRA, lease expiration in May 2030). Additionally, the loan benefits from institutional sponsorship in Simon Property Group and the Canadian Pension Plan Investment Board. Given the decline in performance relative to issuance and the upcoming maturity date in July 2025, Morningstar DBRS maintained the stressed value scenario approach from the previous credit rating action, which resulted in an EL more than twice the pool's WA EL.

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 factor(s) 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.

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 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.

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 Limited
DBRS Tower, 181 University Avenue, Suite 700
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 (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

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.