NEW YORK--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on Morgan Stanley Bank of America Merrill Lynch Trust (MSBAM) Commercial Mortgage Trust 2015-C23 Commercial Mortgage Pass-Through Certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
-- $45,800,000 class A-1 'AAAsf'; Outlook Stable;
-- $122,100,000 class A-2 'AAAsf'; Outlook Stable;
-- $67,600,000 class A-SB 'AAAsf'; Outlook Stable;
-- $230,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $285,394,000 class A-4 'AAAsf'; Outlook Stable;
-- $750,894,000b class X-A 'AAAsf'; Outlook Stable;
-- $75,089,000c class A-S 'AAAsf'; Outlook Stable;
-- $60,340,000c class B 'AA-sf'; Outlook Stable;
-- $135,429,000b class X-B 'AA-sf'; Outlook Stable;
-- $182,360,000c class PST 'A-sf'; Outlook Stable;
-- $46,931,000c class C 'A-sf'; Outlook Stable;
-- $56,317,000a class D 'BBB-sf'; Outlook Stable;
-- $24,136,000a class E 'BB-sf'; Outlook Stable;
-- $10,727,000a class F 'B-sf'; Outlook Stable.
(a) Privately placed and pursuant to Rule 144A.
(b) Notional amount and interest-only.
(c) Class A-S, B and C certificates may be exchanged for class PST certificates, and class PST certificates may be exchanged for class A-S, B, and C certificates.
The expected ratings are based on information provided by the issuer as of May 27, 2015. Fitch does not expect to rate the $16,091,000 class G, the $32,181,368 class H, the $32,181,368 interest-only class X-H or the $26,818,000 interest-only class X-FG.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 75 loans secured by 151 commercial properties having an aggregate principal balance of approximately $1.073 billion as of the cutoff date. The loans were contributed to the trust by Morgan Stanley Mortgage Capital Holdings LLC, Bank of America, National Association, Starwood Mortgage Capital LLC, and CIBC, Inc.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 69.5% of the properties by balance, cash flow analysis of 79.3%, and asset summary reviews on 79.3% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The transaction has higher leverage than other recent Fitch-rated fixed-rate multiborrower transactions. The pool's Fitch DSCR of 1.14x is lower than both the YTD 2015 average of 1.18x and the 2014 average of 1.19x, and the pool's Fitch LTV of 113.1% is higher than both the YTD 2015 average of 110.4% and the 2014 average of 106.2%.
Pool Concentration: The largest 10 loans in the transaction account for 46.0% of the pool by balance. This is lower than the YTD 2015 average of 47.8% and lower than the 2014 average of 50.5%. The pool's below-average concentration resulted in a loan concentration index (LCI) of 298, which was lower than the YTD 2015 and 2014 averages of 357 and 387, respectively. However, three of the ten largest loans (12.9% of the pool) are secured by properties located in New York.
Collateral Quality: Three properties (13.6% of the pool), all of which serve as collateral for top 10 loans (Fairfax Corner, Georgian Terrace and Hilton Garden Inn W 54th Street), were assigned property quality grades of 'A-'. The majority of the pool (57.4%) was assigned a property quality grade in the 'B' range.
Concentration in Primary Markets: Six of the pool's top 10 loans (28.1%) are secured by properties in primary MSA's. The pool's largest market concentrations are New York-New Jersey (16.2%), Houston (7.3%) and Washington D.C. (5.6%).
Pari Passu Debt and Additional Debt: Five loans, representing 22.2% of the pool are pari passu: TKG 3 Retail Portfolio (7.4% of the pool), 32 Old Slip Fee (6.2%), Hilton Garden Inn W 54th Street (3.7%), US StorageMart Portfolio (2.9%) and Aviare Place Apartments (1.9%). Three loans in the pool (12.05%) have mezzanine debt held outside the trust.
Investment-Grade Credit Opinion Loan: The eleventh largest loan in the pool, US StorageMart Portfolio (2.91%), received a credit opinion of 'BBBsf' on a stand-alone basis. The loan is secured by 66 self-storage properties located throughout 15 states. The note in the trust is a part of a $188.9 million senior portion of a $412.5 million first mortgage. The portfolio's capital stack also includes a $102.5 million mezzanine loan.
Low Mortgage Coupons: The pool's weighted average coupon is 4.16%, well below historical averages. Fitch accounted for increased refinance risk in a higher interest rate environment by reviewing an interest rate sensitivity that assumes an interest rate floor of 5% for the term risk for most property types, 4.5% for multifamily properties and 6% for hotel properties in conjunction with Fitch's stressed refinance rates, which were 9.44% on a weighted average basis.
High Hotel Exposure: Approximately 16.5% of the pool by balance, including three of the top ten loans (11.1%), consists of hotel properties, which is higher than the year to date 2015 average of 16.2% and the 2014 average of 14.2%; hotels have the highest probability of default in Fitch's multiborrower CMBS model.
For this transaction, Fitch's net cash flow (NCF) was 15.2% below the most recent net operating income (NOI; for properties for which a recent NOI was provided, excluding properties that were stabilizing during this period). Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans, and could result in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to MSBAM 2015-C23 certificates and found that the transaction displays average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'A-sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 10 - 11.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Additional information is available at www.fitchratings.com.
MSBAM Commercial Mortgage Trust 2015-C23 (US CMBS)
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage
Transactions (pub. 20 Mar 2015)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial
Mortgage Transactions (pub. 28 May 2015)
Global Structured Finance Rating Criteria (pub. 31 Mar 2015)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
(pub. 10 Dec 2014)