DBRS Morningstar Confirms Ratings on COMM 2015-LC19 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-LC19 issued by COMM 2015-LC19 Mortgage Trust as follows:

-- Class A-2 at AAA (sf)
-- 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 (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class PEZ at A (low) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance when the collateral consisted of 59 fixed-rate loans secured by 139 commercial and multifamily properties with a trust balance of $1.4 billion. As of the November 2021 remittance, 54 of the original 59 loans remain in the pool, with a collateral reduction of 9.1% from issuance. This includes two loans (Prospectus ID#33 – Hampden Villa and Prospectus ID#51 – Holiday Inn Express Houston) that have been liquidated from the trust with total realized losses to the trust of $4.5 million, which have been contained to the unrated Class H. The pool benefits from nine loans (representing 20.3% of the current pool balance) that are fully defeased, including the largest loan (Prospectus ID#1 – One Memorial; 11.1% of the current pool) and the sixth-largest loan (Prospectus ID#7 – Harmon Meadow Portfolio; 4.2% of the current pool), both of which defeased as of the October 2021 reporting.

As of the November 2021 reporting, three loans (representing 4.0% of the current pool balance) were in special servicing and 13 loans (representing 30.4% of the current pool balance) were on the servicer’s watchlist. Each of the loans in special servicing is severely delinquent and has been in special servicing for at least the past year.

The largest loan in special servicing is the DoubleTree Arctic Club loan (Prospectus ID#16; 1.8% of the current pool balance). The loan is secured by a hotel in the financial district of Seattle and was transferred to special servicing in June 2020. The property has been closed since mid-March 2020, initially by government mandate through June 2021; while the property is currently eligible to reopen, is not expected to do so until January 2022, given the poor market conditions. While the borrower was initially willing to cover operating expenses, the loan fell delinquent for the October 2020 debt payment and a receiver was appointed in March 2021. The latest commentary from the special servicer indicates resolution strategies, including an asset sale through the receiver, among others, remain under evaluation. An appraisal dated August 2021 valued the property at $26.3 million, reflecting a 42.3% decline from the issuance appraised value of $45.6 million. Taking into account the total exposure of just over $27.0 million, this valuation results in a loan-to-value (LTV) ratio of 102.8%. In its analysis, DBRS Morningstar liquidated this loan with an implied loss of $6.6 million and a loss severity of 27.7%.

The loss dollar amount for this loan is relatively small, which is the same for the other two loans in special servicing that were also liquidated in the analysis. In addition, the trust benefits from the $41.4 million remaining balance in Class H, which is reduced a moderate figure of $13.3 million to $28.1 million, based on the liquidation scenarios assumed with this review.

Of the 14 loans on the servicer’s watchlist, eight are in the top 15 loans in the pool. The largest loans on the watchlist are backed by a variety of property types and are generally exhibiting performance declines related to the effects of the Coronavirus Disease (COVID-19) pandemic. The largest watchlisted loan backed by a hotel property is the Embassy Suites La Jolla loan (Prospectus ID #5; 4.4% of the pool balance), which is secured by a hotel property in San Diego. The property has historically been heavily reliant on group demand, a travel sector that the effects of the pandemic have been particularly curtailed. However, the cash flows have trended up as of late and the loan was recently assumed by an affiliate of Blackstone for a purchase price of $226.7 million, implying a healthy cushion above the issuance appraised value of $106.0 million. An adjustment was made to increase the expected loss for this and other loans on the watchlist, as applicable, in the analysis for this review.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, and X-C 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 ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#16 – DoubleTree Arctic Club (1.8% of current pool)
-- Prospectus ID#21 – Enclave West (1.5% of current pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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