DBRS Morningstar Confirms Ratings on Citigroup Commercial Mortgage Trust 2015-GC31, Maintains Negative Trends on Two Classes

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-GC31 issued by Citigroup Commercial Mortgage Trust 2015-GC31 as follows:

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

DBRS Morningstar maintained the Negative trends on Classes F and G. All other trends remain Stable. DBRS Morningstar previously issued rating actions on this transaction in October 2021. (For additional information, please see the press release dated October 19, 2021, on the DBRS Morningstar website.) Since that time, there have been material updates for two large loans, as further discussed below. These updates prompted the most recent review, with DBRS Morningstar reaching the conclusion that the new information was not indicative of any significantly increased risks as compared with those known at the time of the October 2021 review.

The Negative trends on Classes F and G were added with the October review and maintained with these rating actions as a result of concerns regarding the largest loan in the pool, 135 South LaSalle (Prospectus ID#1, 14.8% of the pool), which is secured by a Class A office property in Chicago’s Central Loop submarket. The loan transferred to special servicing in November 2021 for payment default and was previously on the servicer’s watchlist because of the near-term lease expiry for the largest tenant, Bank of America (BofA; 62.3% of the net rentable area (NRA)). The tenant vacated at its July 2021 lease expiration and, shortly thereafter, the borrower notified the servicer that the in-place cash flow would not support debt service and suggested there was an unwillingness to fund out of pocket. News reports have further supported the suggestion that the borrower intends to turn the property over to the trust in the last month, with various outlets reporting the subject is no longer a core asset for the sponsor’s firm. Given this possibility was on DBRS Morningstar’s radar at the time of the October 2021 review, we believe the probability of default penalty derived for that review was appropriately conservative and are not suggesting further stress in the analysis at this time. The loan was conservatively underwritten at issuance, with a going-in loan-to-value ratio of 30.3% and, although the latest developments suggest there has likely been a sharp decline in the as-is value, the conservative structure does provide some cushion against a significant loss.

Another update since October is in the repayment of the Crowne Plaza Bloomington loan (Prospectus ID#16), which was previously in special servicing and was analyzed with a loss scenario in October given the servicer’s commentary that a discounted payoff was a possibility. The better-than-expected outcome for this loan provides some cushion against any further deterioration in the outlook for the 135 South LaSalle loan, which also supports the rating actions taken with this review where all ratings were confirmed and the Negative trends assigned in October were maintained.

ESG CONSIDERATIONS
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.

DBRS Morningstar did not perform an updated model run as the analysis was deemed to be generally in line with the last review. As of the previous actions published on October 19, 2021, a material deviation from the North American CMBS Insight Model was reported on Class F, in which the rating assigned was higher than the implied results. The material deviation is warranted given the uncertain loan-level event risk with the loans in special servicing and on the servicer’s watchlist.

Classes X-A is an interest-only (IO) certificate that references 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#1 – 135 South LaSalle (15.1% of the 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 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 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@dbrsmorningstar.com.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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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