DBRS Morningstar Confirms All Ratings on Classes of CSAIL 2015-C4 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed all ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C4 issued by CSAIL 2015-C4 Commercial Mortgage Trust as follows:

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

All trends are Stable. The rating confirmations and Stable trends reflect DBRS Morningstar’s expectation that the underlying loans will continue to perform generally in line with historical trends.

As of the May 2023 remittance report, 84 of the original 87 loans remain in the pool, representing a collateral reduction of 11.3% since issuance as a result of loan amortization and loan repayments. Twenty-two loans, representing 21.3% of the pool, have been fully defeased, an increase from 14.0% at the time of the last rating action in November 2022. The pool also benefits from relatively low exposure to loans collateralized by office properties, which represent 8.9% of the pool. In general, the office loans in the pool are performing in line with historical trends (except for one loan, Dorsey Business Center III (Prospectus ID #48; 0.7% of the pool), currently in special servicing) but DBRS Morningstar is closely monitoring their performance, given the uncertainty surrounding the office sector in recent years. In addition, four loans, representing 2.4% of the pool, are on the servicer’s watchlist, a significant decrease from 25.2% as of November 2022. Excluding defeasance, the top 14 loans, representing 45.9% of the pool, had a weighted-average debt service coverage ratio (DSCR) of 3.13 times (x) based on 2022 reporting, suggesting the overall performance remains stable.

During DBRS Morningstar’s last review in November 2022, the two loans that were in special servicing at the time were liquidated with a combined projected loss of $4.9 million. Since then, both loans, representing 1.3% of the current pool, have each reported value declines from the appraisals available as of November 2022. For this review, DBRS Morningstar adjusted the projected loss scenarios for both loans, resulting in a combined loss figure of $5.9 million, which erodes 14.1% of the nonrated first loss certificate, which had a balance of $41.8 million as of the May 2023 remittance.

The largest loan in the pool, Fairmont Orchid (Prospectus ID#1; 13.5% of the pool), is secured by a full-service hotel in Kohala Coast, Hawaii. The property experienced performance declines as a result of the travel restrictions imposed amid the Coronavirus Disease (COVID-19) pandemic restrictions; however, as those restrictions have eased, performance has significantly improved and is now even exceeding the issuance metrics. According to the YE2022 financials, net cash flow (NCF) was reported at $24.1 million (reflecting a DSCR of 5.60x), a substantial increase from the issuance figure of $9.2 million (reflecting a DSCR of 2.14x), as a result of a 39.0% increase in departmental revenue. Per the March 2023 STR report, figures for the trailing 12 month (T-12) ended March 31, 2023, for occupancy rate, average daily rate, and revenue per available room (RevPAR) were 65% (+12.6% year-over-year (YOY)), $512.37 (+6.5% YOY), and $330.02 (+19.9% YOY), respectively. The improvement from issuance is significant, but it is noteworthy that the hotel underperforms its competitive set, with a RevPAR penetration rate of 86.0% for the same T-12. Although the performance has significantly improved, to be conservative, DBRS Morningstar maintained a probability of default stress in the analysis from previous reviews.

The two specially serviced loans in the pool were both transferred to special servicing in October 2021 for payment default. As of May 2023, both loans remain delinquent. The Dorsey Business Center III loan is secured by a Class B suburban office building in Elkridge, Maryland. After several tenants vacated the property at their lease expirations, the occupancy rate dropped to 42.1% as of YE2020—where it has remained as of YE2022—from 91.8% as of YE2019. The property was reappraised at $4.3 million in November 2022, representing a 53% decline from $9.1 million at issuance. The Richmond Highlands Center loan (Prospectus ID#56; 0.6% of the current pool) is secured by a mixed-use retail/office space in Warrenville, Ohio. As of March 2023, the property was 39.1% occupied with minimal near-term rollover scheduled. The servicer reports the borrower is struggling to backfill the vacant spaces and the servicer is in the process of installing a receiver. A January 2023 appraisal revalued the property at $2.9 million, a 60.0% decline from $7.2 million at issuance. For this review, DBRS Morningstar liquidated both of these loans based on a haircut to the most recent appraised values, with the analyzed losses resulting in a loss severity in excess of 51.0% for Dorsey Business Center III and 62.0% for Richmond Highlands Center.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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 (May 17, 2022) at https://www.dbrsmorningstar.com/research/396929.

Classes X-A, X-B, X-D, X-F, and X-G 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.

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating assigned to Class G materially deviates from the rating implied by the predictive model. DBRS Morningstar typically expects there to be a substantial likelihood that a reasonable investor or other user of the credit rating would consider a three-notch or more deviation from the credit rating stress(es) implied by the predictive model to be a significant factor in evaluating the credit rating. The rationale for the material deviation for Class G is uncertain loan-level event risk tied to the loans in special servicing and other loans in the pool exhibiting performance challenges that could impair the ability to secure replacement financing over the remaining term.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model Version 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

Rating North American CMBS Interest-Only Certificates (December 19, 2022) https://www.dbrsmorningstar.com/research/407577

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022) https://www.dbrsmorningstar.com/research/402646

North American Commercial Mortgage Servicer Rankings (September 8, 2022) https://www.dbrsmorningstar.com/research/402499

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022) https://www.dbrsmorningstar.com/research/402153

Legal Criteria for U.S. Structured Finance (December 7, 2022)
https://www.dbrsmorningstar.com/research/407008

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