DBRS Morningstar Upgrades Two Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2014-C15

DBRS Limited (DBRS Morningstar) upgraded its ratings on two classes of the Commercial Mortgage Pass-Through Certificates, Series 2014-C15 (the Certificates) issued by Morgan Stanley Bank of America Merrill Lynch Trust 2014-C15 (the Trust) as follows:

-- Class D to BBB (high) (sf) from BBB (sf)
-- Class E to BBB (sf) from BBB (low) (sf)

DBRS Morningstar also confirmed the following classes:

-- Class A-SB at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (sf)
-- Class PST at AA (sf)
-- Class F at BB (sf)
-- Class G at BB (low) (sf)
-- Class X-C at B (sf)
-- Class H at B (low) (sf)

All trends are Stable.

The rating upgrades reflect the increased credit support to the Certificates as a result of the repayment of the third-largest loan in the pool, La Concha Hotel & Tower (Prospectus ID#3; previously 10.1% of the pool), and additional defeasance of two loans since DBRS Morningstar’s last rating action in November 2022. In total, the trust has paid down more than 40% since issuance as a result of scheduled loan repayments and amortization, and 21.2% of the pool is defeased as of the June 2023 remittance. Additionally, the transaction benefits from the presence of two loans, comprising more than 30.0% of the pool, that are shadow-rated investment grade by DBRS Morningstar, including the largest loan in the pool, Arundel Mills & Marketplace (Prospectus ID#1; 23.3% of the pool). Performance across the remaining non-defeased loans in the pool continues to be quite strong, with a weighted average debt service coverage ratio (DSCR) and debt yield of 2.60 times (x) and 17.2%, respectively, as of the YE2022 reporting. There have been no realized losses to date, with the full issuance balance of $27.0 million remaining in the unrated Class J.

As of the June 2023 remittance, the trust consists of 32 of the original 48 loans, with an aggregate principal balance of $639.6 million, reflecting a collateral reduction of 40.8% since issuance. The transaction is concentrated by property type with more than 70.0% of the loans in the pool secured by either retail or hotel collateral. There are currently no loans in special servicing and five loans, representing 23.3% of the pool, are being monitored on the servicer’s watchlist, including the second-largest loan in the pool, AmericasMart (Prospectus ID#2; 17.0% of the pool). This loan, secured by one of the country’s largest wholesale market centers in Atlanta, was added to the watchlist in June 2023 because of the upcoming loan maturity in December 2023. Although cash flow declined in 2020 and 2021 as a result of the pandemic, performance has since increased close to pre-pandemic levels, most recently reporting a DSCR of 2.08x as of YE2022. In addition to AmericasMart, two other loans, Miami Airport Hotel Portfolio - Hilton Garden Inn (Prospectus ID#8; 2.9% of the pool) and Miami Airport Hotel Portfolio - Homewood Suites by Hilton (Prospectus ID#9, 2.1% of the pool), were also added to the servicer’s watchlist in June 2023 for upcoming maturity in December 2023. Both loans appear to be well positioned ahead of their respective loan maturities, reporting DSCRs of 2.83x and 2.51x, respectively. All 32 of the remaining loans are scheduled to mature by April 2024.

In the case of the loans showing performance declines on the servicer’s watchlist, where applicable, probability-of-default and/or loan-to-value penalties were applied to reflect the increased risks and increased the expected loss in the analysis.

At issuance, DBRS Morningstar shadow-rated the Arundel Mills & Marketplace and JW Marriott and Fairfield Inn & Suites loans (Prospectus ID#7; 7.3% of the pool) investment grade. With this review, DBRS Morningstar confirms that the performance of these loans remains consistent with investment-grade loan characteristics.

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

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.

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 ratings assigned to Classes F, G, and H materially deviate from the ratings 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 ratings 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 ratings. The significant paydown and defeasance are primary contributors to the upgrade pressure; however, DBRS Morningstar maintained a conservative approach for the three lowest-rated classes given the increased concentration for the pool that means higher adverse selection risk. DBSRS Morningstar also notes uncertain loan-level event risk given that all loans mature by April 2024 and the current financing environment is challenging, even for property owners with collateral showing healthy performance metrics.

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.

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

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 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 (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

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

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.

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