Morningstar DBRS Downgrades Credit Ratings on Seven Classes of Morgan Stanley Bank of America Merrill Lynch Trust 2015-C27, Changes Trend on One Class to Negative From Stable

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on seven classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C27 issued by Morgan Stanley Bank of America Merrill Lynch Trust 2015-C27 as follows:

-- Class C to BBB (low) (sf) from A (low) (sf)
-- Class D to CCC (sf) from BBB (sf)
-- Class XD to CCC (sf) from BBB (high) (sf)
-- Class E to C (sf) from BB (low) (sf)
-- Class X-E to C (sf) from BB (sf)
-- Class F to C (sf) from CCC (sf)
-- Class X-F to C (sf) from CCC (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class A-3 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 AA (low) (sf)
-- Class G at C (sf)
-- Class H at C (sf)

Morningstar DBRS discontinued the credit rating on Class A-SB, which repaid with the April 2025 remittance. Morningstar DBRS changed the trend on Class C to Negative from Stable. Classes A3, A4, AS, B, C, X-A, and X-B have Stable trends. Classes D, E, X-D, X-E, F, G, H, and X-F have credit ratings that do not typically carry trends in commercial mortgage backed securities (CMBS) transactions.

The credit rating downgrades on Classes C, D, E, F, X-D, X-E, and X-F reflect the increased loss projections for the pool stemming from the liquidation analysis for the two loans in special servicing: 535-545 Fifth Avenue (Prospectus ID#1; 14.8% of the pool) and Granite 190 (Prospectus ID#5; 6.1% of the pool), discussed further below. In its analysis, Morningstar DBRS liquidated both specially serviced loans from the pool and, on a combined basis, losses were projected at approximately $55.0 million. The projected losses erode up to the Class E certificate, supporting the credit rating downgrades on Classes E, F, X-D, X-E, and X-F. The transaction's structure is limited due to the smaller principal class balances toward the bottom of the capital stack, which resulted in a considerable decline in credit enhancement to Classes C and D with the liquidation analysis, supporting the credit rating downgrades on those two classes.

The majority of the remaining loans in the pool have a scheduled maturity in the next three months and Morningstar DBRS expects most of those loans will repay successfully from the trust. However, Morningstar DBRS has identified three loans, representing 14.8% of the pool, that have an elevated refinance risk as a result of performance concerns and below-submarket figures in a maturity year. The weighted-average (WA) expected loss (EL) for these loans is more than 170% greater than the WA EL for the pool. In the event that these loans or other loans in the pool do not secure takeout financing there is potential for further credit rating actions, supporting the Negative trend on Class C.

The largest loan in the pool, 535-545 Fifth Avenue, is secured by two mixed-use buildings in Manhattan, including 415,440 square feet (sf) of office space and 91, 247 sf of retail space. The loan transferred to special servicing in March 2025 for maturity default after the borrower was unable to pay off the loan at its scheduled maturity date earlier that month. According to the April 2025 servicer commentary, the borrower is in discussions with the lender regarding a potential extension of the loan. Performance at the subject has improved over the last few reporting periods. As of YE2024, the subject reported an occupancy rate of 95% with a net cash flow (NCF) of $23.9 million and debt service coverage ratio (DSCR) of 1.96x compared with the YE2023 NCF and DSCR of $20.4 million and 1.68x and the low YE2019 NCF of $11.7 million and DSCR of 0.96x. Given the strong coverage and positive leasing momentum, Morningstar DBRS expects the loan to be extended; however, by YE2025, there is a cumulative rollover risk of 25.8% of the net rentable area (NRA) coupled with the subject's recent maturity default, Morningstar DBRS believes overall credit risk remains heightened. As a result, Morningstar DBRS liquidated this loan from the pool with a 65.0% haircut to the issuance appraised value of $630 million in addition to including the outstanding advances and expected servicer expenses, which totaled nearly $7.1 million. This analysis suggested a loss severity in excess of 35.0%, or approximately $33 million.

The second-largest loan in special servicing is secured by Granite 190, which includes two three-story Class A suburban office buildings in Richardson, Texas. The loan transferred to special servicing in February 2023 for imminent monetary default resulting from the downsizing of the former largest tenant, United Healthcare, to 49,6000 sf (16.1% of the NRA) from 176,000 sf (56.8% of the NRA). The loan was ultimately foreclosed on and the property became real estate owned in December 2023. Although United Healthcare retained its place as the largest tenant, its lease has an upcoming expiration in June 2026. According to the March 2024 rent roll, the property is 37.2% occupied by only two small tenants, cumulatively representing only 2.4% of NRA, that are scheduled to roll in the next 12 months. According to Reis, the vacancy rate in the Plano/Allen submarket was notable at 27.4% as of Q1 2025. The most recent appraisal dated December 2024 valued the property at $30.4 million compared with $28.8 million in January 2024, $33.0 million in June 2023, and $55.0 million at issuance. Given the subject property continues to struggle with occupancy and location in a submarket with high vacancy, the loan was liquidated from the pool. Morningstar DBRS applied a 20% haircut to the December 2024 appraised value, in addition to including the outstanding advances and expected servicer expenses, which totaled nearly $9.0 million. This analysis suggested a loss severity of nearly 60.0%, or approximately $21.8 million.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

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

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448963.

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

The credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

-- North American CMBS Multi-Borrower Rating Methodology (April 09, 2025)/North American CMBS Insight Model v 1.3.0.0, https://dbrs.morningstar.com/research/451739.

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702.

-- Legal Criteria for U.S. Structured Finance (December 03, 2024), https://dbrs.morningstar.com/research/444064.

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283.

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.