DBRS Morningstar Maintains MAD 2015-11MD Mortgage Trust Ratings Under Review with Negative Implications

DBRS, Inc. (DBRS Morningstar) maintained the Under Review with Negative Implications status of the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-11MD issued by MAD 2015-11MD Mortgage Trust:

-- Class A rated AAA (sf)
-- Class B rated AA (sf)
-- Class C rated A (low) (sf)
-- Class D rated BBB (low) (sf)

These ratings currently do not carry trends.

DBRS Morningstar placed these classes Under Review with Negative Implications on March 24, 2023, following the announcement that the collateral property’s largest tenant, Credit Suisse AG (Credit Suisse), would be acquired by UBS AG (UBS). DBRS Morningstar noted that these events could negatively affect the credit for the subject transaction given the uncertainty with regard to the tenant’s lease, which represents approximately half of the collateral property’s net rentable area (NRA).

These events prompted DBRS Morningstar to address Credit Suisse’s ratings on March 22, 2023 (see the press release titled “DBRS Morningstar Takes Rating Actions on Credit Suisse Following Sale to UBS,” https://www.dbrsmorningstar.com/research/411462). After the ratings for the subject transaction were placed Under Review with Negative Implications, on March 31, 2023, DBRS Morningstar discontinued and withdrew Credit Suisse’s Long-Term and Short-Term Issuer ratings and assigned new ratings, which were equalized to the ratings of UBS (see the press release titled “DBRS Morningstar Takes Follow-Up Rating Actions on Credit Suisse Following Sale to UBS,” https://www.dbrsmorningstar.com/research/412157).

The UBS acquisition of Credit Suisse closed on June 12, 2023; to date, nothing has been confirmed regarding the Credit Suisse lease for the collateral property, which is comprised of the fee, leasehold, and reversionary interest in the condominium units for 11 Madison Avenue, a Class A, 29-story, 2.3 million-square-foot office tower in Manhattan’s Midtown South submarket. News outlets have reported that UBS is exploring possibilities for distributing team operations between the subject property and UBS’s offices at 1285 Avenue of the Americas. Given the outstanding unknowns regarding the Credit Suisse lease and long-term plans for the subject property, DBRS Morningstar maintained the Under Review with Negative Implications for all classes.

Credit Suisse is the largest tenant at the property, in place on a lease expiring in May 2037. The building is located between 24th Street and 25th Street, occupying an entire city block that overlooks Madison Square Park. The servicer reported the property was 97.0% occupied as of year-end (YE) 2022. Credit Suisse recently gave back a floor of space representing approximately 3.5% of the NRA in exchange for a termination fee of $6.1 million, which was deposited into a reserve account. Other major tenants at the property include Sony (24.5% of the NRA, lease expiry in January 2031) and Yelp (8.1% of the NRA, lease expiry in April 2025).

Servicer-reported net cash flow for YE2022 was $130.2 million, reflective of a 2.84 times debt service coverage ratio. Performance has been stable to improving year over year since issuance. Credit Suisse has two remaining termination options, available in 2027 and 2032; each may be exercised for up to a full floor of space.

DBRS Morningstar has requested updates on the status of the Credit Suisse lease and UBS’s obligation given the acquisition’s closing and will continue to monitor closely for developments.

ENVIRONMENTAL, SOCIAL, 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 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/396929 (May 17, 2022).

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), which can be found on https://www.dbrsmorningstar.com/research/410912.

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

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 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.

These ratings are Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

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

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

North American Single-Asset/Single-Borrower Ratings Methodology (February 23, 2023;
https://www.dbrsmorningstar.com/research/410191)

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)