DBRS Assigns Provisional Ratings to BANK 2017-BNK6

DBRS, Inc. (DBRS) has today assigned provisional ratings to the followings classes of Commercial Mortgage Pass-Through Certificates, Series 2017-BNK6 (the Certificates) to be issued by BANK 2017-BNK6:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class C at AA (sf)
-- Class X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class X-E at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (high) (sf)
-- Class F at BB (sf)

All trends are Stable.

Classes X-D, X-E, X-F, X-G, D, E, F and G will be privately placed. The X-A, X-B, X-D, X-E, X-F and X-G balances are notional.

The collateral consists of 72 fixed-rate loans secured by 189 commercial and multifamily properties. The transaction is a sequential-pay pass-through structure. The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized net cash flow (NCF) and their respective actual constants, no loans had a DBRS Term debt service coverage ratio (DSCR) below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default. Additionally, to assess refinance (refi) risk given the current low interest rate environment, DBRS applied its refinance constants to the balloon amounts. This resulted in 17 loans, representing 49.6% of the pool, having refinance DSCRs below 1.00x and 11 loans, representing 34.4% of the pool, having refinance DSCRs below 0.90x.

Three loans, representing 22.6% of the transaction balance, exhibit credit characteristics consistent with an investment-grade shadow rating: General Motors Building (AAA), Gateway Net Lease Portfolio (BBB (high)) and Del Amo Fashion Center (A (low)). Both the pool’s term default risk and refinance risk are low as indicated by the strong weighted-average (WA) DBRS Term and Refi DSCRs of 1.95x and 1.28x, respectively. In addition, 52 loans, representing 77.1% of the pool, have a DBRS Term DSCR in excess of 1.50x and 34 loans, totaling 77.1%, have a DBRS Refi DSCR in excess of 1.15x. Eleven of the largest 15 loans in the pool meet both criteria. Even when excluding the three loans shadow-rated investment grade and the 19 co-operative loans that are very low leverage, the deal exhibits robust WA DBRS Term and Refi DSCRs of 1.73x and 1.13x, respectively. Seven loans that comprise 36.8% of the DBRS sample (28.3% of the pool) have favorable property quality based on physical attributes and/or a desirable location within their respective markets. One loan, representing 12.5% of the DBRS sample, was considered to be of Excellent property quality and two loans, totaling 11.9% of the DBRS sample, were considered to be Above Average property quality. Another four loans, representing 12.4% of the DBRS sample, received Average (+) property quality. Higher-quality properties are more likely to retain existing tenants/guests and more easily attract new tenants/guests, resulting in a more stable performance. No sampled loans were considered to be Below Average or Poor quality and only one loan, comprising 3.6% of the DBRS sample, was considered to be Average (-) quality.

The pool has a relatively high concentration of loans secured by non-traditional property types, such as self-storage, hospitality and mobile home community (MHC) assets which, on a combined basis, represent 24.0% of the pool across 17 loans. There are six loans totaling 14.7% of the pool that are secured by hotels, nine loans totaling 8.7% of the transaction balance secured by self-storage properties and two loans comprising 0.7% of the pool secured by MHC properties. Each of these asset types is vulnerable to high NCF volatility because of the relatively short-term leases compared with other commercial properties, which can cause NCF to quickly deteriorate in a declining market; however, such loans exhibit a WA DBRS Debt Yield and DBRS Exit Debt Yield of 11.5% and 13.0%, respectively, which compare favorably with the overall deal. The pool’s interest-only (IO) concentration is elevated at 73.3%. Fourteen loans, representing 43.9% of the pool, including seven of the largest 15 loans, are structured with IO payments for the full term and another 20 loans, representing 29.5% of the pool, have partial-IO periods ranging from 12 months to 60 months. Four of the full-term IO loans, representing 27.8% of the full-IO concentration in the transaction, have excellent locations in super dense urban markets that benefit from steep investor demand. Additionally, the transaction’s scheduled amortization by maturity is 9.4%, which is generally in line with other recent conduit securitizations.

The DBRS sample included 30 of the 72 loans in the pool. Site inspections were performed on 72 of the 189 properties in the portfolio (66.8% of the pool by allocated loan balance). The DBRS sample had an average NCF variance of -8.6% and ranged from -26.6% (General Motors Building) to +5.0% (Amazon Lakeland).

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

For more information on this transaction and supporting data, please log into www.ireports.dbrs.com. DBRS will continue to monitor this transaction with periodic updates provided in the DBRS CMBS IReports platform.

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

The principal methodology is North American CMBS Multi-Borrower Rating Methodology, which can be found on dbrs.com under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form 15-E), which contains a description of the information that the third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While DBRS did not rely on the due diligence services outlined in Form 15-E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.

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