DBRS Upgrades One Class of MSC 2011-C3 Mortgage Trust

DBRS Limited (DBRS) upgraded the rating of the following class in the Commercial Mortgage Pass-Through Certificates, Series 2011-C3 issued by MSC 2011-C3 Mortgage Trust:

-- Class C to AA (sf) from AA (low) (sf)

Additionally, DBRS has confirmed the following classes:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-J at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AAA (sf)
-- Class D at A (sf)
-- Class E at BBB (sf)
-- Class F at BBB (low) (sf)
-- Class X-B at BB (low) (sf)
-- Class G at B (high) (sf)

All trends are Stable. DBRS has removed the positive trends on Class F and Class G due to uncertainty surrounding the recent transfer of the Forum at Central loan (Prospectus ID#51 – 0.6% of the pool balance) to special servicing. In addition, there are currently five loans representing 10.3% of the pool balance that are located in Houston, Texas, that have potentially been affected by Hurricane Harvey. DBRS continues to monitor these loans for further developments and will provide updated loan level commentary on the CMBS IReports platform as information becomes available.

The rating upgrade to Class C reflects the increased credit support to the bonds as a result of significant principal repayment and overall strong performance of the transaction since issuance. The transaction originally consisted of 63 fixed-rate loans secured by 76 properties. As of the August 2017 remittance, 45 loans remain in the pool, with 18 loans repaid since issuance, resulting in a collateral reduction of 37.9% and a current outstanding trust balance of $926.1 million. Thirty-seven loans, representing 91.3% of the pool balance, are reporting Q1 or Q2 2017 financials, and 40 loans, representing 95.8% of the pool balance, have reported year-end (YE) 2016 figures. These loans reported a weighted-average (WA) debt service coverage ratio (DSCR) and WA Debt Yield of 1.80 times (x) and 12.6%, respectively. This is an improvement from the DBRS WA Term DSCR and WA Debt Yield at issuance of 1.70x and 10.8%, respectively. The Top 15 loans reported a WA DSCR and WA Debt Yield of 1.85x and 12.9%, respectively, reflective of a 21.7% improvement in cash flows over the DBRS cash flows at issuance.

As of the August 2017 remittance, six loans, representing 12.0% of the pool balance, are being monitored on the servicer’s watchlist. Two loans are being monitored for not reporting YE2016 financials (both of which have reported healthy metrics historically), with the remaining four loans monitored for occupancy-related issues. There is one loan, representing 0.6% of the pool balance, in special servicing.

At issuance, DBRS shadow-rated three loans investment grade. These loans include Park City Center (Prospectus ID#1 – 15.2% of the pool balance), Washington Tower (Prospectus ID#13 – 4.3% of the pool balance) and 420 East 72nd Street Coop (Prospectus ID#33 – 1.2% of the pool balance). DBRS has today confirmed that the performance of these loans remains consistent with investment-grade characteristics.

The ratings assigned to Classes D, E, F and G materially deviate from the higher ratings implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology. The deviations are warranted due to uncertain loan level event risk associated with the recent transfer of the Forum at Central loan (Prospectus ID#51 – 0.6% of the pool balance) and the uncertainty surrounding the impact of Hurricane Harvey in Texas.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans and the specially serviced loan in the transaction, as well as the Top 15 loans, in the DBRS CMBS IReports platform. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register or log into DBRS CMBS IReports at www.ireports.dbrs.com.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies.

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

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.