DBRS Confirms All Classes of BANK 2017-BNK7

DBRS Limited (DBRS) confirmed all ratings of the following classes of Commercial Mortgage Pass-Through Certificates, Series 2017-BNK7 (the Certificates) issued by BANK 2017-BNK7:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS’s expectations since issuance. The subject transaction closed in September 2017 and originally consisted of 65 fixed-rate loans secured by 83 commercial and multifamily properties with an original trust balance of $1,213 million. As of the August 2018 remittance, there has been a collateral reduction of 0.3% since issuance, due to scheduled loan amortization, with all 65 loans remaining in the pool.

Five of the largest 13 loans in the pool, representing 24.9% of the pool balance (General Motors Building (Prospectus ID#1; 9.3% of the pool), Westin Building Exchange (Prospectus ID#5; 5.6% of the pool), The Churchill (Prospectus ID#8; 4.1% of the pool), Overlook at King of Prussia (Prospectus ID#9; 3.4% of the pool) and Moffett Place B4 (Prospectus ID#13; 2.6% of the pool)), exhibit credit characteristics consistent with investment-grade shadow ratings. Furthermore, 19 loans, representing 9.4% of the pool, are secured by cooperative properties and are very low-leverage with minimal term and refinance default risk. Twenty-three loans, representing 52.1% of the pool, including seven of the largest 15 loans, are structured with interest-only (IO) payments for the full term and an additional 12 loans, representing 20.7% of the pool, have partial IO periods.

As of the August 2018 remittance, there was one loan (38-50 West 9th Street Corp.; Prospectus ID#34), representing 0.6% of the pool balance, listed on the servicer’s watchlist. The loan was placed on the watchlist for the lack of financial reporting since issuance, with the servicer’s commentary suggesting covenant default letters had been sent to the sponsor. It is noteworthy that the recently released September 2018 remittance showed a total of six loans on the servicer’s watchlist, including the 38-50 West 9th Street Corp. loan. All six loans are secured by cooperative properties, with most being monitored for non-reporting of property financials, a common occurrence for this property type and time since closing for the transaction. As the September 2018 reporting suggests those loans were all added to the watchlist in December 2017, DBRS has requested clarification from the servicer.

As of the August 2018 remittance, there were nine loans, representing 24.7% of the pool balance, reporting year-end 2017 financials, with 34 loans representing 58.4% of the pool, reporting a partial-year 2018 figure. Four of the loans reporting YE2017 financials are in the top 15, representing 19.9% of the pool. In general, the YE2017 figures reported for those loans are in line with DBRS’s expectations at issuance. The limited financial reporting for the deal is not uncommon, given the recent vintage and fourth-quarter closing date. DBRS will continue to monitor for updated financials as the deal continues to season.

With this review, DBRS has also confirmed that the performance of all five shadow-rated loans remains in line with the investment-grade shadow rating. For additional information on those loans, please see the loan commentary in the DBRS Viewpoint platform, for which information has been provided below.

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

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Westin Building Exchange (Prospectus ID#5)
-- The Churchill (Prospectus ID#8)
-- Overlook at King of Prussia (Prospectus ID#9)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

The rating assigned to Class F materially deviates 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 given the sustainability of loan performance not yet demonstrated.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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@dbrs.com.

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

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