DBRS Morningstar Places North American Single-Asset/Single-Borrower (SASB) Transactions Backed by Retail Properties Under Review with Negative Implications

DBRS, Inc. (DBRS Morningstar) placed the ratings on its outstanding North American Single-Asset/Single-Borrower (NA SASB) transactions secured by retail properties Under Review with Negative Implications. In addition, DBRS Morningstar placed the ratings on one outstanding NA SASB transaction secured by showroom properties and one outstanding NA SASB transaction secured by a mixed-use property with a high concentration of showroom and retail space Under Review with Negative Implications. DBRS Morningstar placed the relevant NA SASB ratings Under Review with Negative Implications as a result of the negative impact of the Coronavirus Disease (COVID-19) on the retail sector. DBRS Morningstar ratings that are placed Under Review with Negative Implications are typically confirmed or downgraded by a subsequent rating committee.

DBRS Morningstar ratings on NA SASB transactions backed by other property types are not affected by today’s rating action.

Today’s rating action follows a recent DBRS Morningstar commentary, “Extended Closures Come With Significant Challenges for Retail Loans in CMBS,” which discusses concerns surrounding the unique impacts of the coronavirus on U.S. CMBS deals backed by retail properties with the impact on SASB generally concentrated in regional malls. In that commentary, DBRS Morningstar described the reasons for its negative outlook on SASB deals backed by retail properties, including forced property closures caused by governmental mandates, ceased rental payments from some tenants, potential tenant bankruptcies, and changes in consumer behavior resulting from the pandemic.

Given that the updated mandates in the U.S. for social distancing and shelter in place have continued into the second quarter, DBRS Morningstar now believes that the net cash flow (NCF) decline may be substantial for some properties with a longer recovery period as store closings, rental interruptions, and potential tenant bankruptcies will have effects that extend beyond the lifting of shelter-in-place orders.

Similar to the effects of the coronavirus on the retail sector, showroom properties also face significant challenges with the closure of nonessential businesses, cancellation of events, and general stoppage in traffic for those property types amid efforts to curb the coronavirus’ spread.

DBRS Morningstar’s NA CMBS analytical team’s review is expected to include an analysis of several factors, including each property’s position within its market, its tenancy and exposure to struggling retailers, and sponsorship strength as a gauge of the property’s ability to weather the near- to medium-term effects of the pandemic. In addition, DBRS Morningstar’s assessment considers how collateral performance could deteriorate because of macroeconomic stresses associated with the coronavirus. Going forward, DBRS Morningstar will develop and apply the asset-class and transaction-specific stresses based on its set of macroeconomic scenarios for select economies related to the coronavirus, which are available in the DBRS Morningstar commentary, <a href="https://www.dbrsmorningstar.com/research/359679/" target="_blank">“Global Macroeconomic Scenarios: Implications for Credit Ratings”</a> published on April 16, 2020.

DBRS MORNINGSTAR PROVIDES ADDITIONAL UPDATE ON ITS CURRENTLY RATED NA SASB TRANSACTIONS
On March 1, 2020, DBRS Morningstar finalized the Request for Comment on its “North American Single-Asset/Single-Borrower Ratings Methodology” (NA SASB Methodology) and, as of the date of this press release, DBRS Morningstar is in the process of applying the finalized NA SASB Methodology to outstanding DBRS Morningstar-rated NA SASB transactions. Today’s rating action does not have an impact on the DBRS Morningstar ratings on NA SASB transactions that were previously placed Under Review with Developing Implications.

<a href="https://www.dbrsmorningstar.com/research/352726/" target="_blank">“DBRS Morningstar Requests Comments on North American Single-Asset/Single-Borrower Ratings Methodology”</a>

DBRS Morningstar will apply the finalized NA SASB Methodology to the relevant outstanding DBRS Morningstar ratings that remain Under Review with Developing Implications as of the date of this press release, reflecting its qualitative assumptions, capitalization rates, and the latest Loan-to-Value (LTV) Sizing Benchmarks as though there are no disruptions caused by the coronavirus.

At the same time, DBRS Morningstar may also apply the appropriate additional refined stress scenarios referenced above to reflect its then-current view on the disruptions that the coronavirus is expected to cause for the relevant U.S. SASB transactions backed by retail and showroom properties.

DBRS Morningstar notes that, depending on when DBRS Morningstar applies the finalized NA SASB Methodology to its NA SASB transactions backed by retail and showroom properties, every scenario reflecting the impact of the coronavirus may not be fully known; therefore, following its application of the NA SASB Methodology, the relevant DBRS Morningstar ratings may remain Under Review with Negative Implications.

On March 27, 2020, DBRS Morningstar also placed the ratings on its outstanding NA SASB transactions secured by lodging properties Under Review with Negative Implications for similar concerns surrounding the coronavirus and its impact on the hospitality industry. For more information regarding this rating action, please see:

<a href="https://www.dbrsmorningstar.com/research/358958/" target="_blank">“DBRS Morningstar Places North American Single-Asset/Single-Borrower (SASB) Transactions Backed by Lodging Properties Under Review with Negative Implications”</a>

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

MORNINGSTAR CREDIT RATINGS PLACES ITS CURRENTLY RATED NA SASB TRANSACTIONS UNDER REVIEW NEGATIVE
In conjunction with this press release, Morningstar Credit Ratings, LLC (MCR), DBRS Morningstar’s credit rating affiliate, also placed the ratings on its outstanding U.S. SASB transactions secured by retail properties Under Review Negative.

For more information on MCR’s related announcement, please see:

<a href="https://ratingagency.morningstar.com/PublicDocDisplay.aspx?i=IJY74ktHFYI%3d&m=&s=LviRtUKXqs8kml5dHt7FTeE2SZmY0Fvqd4iX49Mk%2f9UapyiFTEO6TA%3d%3d" target="_blank">“Morningstar Credit Ratings Places U.S. Single-Asset/Single Borrower (SASB) Transactions Backed by Retail Properties Under Review Negative”</a>

DBRS MORNINGSTAR AND MCR PROVIDE ADDITIONAL UPDATE ON U.S. SASB TRANSACTIONS MCR CURRENTLY RATES
Following today’s announcement, all outstanding MCR ratings on U.S. SASB transactions that were previously placed Under Review—Analytical Integration Review will remain Under Review—Analytical Integration Review.

<a href="https://ratingagency.morningstar.com/PublicDocDisplay.aspx?i=EJVXeO3Gj90%3d&m=&s=LviRtUKXqs8kml5dHt7FTeE2SZmY0Fvqd4iX49Mk%2f9UapyiFTEO6TA%3d%3d" target="_blank">“Morningstar Places Ratings in NA Single-Asset/Single-Borrower Asset Class Under Review”</a>

Further to the finalization of the DBRS Morningstar NA SASB Methodology on March 1, 2020, DBRS Morningstar will also continue applying the NA SASB Methodology to assign new DBRS Morningstar ratings to outstanding MCR U.S. SASB transactions that are not currently rated by DBRS Morningstar. DBRS Morningstar will apply the finalized NA SASB Methodology to the relevant outstanding MCR ratings, reflecting its qualitative assumptions, capitalization rates, and the latest LTV Sizing Benchmarks as though there are no disruptions caused by the coronavirus.

At the same time, DBRS Morningstar may also apply the appropriate additional refined stress scenarios referenced above to reflect its then-current view on the disruptions that the coronavirus is expected to cause for the relevant U.S. SASB transactions backed by retail and showroom properties.

DBRS Morningstar notes that, depending on when DBRS Morningstar applies the finalized NA SASB Methodology to MCR’s outstanding U.S. SASB transactions backed by retail and showroom properties, every scenario reflecting the impact of the coronavirus may not be fully known; therefore, following its application of the NA SASB Methodology, DBRS Morningstar may place the relevant DBRS Morningstar ratings Under Review with Negative Implications.

Subsequent to the assignment of the DBRS Morningstar ratings, the outstanding MCR ratings will be withdrawn at a future date. In accordance with MCR’s engagement letters covering these U.S. SASB transactions, upon withdrawal of these outstanding MCR ratings for U.S. SASB transactions, the relevant DBRS Morningstar ratings will become the successor ratings to the withdrawn MCR ratings.

A list of impacted NA SASB transactions include:

CURRENT DBRS MORNINGSTAR-RATED NA SASB TRANSACTIONS
-- BAMLL Commercial Mortgage Securities Trust 2013-WBRK
-- BAMLL Trust 2011 FSHN
-- BBCMS Trust 2015-VFM
-- BX Trust 2019-IMC
-- GS Mortgage Securities Corporation Trust 2012-ALOHA
-- GS Mortgage Securities Trust 2013-G1
-- Houston Galleria Mall Trust 2015-HGLR
-- Morgan Stanley Capital Barclays Bank Trust 2016-MART
-- MSCCG Trust 2015-ALDR
-- Real Estate Asset Liquidity Trust, Series 2019-HBC
-- Faubourg Boisbriand Shopping Centre Holdings Inc.
-- Ontrea Inc. (Lime Ridge Mall)
-- West Edmonton Mall Property Inc.
-- 110 Bloor Street West Inc.

CURRENT MCR-RATED NA SASB TRANSACTIONS
-- BBCMS 2013-TYSN
-- BBCMS 2015-STP
-- BB-UBS 2012-TFT
-- BX 2018-EXCL
-- CGMS 2017-MDDR
-- COMM 2012-LTRT
-- COMM 2013-GAM
-- CSMC 2018-SITE
-- DBWF 2015-LCM
-- GSMS 2012-TMSQ
-- Hudson’s Bay Simon JV Trust 2015-HBS
-- JPMCC 2012-WLDN
-- MSBAM 2012-CKSV
-- MSC 2013-ALTM
-- MSC 2018-MP
-- MSCI 2015-XLF2
-- SFAVE 2015-5AVE
-- SRPT 2014-STAR
-- US 2018-USDC
-- WFLD 2014-MONT
-- WP Glimcher Mall Trust 2015-WPG

DBRS Morningstar notes that the above press release was amended on April 28, 2020, to add 100 Bloor Street West Inc. to the list of affected DBRS Morningstar-rated NA SASB transactions. The change was minor and would not impact the understanding of the reader.

For analytical inquiries regarding this press release, please contact Erin Stafford, Managing Director, North American CMBS.

DBRS Morningstar
Erin Stafford
[email protected]
+1 312 332-3291

For rating engagement inquiries regarding NA CMBS transactions, please contact Sean O’Connor, Managing Director, Head of Global Business Development.

DBRS Morningstar
Sean O’Connor
[email protected]
+1 212 806-3252

For more information on the transactions rated by DBRS Morningstar, please visit www.dbrsmorningstar.com or contact DBRS Morningstar at [email protected]. For transactions rated by MCR, please visit www.morningstarcreditratings.com or contact [email protected].

DBRS Morningstar
Stephen Bernard
[email protected]
+1 212 806-3240