DBRS Morningstar Confirms Ratings on BANK 2017-BNK7

DBRS Limited (DBRS Morningstar) confirmed the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2017-BNK7 issued by BANK 2017-BNK7 as follows:

-- 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.

Classes G and X-F were removed from Under Review with Negative Implications where they were placed on August 6, 2020.

As of the December 2020 remittance, 64 of the original 65 loans remain in the pool, representing a collateral reduction of 2.1% since issuance. Additionally, 18 loans, representing 15.3% of the current trust balance, are on the servicer’s watchlist. These loans are generally being monitored for a low debt service coverage ratio and occupancy issues that have generally been driven by disruptions related to the Coronavirus Disease (COVID-19) pandemic.

Twelve of the loans on the watchlist (2.4% of the pool) are secured by co-op properties, while six of the loans (12.9% of the pool) are secured by non-co-op properties, including three loans backed by limited service hotels (11.1% of the pool), two by multifamily properties (1.6% of the pool), and one by a retail property (0.2% of the pool). With the exception of the Redondo Beach Hotel (Prospectus #7; 5.1% of the pool) property, which saw cash flow declines through YE2019, the hospitality properties in the pool have generally exhibited stable credit characteristics since issuance. Although the pandemic-related stress on hospitality properties across the country is undoubtedly affecting the collateral hotels in this pool, a factor generally indicative of increased risks from issuance, the historically stable performance and the lack of delinquency were noted as stabilizing factors for this review. DBRS Morningstar will continue to monitor those loans for developments.

At issuance, five loans, representing 25.1% of the current pool balance, were shadow-rated investment grade. These loans include General Motors Building (Prospectus ID #1; 9.4% of the pool); Westin Building Exchange (Prospectus ID#5; 5.7% 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; 2.7% of the pool). With this review, DBRS Morningstar confirms that the performance of these loans remains consistent with investment-grade loan characteristics.

One loan is in special servicing: HGI Memphis Wolfchase Galleria (Prospectus ID#22), representing 1.1% of the pool. The collateral is a 124-key limited service hotel located in Cordova, Tennessee, and the loan was transferred to the special servicer in May 2020 for monetary default related to the coronavirus pandemic. According to the servicer’s commentary, conversations with the borrower regarding the workout strategy remain ongoing.

Although the overall performance of the pool has remained generally stable from issuance, DBRS Morningstar continues to monitor the impact of the pandemic on the underlying collateral. DBRS Morningstar notes that the subject pool has a relatively moderate concentration (12.2%) of loans backed by hospitality properties. The pool has a higher concentration of loans secured by retail properties, which represent 21.9% of the current balance. Both hotel and retail property types have been among the hardest hit by the effects of the pandemic and, as such, these loans will be monitored closely for developments.

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.

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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. 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.

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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 [email protected].

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

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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