DBRS Morningstar Confirms Ratings on DBJPM 2017-C6 Mortgage Trust; Removes Four Classes From Under Review with Negative Implications

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2017-C6 issued by DBJPM 2017-C6 Mortgage Trust as follows:

-- 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-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (sf)
-- Class X-D at BBB (high) (sf)
-- Class E-RR at BB (high) (sf)
-- Class F-RR at BB (low) (sf)

In addition, DBRS Morningstar discontinued the rating on Class A-1 at it was paid out as of the January 2021 remittance. All trends are Stable.

With this review, Classes X-D, D, E-RR, and F-RR were removed from Under Review with Negative Implications, where they were placed on August 6, 2020. The rating confirmations reflect the overall stable performance of the transaction since issuance. At issuance, the transaction consisted of 41 fixed-rate loans secured by 196 commercial and multifamily properties with a trust balance of $1.1 billion. According to the January 2021 remittance, 40 of the original 41 loans remain in the pool, with a collateral reduction of 4.9% as a result of scheduled amortization and the payoff of the deal’s 10th-largest loan in January 2021. The transaction is concentrated by property type as seven loans, representing 24.3% of the current trust balance, are secured by office collateral, while 10 loans, representing 21.0% of the current trust balance, are secured by retail collateral. Additionally, 11 loans, representing 30.9% of the pool, are on the servicer’s watchlist. These loans are being monitored for various reasons, including low debt service coverage ratios (DSCR) or occupancy, tenant rollover risk, and/or pandemic-related forbearance requests.

As of the January 2021 remittance, four loans, representing 6.0% of the pool, were in special servicing. Lake Forest Gateway (Prospectus ID#11, 3.3% of the pool), secured by a neighborhood retail center in Lake Forest, California, transferred to special servicing in June 2020 as a result of payment default. The borrower originally indicated that they wished to turn the property over to the lender because of the uncertainty of tenancy post-coronavirus; however, the property has performed better than anticipated and the borrower is now requesting a 90-day deferral of principal payments and the use of reserve funds to bring the loan current. The lender is in the process of evaluating its options for a modification or enforcement action in order to bring the loan current. The most recent proposal by the lender involves the use of existing reserves, fresh equity, payment deferral, and an extension of the interest-only period to give the property time to recover. As part of this review, DBRS Morningstar analyzed this loan with an elevated probability of default.

The Cincinnati Eastgate Holiday Inn loan (Prospectus ID#25, 1.2% of the pool), secured by a 212-key, full-service hotel 20 miles east of the Cincinnati CBD, transferred to special servicing in July 2020 as a result of payment default. The loan has struggled in 2020 because of the pandemic, reporting negative cash flow according to the T-12 Q3 2020 financials. The sponsor, who cashed out $10.1 million of equity as part of this loan, has given notice that they are unwilling to further carry loan payments and is cooperating in a friendly foreclosure filing. A receiver is now in place, operating the hotel and coordinating turnover with the owner. An updated appraised value as of September 2020 shows a value decline to $10.0 million, down from $20.5 million at issuance. Given the sharp value decline from issuance and the likelihood that the trust will eventually own the collateral properties, this loan was analyzed with a liquidation scenario that implied a loss severity approaching of 45.0%.

The transaction benefits from two loans, Gateway Net Lease Portfolio (Prospectus ID#2, 7.9% of the pool) and Olympic Tower (Prospectus ID#3, 7.4% of the pool), that are shadow-rated investment grade. With this review, DBRS Morningstar confirms that both loans continue to exhibit characteristics consistent with the investment-grade shadow ratings.

ESG CONSIDERATIONS
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, and X-D 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#11 – Lake Forest Gateway (3.3% of the pool)

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 info@dbrsmorningstar.com.

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 info@dbrsmorningstar.com.

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