Press Release

DBRS Morningstar Downgrades Two Classes of CSAIL 2017-C8 Commercial Mortgage Trust, Removes Four Classes from Under Review with Negative Implications

CMBS
January 25, 2021

DBRS Limited (DBRS Morningstar) downgraded two classes of the Commercial Mortgage Pass-Through Certificates Series 2017-C8 issued by CSAIL 2017-C8 Commercial Mortgage Trust as follows:

-- Class E to B (high) (sf) from BB (sf)
-- Class F to B (sf) from B (high) (sf)

The trends on these classes are Negative.

In addition, DBRS Morningstar confirmed the ratings on the remaining classes as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class V1-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class V1-B at A (sf)
-- Class D at BBB (sf)
-- Class V1-D at BBB (sf)

Additionally, DBRS Morningstar confirmed its ratings on the following rake bonds, which are secured by the beneficial interest in the subordinate debt placed on the 85 Broad Street (Prospectus ID#1; 11.2% of pool) loan:

-- Class 85BD-A at AA (low) (sf)
-- Class V1-85A at AA (low) (sf)
-- Class 85BD-B at A (low) (sf)
-- Class V1-85B at A (low) (sf)
-- Class 85BD-C at BBB (low) (sf)
-- Class V1-85C at BBB (low) (sf)
-- Class V2-85 at BBB (low) (sf)

DBRS Morningstar also removed Classes D, E, F, and V1-D from Under Review with Negative Implications where they were placed on August 6, 2020. All trends are Stable, with the exception of classes D, V1-D, 85BD-B, 85BD-C, V1-85B, V1-85C, and V2-85, which all carry a Negative trend.

The Negative trends and rating downgrades reflect the continued performance challenges facing the underlying collateral, much of which has been driven by the impact of the Coronavirus Disease (COVID-19) pandemic. In addition to the seven loans in special servicing, representing 16.2% of the current pool balance as of the January 2020 remittance, DBRS Morningstar notes that the pool has a significant concentration of retail and hospitality properties, representing 14.2% and 14.5% of the pool balance, respectively. The coronavirus pandemic has affected these property types most severely and, as such, those concentrations suggest increased risks for the pool, particularly at the lower rating categories, since issuance.

At issuance, the transaction consisted of 32 fixed-rate loans secured by 55 commercial and multifamily properties at a trust balance of $811.1 million. According to the January 2020 remittance, all 32 loans remain in the pool with a collateral reduction of 1.5%. The transaction is concentrated by property type as eight loans, representing 44.8% of the current trust balance, are secured by office collateral while the second-largest concentration, representing14.5% of the current trust balance, is made up of four loans secured by lodging collateral. Two loans, representing 1.6% of the current trust balance, are fully defeased. Additionally, 18 loans, representing 36.3% 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.

The transaction’s largest specially serviced loan, Hotel Eastlund (Prospectus ID#5; 5.0% of the pool), is secured by a 168-room, full-service hotel located in Portland, Oregon. The loan transferred to special servicing in July 2020 for payment default amid the pandemic. The hotel previously benefited from its proximity to the Portland Convention Center and has historically been well occupied with corporate travelers, reporting a demand segmentation of 35% for commercial guests and 30% for meeting and group guests at issuance. Due to the significant decline in business travel in 2020, occupancy and cash flow has dropped precipitously from YE2019. As of Q3 2020, the loan reported an occupancy rate of 23% and an annualized DSCR of -0.20 times. As of November 2020, the appraised value of the property was $41.1 million, which represents a loan-to-value ratio approaching 100%, based on the current trust balance. DBRS Morningstar assumed a liquidation scenario based on a 10% haircut to the November 2020 value as part of this review, which resulted in a loss severity of 22.4%.

The second-largest specially serviced loan, Acropolis Gardens (Prospectus ID#13; 2.5% of the pool), is secured by a co-operative property in Astoria, New York. The loan transferred to special servicing in November 2018 for payment default. Several lawsuits have been filed against the borrower and property manager for fraudulent misuse of funds over a span of several years and for failure to remediate life/safety issues. Notably, the borrower had previously been involved in over 20 litigation matters relating to fraud and misappropriated funds. The lender had initiated the foreclosure process and had appointed a receiver, however, as of October 2019, the servicer’s commentary shows that a settlement has been executed. The loan will remain with the special servicer until the borrower is in full compliance with all of the terms and conditions. DBRS Morningstar received an updated appraisal dated October 2020 that showed a value increase to $196.7 million from $177.0 million at issuance. Given the risks with this and the other specially serviced loans, DBRS Morningstar analyzed these loans with elevated probabilities of default.

The transaction benefits from four loans, 85 Broad Street (Prospectus ID#1; 11.2% of pool), Apple Sunnyvale (Prospectus ID#3; 8.8% of pool), Urban Union Amazon (Prospectus ID#6; 4.8% of pool), and 71 Fifth Ave (Prospectus ID#12; 3.1% of pool), that are shadow-rated investment grade. With this review, DBRS Morningstar confirms that all four loans continue to exhibit characteristics consistent with the investment-grade shadow ratings.

Classes 85BD-A, 85BD-B, and 85BD-C are nonpooled rake bonds backed by the nonpooled $72.0 million 85 Broad Street A-B note. The loan's nonpooled $58.8 million B-A note and $58.8 million B-B note are subordinate to both the rake bonds and the $169.0 million pooled A note. Classes 85BD-B, V1-85B, 85BD-C, V1-85C, and Class V2-85 carry a Negative trend as DBRS Morningstar remains concerned about the collateral’s exposure to WeWork, which accounts for 26.2% of the asset’s net rentable area and 30.8% of base rent.

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 and X-B 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#5 – Hotel Eastlund (5.0% 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 the 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

Ratings

  • Date IssuedDebt RatedRatingTrendActionAttributesi
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class A-1AAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class A-2AAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class A-3AAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class A-4AAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class A-SAAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class A-SBAAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class V1-AAAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class X-AAAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class BAA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class 85BD-AAA (low) (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class V1-85AAA (low) (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class X-BA (high) (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class CA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class V1-BA (sf)StbConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class 85BD-BA (low) (sf)NegConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class V1-85BA (low) (sf)NegConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class DBBB (sf)NegConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class V1-DBBB (sf)NegConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class 85BD-CBBB (low) (sf)NegConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class V1-85CBBB (low) (sf)NegConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class V2-85BBB (low) (sf)NegConfirmed
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class EB (high) (sf)NegDowngraded
    CA
    25-Jan-21Commercial Mortgage Pass-Through Certificates, Series 2017-C8, Class FB (sf)NegDowngraded
    CA
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CSAIL 2017-C8 Commercial Mortgage Trust
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.