DBRS Morningstar Confirms Ratings on Citigroup Commercial Mortgage Trust 2017-B1

DBRS Limited (DBRS Morningstar) confirmed the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2017-B1 issued by Citigroup Mortgage Trust 2017-B1 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-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class X-E at BB (high) (sf)
-- Class E at BB (sf)
-- Class F at B (high) (sf)
-- Class X-F at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

As of the January 2021 remittance, all 48 original loans remain in the pool. There are 11 loans, representing 20.4% of the current trust balance, on the servicer’s watchlist. Additionally, there are three loans, representing 7.8% of the pool, in special servicing. These loans are generally being monitored for a low debt service coverage ratio and/or occupancy issues that have generally been driven by disruptions related to the Coronavirus Disease (COVID-19) pandemic. There is one loan (representing 1.1% of the pool) that is fully defeased.

DBRS Morningstar notes the transaction is concentrated in loans secured by mixed-use properties, typically a combination of retail and office space, with eight loans, representing 25.9% of the pool, secured by that property type. The transaction has a moderate concentration of retail property types in this pool, with 12 loans secured by regional malls, anchored retail properties, and unanchored retail properties, collectively representing 21.6% of the pool. In addition, the pool has a moderate concentration of hospitality properties, with hotel loans representing 17.4% of the pool. Hospitality properties have been the most severely affected by the initial effects of the coronavirus pandemic and although the hotels backing loans in the subject pool have not been immune to those effects, with two hotel loans in special servicing and others on the watchlist for relief requests, the overall outlook for those loans remains stable as of this review.

Two of the loans on the watchlist (6.0% of the pool) are secured by lodging properties, and two loans are secured by retail properties (4.6% of the pool). Both loans backed by hospitality properties have been flagged for coronavirus relief requests, with those borrowers typically seeking temporary payment relief. Although the increased risks in the performance challenges for these loans amid the pandemic are noteworthy, DBRS Morningstar notes both generally benefit from the historically stable performance of the underlying hotels and borrowers who appear committed to their respective loans and properties. DBRS Morningstar also notes that six loans (8.4% of the pool) are being monitored on the servicer’s watchlist for nonperformance-related issues, which include failure to submit financials, expired flood coverage insurance, and deferred maintenance.

At issuance, four loans, representing 24.3% of the current pool balance, were shadow-rated investment grade. These loans include General Motors Building (Prospectus ID#1; 10.0% of the pool); Lakeside Shopping Center (Prospectus ID#2; 6.4% of the pool); Two Fordham Square (Prospectus ID#5; 5.7% of the pool); and Del Amo Fashion Center (Prospectus ID#18; 2.2% of the pool). With this review, DBRS Morningstar confirms that the performance of these loans remains consistent with investment-grade loan characteristics.

The largest loan in special servicing, Old Town San Diego Hotel Portfolio (Prospectus ID#4; 5.7% of pool), is secured by two cross-collateralized and cross-defaulted limited-service hotels encompassing 299 keys in San Diego’s historic Old Town neighbourhood. The hotels are franchised with Marriott International, Inc. under the Courtyard and Fairfield Inn & Suites flags. The properties are roughly three and a half miles from the San Diego central business district and five miles from San Diego International Airport. The portfolio benefits from various local demand drivers including the downtown office market, the San Diego Convention Center, and the San Diego Zoo. The loan transferred to special servicing in August 2020 for monetary default as a result of the coronavirus pandemic, with payments after May 2020 outstanding. According to servicer commentary, a relief proposal is currently being reviewed. Given the extended delinquency and likelihood of depressed demand through the near to moderate term, the loan was analyzed with an increased probability of default to increase the expected loss for this review.

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, and X-F 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#4 – Old Town San Diego Hotel Portfolio (5.7% 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 [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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