DBRS Morningstar Confirms All Ratings of BBCMS Mortgage Trust 2017-C1

DBRS Limited (DBRS Morningstar) confirmed its ratings of the Commercial Mortgage Pass-Through Certificates, Series 2017-C1 issued by BBCMS Mortgage Trust 2017-C1 as follows:

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

In addition, Classes X-E, E, X-F, F, X-G, and G were removed from Under Review with Negative Implications where they were placed on August 6, 2020. All trends are Stable.

DBRS Morningstar also discontinued the rating on Class A-1, which was repaid in full with the December 2020 remittance.

The ratings confirmations reflect the overall stable performance of the underlying loans in the transaction. At issuance, the trust consisted of 58 fixed-rate loans secured by 75 commercial and multifamily properties with an original balance of $856.1 million. As of the January 2021 remittance report, there has been a collateral reduction of 3.5% as a result of scheduled amortization and the repayment of one loan in Prospectus ID #22, Lakewood Village, which represented 1.6% of the transaction at issuance. One loan, representing 0.5% of the current trust balance, has been defeased since issuance.

There is some notable property type concentration in this transaction as nine loans secured by office properties account for 40.2% of the current trust balance, including seven loans among the top 15. Retail properties account for the second-greatest property type concentration, with 18 loans and 23.6% of the current pool balance. The largest retail loan in the pool is The Summit Birmingham (Prospectus ID #4; 6.1% of the pool) is secured by an open air shopping center in Birmingham, Alabama. Although performance has been quite strong since issuance, a recent development in the largest collateral anchor’s bankruptcy filing (Belk; 24.0% of the net rentable area (NRA)) is noteworthy and will be monitored for developments.

Lodging properties, which have been among the most immediately affected by the Coronavirus Disease (COVID-19) pandemic, account for the third-largest property type concentration, with 11 loans and 15.1% of the current pool balance. Two hotel loans are in special servicing, including the Anaheim Marriott Suites loan (Prospectus ID #9; 3.6% of the pool), which is further discussed below. Another seven of the 14 loans on the servicer’s watchlist (which collectively represent 22.6% of the current trust balance) are backed by hotel properties. Most of those watchlisted hotel loans are being monitored for the respective borrower’s coronavirus relief request and/or performance declines driven by the pandemic. Although the increased risks for these loans are noteworthy, in general, DBRS Morningstar believes the longer-term outlook remains generally healthy for most of the hotel loans in this pool.

The largest loan on the servicer’s watchlist is 1000 Denny Way (Prospectus ID#3; 6.8% of current trust balance). The loan is secured by a 262,565-square-foot mixed-use building in Seattle, Washington. At issuance, the property’s usage was roughly broken out as 66.3% of the NRA in Class B office space, 32.7% of the NRA configured as a data center, and 1.0% of the NRA configured for retail use. The loan was added to the servicer’s watchlist in March 2020 after the largest tenant, The Seattle Times (59.7% of the NRA), failed to renew its lease 12 months prior to expiration in January 2021. The space has served as the headquarters for the tenant since 2011. The servicer has not confirmed the tenant’s status as of the most recent update provided, but DBRS Morningstar does note that an online Jones Lang LaSalle listing for the property that showed a portion of the space leased to The Seattle Times as available suggests at least part of the lease was not expected to be renewed. The loan is structured with a cash flow sweep, should the tenant fail to renew 12 months prior to expiration, and the January 2021 reporting listed a $6.4 million letter of credit provided by the borrower. The servicer reported a trailing six months (T-6) ended June 2020 debt service coverage ratio (DSCR) of 1.86 times (x) and the September 2020 rent roll reported an occupancy rate of 92.5%.

The second-largest loan on the servicer’s watchlist is Hyatt Place Charlotte Downtown (Prospectus ID#9; 3.6% of current trust balance). The loan was added to the watchlist in July 2020 for a low DSCR and evaluation of a coronavirus-related relief request. A forbearance agreement was executed in September 2020, allowing the borrower to use reserve amounts to pay debt service with some reserve collections deferred between September and November 2020, which will be repaid over a specified period ending in August 2021. The servicer also approved the sponsor’s request to obtain a Paycheck Protection Program loan in the amount of $285,000.

There are also five loans in special servicing including Anaheim Marriott Suites (Prospectus ID#9; 3.6% of current trust balance), Wolfchase Galleria (Prospectus ID#28; 1.1% of current trust balance), Franklin Village Shopping Center (Prospectus ID#29; 1.0% of current trust balance), Holiday Inn Express & Suites – Jackson (Prospectus ID#43; 0.7% of current trust balance), and Washington Place Shopping Center (Prospectus ID#52; 0.4% of current trust balance).

The largest loan in special servicing is the previously-mentioned Anaheim Marriot Suites loan, which is secured by a 371 key full-service hotel located in Garden Grove, California. The property is located by two major demand drivers, the Anaheim Convention Center and Disneyland Park. The loan was transferred to special servicing in June 2020 for payment default and, as of the January 2021 remittance, was listed as 121+ days delinquent. The workout strategy is yet to be determined however the servicer has confirmed the borrower has proposed a debt relief option, which is in discussions as of this review. As of the trailing 12 months ended August 2020, Smith Travel Research reported that the collateral reported an occupancy rate of 55.3%, average daily rate of $123.83, and revenue per available room of $68.53. Those figures represented year-over-year declines of 37.6%, 8.1%, and 42.7%, respectively. The servicer most recently reported a T-6 ended June 2020 DSCR of -0.21x, down from the YE2019 DSCR of 1.84x and the YE2018 DSCR of 1.79x.

At issuance, an investment-grade shadow rating was assigned to two loans in Prospectus ID#5 – Merrill Lynch Drive (5.0% of the current trust balance) and Prospectus ID#11 – State Farm Data Center (3.0% of the current trust balance). With this review, DBRS Morningstar confirmed that the performance of these loans remains consistent with the characteristics of an investment-grade loan.

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.

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

-- Prospectus ID#3 – 1000 Denny Way (3.8% of current trust balance)
-- Prospectus ID#9 – Anaheim Marriott Suites (3.6% of current trust balance)
-- Prospectus ID#10 – Hyatt Place Charlotte Downtown (3.1% of current trust balance)
-- Prospectus ID#18 – West Sahara Promenade (1.8% of current trust balance)
-- Prospectus ID#28 – Wolfchase Galleria (1.1% of the current trust balance)

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.

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

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