DBRS Morningstar Confirms Ratings of CSMC Trust 2017-MOON

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

-- Class A at AAA (sf)
-- Class X at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BB (high) (sf)
-- Class HRR at BB (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations at the time ratings were assigned. The loan is secured by Two Independence Square, a 605,897-square-foot (sf) Class A office property in Washington, D.C., within the Southwest Federal Center, a business district mostly occupied by branches of the U.S. government, and just south of the National Mall and Capitol Building. The property is LEED Gold certified and has been the National Aeronautics and Space Administration’s (NASA) headquarters since its construction in 1992.

The interest-only (IO) loan is structured with a five-year term and whole loan proceeds of $225.7 million ($373 per sf (psf)), along with $142.2 million of sponsor equity, facilitated the purchase of the subject for $355.6 million ($587 psf). The trust is secured by the senior A-1 note of $64.0 million and the $61.7 million subordinate B note, while the three remaining senior A notes totaling $100.0 million are securitized in other transactions.

The property is 98.6% leased to NASA on a lease that expires in August 2028, which NASA renewed beyond its original expiration in 2013 for 15 years, well beyond the five-year loan term. The lease contains no early termination options as part of the lease renewal. The seller invested $86.3 million ($142 psf) to renovate the building exteriors and interiors and to upgrade security; NASA invested an additional $42 million ($70 psf) in its space and pays a total rent of approximately $44.54 psf. The remaining 8,644 sf is leased to three ground floor retail tenants. The sponsor for this loan is structured as a U.S. real estate investment trust owned by Hana Financial Group; Korea Investment & Securities Co., Ltd.; and Samsung Securities Co., Ltd.

As of Q3 2020, the servicer reported an annualized net cash flow (NCF) of $20.0 million and debt service coverage ratio (DSCR) of 2.70 times (x) compared with the YE2019 DSCR of 2.86x. The Q3 2020 annualized NCF remains in line with the DBRS Morningstar NCF of $20.2 million.

According to the December 2020 rent roll, the property was 100% occupied, which remains unchanged since issuance. The subject averages a rental rate of $44.58 psf for the office space, compared with office properties within the southwest submarket of the District of Columbia that reported an average asking rental rate of $46.12 psf and an effective rate of $46 psf, according to the Q4 2020 Reis market report. In addition, the overall submarket vacancy rate was reported at 11.7% for the period.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
Class X is an interest-only (IO) certificate that references 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 issuance metrics and all historical surveillance commentary on the DBRS Viewpoint platform.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level 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 26, 2021), 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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