DBRS Morningstar Downgrades Rating on the Remaining Class of Multi Security Asset Trust LP, Series 2005-RR4

DBRS Limited (DBRS Morningstar) downgraded the Commercial Mortgage-Backed Securities Pass-Through Certificates, Series 2005-RR4, Class N issued by Multi Security Asset Trust LP, Series 2005-RR4 (MSAT 2005-RR4) to CCC (sf) from BB (high) (sf). The rating on Class N does not carry a trend, but it does carry an Interest in Arrears designation.

The rating downgrade reflects DBRS Morningstar’s negative outlook on the one remaining underlying commercial mortgage-backed security (CMBS) transaction contributing to the MSAT 2005-RR4 capital structure. The Regal Cinemas, Inc. loan (Regal Cinemas; 85.6% of the current underlying pool balance) is secured by a single-tenant movie theatre in Fredericksburg, Virginia. The property is 100.0% occupied by Regal Cinemas on a lease through June 2023, which is coterminous with the loan’s maturity. Performance has typically hovered around breakeven, but with restrictions imposed after the onset of the Coronavirus Disease (COVID-19) pandemic, the tenant is delinquent on rental payments and the loan has been 90+ days delinquent. Regal Cinemas’ parent company, Cineworld, closed all 543 theatres in the U.S. in March 2020, reopening most in August 2020 for short period of time, before closing all of them again in October 2020 given the operational costs and lack of blockbuster films being released. In addition, since issuance, a new theatre opened approximately one mile from the subject. While the property is scheduled to reopen in May 21, 2021, a November 2020 appraisal valued the property at $3.1 million, significantly below the issuance value of $8.2 million, representing a reduction of 62.2%.

Credit support for the rated bond has decreased by 3.0% since the last ratings review about a year ago. The sole rated bond, Class N, of the ReREMIC structure now has a current credit support of 40.6%. However, because the PMAC 1999-C1 transaction is the only remaining underlying transaction currently contributing to the MSAT 2005-RR4 transaction, the ultimate repayment of the rated class in the ReREMIC transaction highly depends on the ultimate workout of the Regal Cinemas loan in the underlying deal.

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.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

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 the 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.

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

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