DBRS Morningstar Confirms All Classes of Natixis Commercial Mortgage Securities Trust 2017-75B

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2017-75B issued by Natixis Commercial Mortgage Securities Trust 2017-75B as follows:

-- Class A at AAA (sf)
-- Class V1A at AAA (sf)
-- Class XA at AAA (sf)
-- Class B at AA (sf)
-- Class V1B at AA (sf)
-- Class V1XB at A (high) (sf)
-- Class XB at A (high) (sf)
-- Class C at A (sf)
-- Class V1C at A (sf)
-- Class D at BBB (low) (sf)
-- Class V1D at BBB (low) (sf)
-- Class E at B (high) (sf)
-- Class V1E at B (high) (sf)
-- Class V2 at B (high) (sf)

All trends are Stable.

The rating confirmations reflect the relatively stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. According to the March 2021 rent roll, the collateral property was 77.0% occupied, with the largest tenants including Board of Education of the City School District of the City of New York (16.3% of net rentable area (NRA), lease through January 2035), AT&T Corporation (4.3% of NRA, lease through February 2034), and Northsouth Production (4.1% of NRA, lease through April 2025). Occupancy declined from 85.9% in March 2020 because 10 tenants, representing 9.7% of NRA, vacated or downsized in 2020. There are six additional tenants, representing 3.9% of the NRA, that are scheduled to roll in the next 12 months. Because of the subject’s higher vacancy in 2020, cash flow declined 12.7% from the YE2019 figure. The YE2020 debt service coverage ratio (DSCR) was reported at 1.07 times (x), down from the YE2019 DSCR of 1.23x. The loan was briefly added to the servicer’s watchlist in April 2020 for a Coronavirus Disease (COVID-19) relief request; however, the request was denied and the loan was removed from the watchlist in August 2020. The loan remains off the servicer’s watchlist despite the decline in cash flow. DBRS Morningstar has requested a leasing update at the property as it appears the drop in occupancy was the result of several smaller tenants vacating amid the pandemic. According to Reis, the subject’s submarket reported a Q1 2021 vacancy rate of 11.1% which provides some hope for a rebound. As of June 2021, the property’s website lists approximately 121,000 square feet (sf) available for rent, implying an occupancy rate of 81.9%.

The total $250.0 million financing consisted of $59.0 million of pooled trust debt, $84.0 million of a subordinated B note held in the trust, $33.0 million of nonpooled pari passu debt outside the trust, and $54.0 of a subordinated B note held outside the trust. The 10-year loan pays interest only (IO) for the entire term. The total mortgage debt of $230.0 million was supplemented by $20.0 million of mezzanine debt.

Collateral for the loan is the fee-simple interest in a 35-story Class B office tower in the Financial District of lower Manhattan, New York. The property was developed in 1928 as the headquarters of ITT Inc. (formerly International Telephone & Telegraph) not long after the company was founded in 1920. Many architectural details remain from that time, including the large entrance lobby with hanging brass chandeliers, terrazzo and marble floors, fresco painted vaulted ceilings, brass cab elevators (with modernized controls and mechanics), and a separate domed mosaic entrance on the corner of Broad and William Streets. The 671,369-sf building has undergone recent renovations and upgrades to the lobby, elevator, and mechanical systems. The property sits along Broad Street within one block of the New York Stock Exchange and the National Museum of the American Indian. It is a short walk from the World Trade Center complex, the New Jersey PATH commuter rail station, the Staten Island Ferry, and Fulton Street Subway Station with access to approximately nine subway lines and several bus lines all converging in lower Manhattan. The property’s immediate vicinity is populated by other office buildings, large apartment and condominium buildings, restaurants, sports facilities, entertainment, cultural and tourist attractions, multiple transportation options, and places for outdoor recreation.

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.

Classes XA, XB, and V1XB are 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.

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 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 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. 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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