DBRS Morningstar Confirms All Ratings on BANK 2017-BNK6

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2017-BNK6 issued by BANK 2017-BNK6 as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class C at AA (sf)
-- Class X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class X-E at BB (high) (sf)
-- Class E at BB (sf)
-- Class X-F at B (high) (sf)
-- Class F at B (sf)

All trends are Stable. The rating for Class A-1 was previously discontinued as a result of a full repayment with the December 2021 remittance.

The rating confirmations reflect the overall stable performance of the transaction since last review, despite more recent challenges that have generally been driven by the effects of the Coronavirus Disease (COVID-19) pandemic. At issuance, the transaction consisted of 72 fixed-rate loans secured by 189 commercial and multifamily properties, with a trust balance of $933.3 million. According to the December 2021 remittance report, two loans have paid in full, leaving 70 loans within the transaction. There has been a collateral reduction of 3.9% since issuance, lowering the trust balance to $897.3 million. Defeasance has been minimal, with four small loans, representing 3.6% of the pool, defeased since issuance. There have been no losses to date, with the $28.8 million unrated Class G balance at issuance unchanged as of the December 2021 remittance.

The transaction is concentrated with loans backed by retail, mixed-use, and office property types, representing 27.6%, 19.8%, and 17.1% of the current trust balance, respectively. The remaining concentrations by property type are relatively low, including lodging, which represents about 14.0% of the pool balance. According to the December 2021 remittance report, one loan is in special servicing. There are 19 loans, representing 24.4% of the current trust balance, on the servicer’s watchlist. These loans are on the watchlist for a variety of reasons, including low debt service coverage ratios (DSCRs), low occupancy, and tenant rollover concerns. However, the primary drivers are retail and hospitality properties, which continue to suffer from sustained downward pressure on operational performance, stemming from ongoing disruptions related to the pandemic. Where applicable, DBRS Morningstar analyzed the watchlisted loans with probability of default penalties to increase the expected loss for this review.

The largest loan on the servicer’s watchlist, Starwood Capital Group Hotel Portfolio (Prospectus ID#2; 6.1% of the pool), is secured by a portfolio of 65 hotels totaling 6,366 keys and spread across 21 states. The majority of the rooms (59%) are limited service while 35% are extended stay and the remaining 6% are full service. The portfolio is granular with no property representing more than 2.6% of the allocated loan balance. The loan was added to the servicer’s watchlist in July 2020, when the servicer was processing the borrower’s request for coronavirus relief. A forbearance was granted in the form of deferment of non-tax, non-insurance, and non-ground rent reserves for a period of three months to allow for those amounts to be applied to the monthly debt service obligations. Repayment of the deferred amounts was to begin over a 12-month period beginning in February 2021. The loan has remained current since the modification request was granted. As expected during the pandemic, cash flows were quite low at year-end 2020, but the most recent reporting shows a trailing six months ended June 2021 DSCR of 1.26 times (x), suggesting demand has picked up substantially since last year.

The only specially serviced loan, Trumbull Marriott (Prospectus ID#12; 2.3% of the pool), is secured by a 325-key, full-service hotel in Trumbull, Connecticut. The loan transferred to special servicing in May 2020 and since that time, the servicer has filed a friendly foreclosure with GF Hotels & Resorts appointed as the receiver. The property was re-appraised in August 2020 with an as-is value of $14.5 million, a significant decline from the issuance value of $35.1 million. According to the October 2021 STR, Inc. report, property performance continues to underperform its competitive set. DBRS Morningstar received Q2 2021 annualized financial reporting for the property, which showed cash flow of negative $1.3 million with a DSCR of negative 0.89x. Based on the August 2020 appraised property value, the loan is below water with a current loan-to-value ratio of 145.4%.

Based on the updated appraised value, DBRS Morningstar assumed a liquidation scenario for the loan and expects a loss severity approaching 70% at resolution. This view is in line with the expectations at the January 2021 review of this transaction, when DBRS Morningstar downgraded Classes E and F based on the expected loss amount for the subject loan. For additional information on those rating actions, please see the press release dated January 14, 2021, on the DBRS Morningstar website.

At issuance, DBRS Morningstar shadow-rated three loans—General Motors Building (Prospectus ID#1; 10.0% of the pool), Gateway Net Lease Portfolio (Prospectus ID#2; 6.8% of the pool), and Del Amo Fashion Center (Prospectus ID#3; 6.6% of the pool)—investment grade, supported by the loans’ strong credit metrics, strong sponsorship strength, and historically stable collateral performance. With this review, DBRS Morningstar confirms that the characteristics of these loans remain consistent with the investment-grade shadow rating.

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 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 – Starwood Capital Hotel Portfolio (6.6% of the pool)
-- Prospectus ID#12 – Trumbull Marriott (2.3% 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 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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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