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

DBRS Limited (DBRS Morningstar) confirmed 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) at CCC (sf). The rating on Class N does not carry a trend and continues to carry an Interest in Arrears designation.

The rating confirmation reflects the stable performance from the prior review. In May 2021, DBRS Morningstar downgraded the rating for Class N from BB (high) (sf) to the current rating of CCC (sf), as a result of concerns for the remaining underlying commercial mortgage-backed security (CMBS) transaction contributing to the MSAT 2005-RR4 capital structure. The largest remaining loan in the transaction, Regal Cinemas, Inc. (88.9% of the current underlying pool balance), is secured by a single-tenant Regal Cinemas movie theatre in Fredericksburg, Virginia, with a lease that runs through June 2023, 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 became delinquent on rental payments and the loan has now been delinquent since May 2020 and in special servicing since June 2020. The subject theatre was closed as part of the parent company’s chainwide closures in the early months of the pandemic, but has been open since May 2021. However, ticket sales were down prior to the onset of the pandemic, due in part to a new movie theatre that opened within one mile of the subject.

A November 2020 appraisal valued the property at $3.1 million, which is significantly below the issuance value of $8.2 million, and suggestive of a loan-to-value (LTV) ratio of over 150.0% on the outstanding trust exposure of approximately $4.7 million. DBRS Morningstar expects the loan will be liquidated from the trust, with the high LTV suggesting a loss to the rated certificate could be realized given the reduction in credit support to the bond due to losses incurred to date.

ESG CONSIDERATIONS

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.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), 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.

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 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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