DBRS Morningstar Confirms All Ratings on DBUBS 2017-BRBK Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2017-BRBK issued by DBUBS 2017-BRBK Mortgage Trust:

-- Class A at AAA (sf)
-- Class X at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class HRR at B (low) (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. The underlying loan is secured by four Class A office properties in Burbank, California. The portfolio includes three office towers in Burbank’s Media District known as The Pointe, 3800 Alameda, and Central Park as well as a five-building creative office campus called Media Studios, which is four miles north of the Media District. The portfolio totals approximately 2.1 million square feet (sf) of net rentable area (NRA).

The trust loan is part of a split loan structure and includes four senior notes with an aggregate balance of $249 million and two junior notes with an aggregate balance of $281 million, resulting in a total trust balance of $530 million. The whole loan includes five nontrust senior notes that total $130 million, which are securitized in other commercial mortgage-backed security transactions, including CD 2017-CD6 Mortgage Trust, which is also rated by DBRS Morningstar. The whole loan is structured as an interest-only (IO), fixed-rate loan with a seven-year term that matures in October 2024.

The portfolio’s five largest tenants, representing 61.8% of total portfolio NRA, include The Walt Disney Company (Disney; 31.0% of portfolio NRA); AT&T (12.7% of portfolio NRA, primarily through subsidiaries Warner Bros. Entertainment, Inc. and Turner Broadcasting System, Inc.); Kaiser Foundation Health Plan, Inc. (9.3% of portfolio NRA); Legendary Entertainment (5.1% of portfolio NRA); and Hasbro, Inc. (3.7% of portfolio NRA). Disney, Turner Broadcasting System, Inc., Warner Bros. Entertainment, Inc., and Kaiser Foundation Health Plan, Inc. were all considered investment-grade tenants at issuance, and, as of April 2022, the tenants remain investment grade.

The December 2021 rent roll indicated moderate rollover risk in the near term, with leases representing 6.4% of total NRA scheduled to roll between YE2021 and YE2022, including Tivo (formerly known as Rovi Corporation) and NBC Universal Media (NBC). However, a web search indicated the Tivo (1.6% of NRA; lease expiration in December 2021) and NBC (0.7% of NRA; lease expiration in January 2022) offices are still operational within the Media Studios campus. DBRS Morningstar has reached out to the servicer for updates regarding potential lease extensions. Leases representing an additional 6.9% of the NRA are scheduled to roll in 2023. Recent leasing activity has been strong. In addition to Disney’s lease renewal in 2021, MSG Entertainment Group signed a 10-year lease for 67,675 sf (3.2% of total NRA), with staggered occupancy dates in January 2022 and October 2022. The portfolio was 92.4% occupied as of December 2021, however recent leasing activity suggests occupancy will likely increase to 95.6% in the near term.

In general, the collateral continues to perform well. As of YE2021, the loan reported a debt service coverage ratio of 2.76 times. Net cash flow as of YE2021 was $65.5 million, a 14.2% increase from the prior year. The property continues to benefit from strong sponsorship and experienced management from Blackstone Group Inc. and Worthe Real Estate Group Inc. DBRS Morningstar expects performance to remain stable given the property’s positive leasing history, high-quality tenancy, and desirable location of the assets, all of which suggest the subject transaction is well insulated against near-term risks.

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 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 updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loan 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.

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 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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