DBRS Morningstar Discontinues Ratings on Eight Classes and Confirms Ratings on Seven Classes of CSAIL 2017-CX10 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) discontinued its ratings on Classes UES-A, UES-B, UES-C, UES-D, UES-X, V1-UESA, V1-UESD, and V2-UES of Commercial Mortgage Pass-Through Certificates, Series 2017-CX10 issued by CSAIL 2017-CX10 Commercial Mortgage Trust. These classes were repaid in full with the June 2022 remittance.

In addition, DBRS Morningstar confirmed its ratings on the following seven classes as follows:

-- Class STN-A at AA (low) (sf)
-- Class STN-X at A (sf)
-- Class STN-B at A (low) (sf)
-- Class V1-STNA at A (low) (sf)
-- Class STN-C at BBB (low) (sf)
-- Class V1-STNC at BBB (low) (sf)
-- Class V2-STN at BBB (low) (sf)

All trends are Stable.

DBRS Morningstar rates the remaining rake bond, which is tied to the Standard High Line NYC Loan-Specific Certificates, backed by the Standard High Line NYC loan. The loan is secured by the borrower’s fee-simple interest in a high-end, 338-key boutique hotel in the Meatpacking District of Manhattan. The single mortgage loan is evidenced by four separate promissory notes with a principal balance of $170 million, including an A-A note totalling $45.0 million, a subordinated A-B note totalling $58.4 million, a B-A note with a principal balance of $36.6 million, and a B-B note with a principal balance of $30.0 million. The A-A note is included in the trust and serves as collateral for the pooled certificates. The $58.4 million subordinated A-B note serves as collateral for the rake bond that DBRS Morningstar rates. The B-A and B-B notes are not included in the trust.

Notwithstanding its high quality, amenities, and location, the hotel’s vacancy rate has historically remained elevated for extended periods of time, with net cash flow (NCF) declining substantially since the initial securitization. Even prior to the Coronavirus Disease (COVID-19) pandemic, the asset saw steadily declining room revenues, which were amplified by large declines in food and beverage revenues. However, performance at the property does appear to be improving, albeit at a slow pace. Occupancy and average daily rate (ADR) figures were 79.0% and $394, respectively, as of September 2021, with a revenue per available room (RevPAR) penetration rate of 113.0%. According to the July 2022 servicer reporting, occupancy and the RevPAR penetration rate increased to 91.0% and 121%, respectively, while ADR decreased 11.7% to $348. The loan transferred to special servicing in June 2020 for payment default and is currently 90-plus days delinquent having last made payment in April 2020. According to the July 2022 remittance, the current principal and interest outstanding is approximately $5.4 million. The special servicer has noted it is proceeding with the exercise of remedies.

The August 2021 appraisal obtained by the special servicer valued the collateral at $245.7 million, up from the September 2020 appraisal value of $241.0 million, but lower than the issuance value of $340.0 million. The DBRS Morningstar value of $159.6 million represents a variance of 53.1% from the issuance value and is 35.0% lower the August 2021 appraisal value. Although the August 2021 valuation suggests increased risks for the underlying loan and corresponding certificates, DBRS Morningstar’s ratings are reflective of the lower DBRS Morningstar value that was derived in 2020 based on a 5.0% discount to the appraiser’s estimated land value of $168.0 million, and takes the collateral’s previous performance declines from issuance into account, supporting the rating confirmations with this review.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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 STN-X and UES-X 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 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.

DBRS Morningstar notes that this press release was amended on July 11, 2023, to correct the IO certficates to Classes STN-X and UES-X.

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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