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

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

-- 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 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, that total approximately 2.1 million square feet (sf). 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 office campus called Media Studios, which is four miles north of the Media District near the Hollywood Burbank airport. The loan is sponsored by a joint venture between Blackstone Group Inc. (80% ownership interest) and Worthe Real Estate Group Inc. (20% ownership interest).

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 $660.0 million whole loan includes five non-trust senior notes totaling $130 million that 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 was 91.5% occupied as of December 2022, remaining relatively stable from prior years. The portfolio’s five largest tenants, representing 61.8% of total portfolio net rentable area (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. (Kaiser; 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 were all considered investment-grade tenants at issuance and, as of March 2023, these tenants remain investment grade. Disney and Kaiser have lease expirations in May 2026 and May 2024, respectively. There is minimal rollover within the next 12 months with only 7.9% of NRA expected to roll, including several of the Warner Bros. Entertainment leases that have expirations from September 2023 through December 2025.

The net cash flow (NCF) was $58.8 million for the trailing 12 months ended December 31, 2020, a 10.2% decrease from the NCF of $65.5 million at YE2021. The decrease was largely attributed to a decline in rent, stemming from rent abatements for MSG Entertainment Group, LLC’s lease renewal and an increase costs in repairs and maintenance. Despite the minor dip in the NCF, the loans debt service coverage ratio remains healthy at 2.48 times.

DBRS Morningstar did not perform an updated loan-to-value ratio (LTV) sizing for this review. While cash flow decreased to $58.8 million at YE2022, it remained above the DBRS Morningstar derived NCF of $49.9 million in 2020. The derived NCF and 6.75% capitalization rate gives a DBRS Morningstar value of $743.2 million, a -28.4% variance from the appraised value of $1.0 billion at issuance. The DBRS Morningstar value implies an LTV of 71.3%, compared with the 51.1% LTV on the appraised value at issuance.

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/396929 (May 17, 2022).

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.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410913).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the rating process for this rating action.
DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This is a solicited credit rating.

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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American Single-Asset/Single-Borrower Ratings Methodology (February 23, 2023;
https://www.dbrsmorningstar.com/research/410191)

Rating North American CMBS Interest-Only Certificates (December 19, 2022)
https://www.dbrsmorningstar.com/research/407577/rating-north-american-cmbs-interest-only-certificates

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022; https://www.dbrsmorningstar.com/research/402646)

North American Commercial Mortgage Servicer Rankings (September 8, 2022; https://www.dbrsmorningstar.com/research/402499)

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022; https://www.dbrsmorningstar.com/research/402153)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008)

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].