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

DBRS Limited (Morningstar DBRS) 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). There is no trend, as the Class N certificate has a credit rating that does not typically carry a trend in commercial mortgage-backed securities (CMBS) ratings.

The Class H certificate of PMAC 1999-C1 (not rated by Morningstar DBRS) is the only remaining bond that contributes to the MSAT 2005-RR4 structure, and the rating confirmation reflects Morningstar DBRS’ unchanged recoverability expectations for the one remaining loan in that transaction. Since Morningstar DBRS’ last rating action, one other loan within that same transaction, Post Haste Plaza (previously 6.8% of the pool balance), was liquidated in October 2023 with a loss of $0.2 million. The remaining loan in the transaction, Regal Cinemas, Inc. (100.0% of the current pool balance), is secured by a single-tenant movie theatre in Fredericksburg, Virgina. The loan transferred to special servicing after the tenant became delinquent on its rent payments as a result of the Coronavirus Disease (COVID-19) pandemic, and eventually became REO in December 2021. Following its loan maturity in June 2023, the loan has since been deemed a nonperforming matured balloon. While the Regal Cinema’s lease is co-terminous with the loan’s maturity, the tenant remains in occupancy per sources online.

A November 2022 appraisal valued the property at $7.0 million, which is substantially greater than the November 2020 value of $3.1 million, and approximately 14.6% below the issuance value of $8.2 million. In spite of the significant increase in value from 2020, Morningstar DBRS believes a significant loss at resolution is likely and given the class below the contributed certificate to the subject transaction, Class O, has now been reduced by more than 85.0% as of February 2024, there isn’t much cushion against loss for the subject transaction, supporting the CCC (sf) rating.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024; https://dbrs.morningstar.com/research/427030).

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://dbrs.morningstar.com/research/410912).

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

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS 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.

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

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

North American CMBS Multi-Borrower Rating Methodology (November 3, 2023)/North American CMBS Insight Model v 1.2.0.0 (https://dbrs.morningstar.com/research/422859)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://dbrs.morningstar.com/research/420982)

North American Commercial Mortgage Servicer Rankings (August 23, 2023;
https://dbrs.morningstar.com/research/419592)

Legal Criteria for U.S. Structured Finance (December 7, 2023;
https://dbrs.morningstar.com/research/425081)

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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