Morningstar DBRS Confirms Credit Ratings on All Classes of Citigroup Commercial Mortgage Trust 2017-B1

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2017-B1 issued by Citigroup Commercial Mortgage Trust 2017-B1 as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class X-E at BB (high) (sf)
-- Class E at BB (sf)
-- Class F at B (high) (sf)
-- Class X-F at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the majority of the loans in the transaction evidenced by the pool's healthy weighted-average (WA) debt service coverage ratio (DSCR) of 2.50 times (x) based on the most recent financial reporting. In addition, since the last rating action in September 2023, two additional loans, representing 2.5% of the pool balance have fully defeased, including the 6 West 48th Street loan (Prospectus ID#19; 1.8% of the pool balance), which was previously secured by an office property exhibiting declining occupancy and performance metrics. Morningstar DBRS recognizes that the transaction's remaining office concentration in nine loans, representing 32.6% of the pool balance, poses increased credit risk. The majority of the office loans in the transaction continue to perform as expected; however, there are a handful that are exhibiting declines in performance from issuance, including the pool's third- and 13th-largest loans, 411 East Wisconsin (Prospectus ID# 3; 6.2% of the pool balance) and Wilshire Plaza (Prospectus ID#11; 2.6% of the pool balance). In the analysis for this review, select loans, secured by office collateral as well as other property types, which were demonstrating increased risks from issuance were analyzed with stressed scenarios to increase the expected losses as applicable.

As of the August 2024 remittance, 45 of the original 48 loans remain in the pool, with an aggregate trust balance of $840.8 million, representing a collateral reduction of approximately 10.7% since issuance as a result of repayment and scheduled loan amortization. Seven loans, representing 6.5% of the pool, have been fully defeased. There are two specially serviced loans, representing 2.2% of the pool. In addition, there are four loans, representing 10.1% of the pool, being monitored on the servicer's watchlist; however, three of the four loans have positive leasing updates as of the most recent reporting, which are expected to result in increased cash flow and DSCR.

The 411 E. Wisconsin loan is secured by the borrower's fee simple interest in a 678,839-square-foot (sf), 30-story office building, an adjacent eight-story parking garage, and a six-story parking garage across the street from the office building in Milwaukee. Occupancy declined to about 75% following the loss of Northwestern Mutual Life Insurance, which vacated in March 2019. Occupancy has remained near that level since 2019 and the servicer reported a DSCR of 1.20x as of June 2024, a slight decline from 1.27x at YE2023, but still comfortably above water. The property's inability to backfill the vacant space over a prolonged period of time, coupled with additional rollover risk prior to maturity, poses increased risks for the loan; however, Morningstar DBRS applied a stressed loan-to-value ratio and increased the probability of default penalty, resulting in an expected loss that is more than 3.5x that of the pool average.

The Wilshire Plaza loan is secured by the borrower's fee simple interest in a 349,643- sf, suburban office property built in 1986 in Troy, Michigan. Occupancy at the property declined to 76% as of the most recent servicer reporting in June 2024, down from 79% at YE2023 and 82% at YE2022. Similarly, the servicer reported a DSCR of 1.26x as of June 2024, down from 1.37x at YE2023. Upcoming tenant rollover is not significantly concentrated in any single tenant, but collectively accounts for half of the property's net rentable area (NRA), including two major tenants comprising 9.0% of NRA by YE2025. Given the property's vintage, combined with the shift in workplace dynamics resulting in challenges for older properties, Morningstar DBRS anticipates there will be continued leasing challenges stabilizing the property back to historical occupancy levels. Consequently, Morningstar DBRS applied a stressed loan-to-value ratio and increased the probability of default penalty, resulting in an expected loss that is almost 3.0x that of the pool average.

The transaction benefits from four loans that are shadow-rated investment grade: General Motors Building (Prospectus ID#1, 11.0% of the pool), Lakeside Shopping Center (Prospectus ID#2, 7.0% of the pool), Two Fordham Square (Prospectus ID#5, 6.2% of the pool), and Del Amo Fashion Center (Prospectus ID#18, 2.4% of the pool). With this review, Morningstar DBRS confirms that the performance of these four loans is consistent with the investment-grade shadow ratings.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

Classes X-A, X-B, X-D, X-E, and X-F are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO ratings mirror the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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 1, 2024), https://dbrs.morningstar.com/research/428798.

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

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 see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 696-6293

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

-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024); https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

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 (July 17, 2023).

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.