Morningstar DBRS Confirms Credit Ratings on All Classes of BXP Trust 2017-CC

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

-- Class A at AAA (sf)
-- Class X-A 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)

All trends are Stable.

The credit rating confirmations and Stable trends reflect the performance of the underlying collateral, which remains in line with Morningstar DBRS' expectations since the previous credit rating action in April 2024. The collateral property for the underlying loan continues benefit from stable occupancy, with several tenants headquartered at the subject and no rollover scheduled in 2025.

The underlying loan is secured by Colorado Center, an office park consisting of six Class A buildings totaling 1.2 million square feet (sf), and a three-level underground parking garage in the Media and Entertainment District of Santa Monica, California. The whole loan of $550.0 million consists of $298.0 million of senior debt and $252.0 million of subordinate debt. The subject transaction includes a $98.0 million pari passu portion of the senior debt and the entire subordinate debt amount. The 10-year fixed-rate loan is interest only (IO) for the full loan term with a maturity in August 2027. The loan sponsors are Teachers Insurance and Annuity Association of America and Boston Properties Limited Partnership (BPLP). BPLP provides property management services and, since the 2017 issuance, has completed upgrades to the property, with online news articles reporting a $40.0 million project in 2019 that upgraded and expanded the property amenities.

According to the servicer's analysis of the September 30, 2024, operating statement, annualized net cash flow (NCF) for the trailing nine-month period ended September 30, 2024, was reported at $54.1 million, which is in line with the YE2023 figure and higher than the Morningstar DBRS NCF of $43.8 million. The September 2024 rent roll showed an occupancy rate of 90.3%, an improvement from the April 2024 rate of 87.1% and trending toward the issuance occupancy rate of approximately 92.0%. No rollovers are scheduled in 2025 and all of the top tenants have long-term leases scheduled to expire after the loan's scheduled maturity in August 2027. The largest tenant, Hulu, currently represents 33.9% of the net rentable area (NRA) on a lease through February 2029. Other large tenants at the property include Edmunds.com Inc. (18.9% of NRA, lease expires in January 2028), Rubin Postaer and Associates (RPA; 18.8% of NRA, lease expires in June 2033), and Kite Pharma (15.5% of NRA, lease expires July 2032). According to the servicer, 81,183 sf of RPA's space (6.8% of NRA) was subleased to Roku, Inc., and the sublease is co-terminous with the direct lease. As of the February 2025 loan-level reserve report, the servicer reported $5.4 million in tenant reserves.

In the analysis for this review, Morningstar DBRS maintained its valuation approach from the April 2024 review, which was based on the Morningstar DBRS NCF of $43.8 million, derived at issuance, and an updated capitalization (cap) rate of 7.25%, an increase from the previous cap rate of 7.0% to reflect the view that office property types exhibit increased value volatility in the post-pandemic environment, as further outlined in the April 15, 2024, press release for this transaction, available on the Morningstar DBRS website at dbrs.morningstar.com. Morningstar DBRS also maintained positive qualitative adjustments to the loan-to-value ratio (LTV) sizing benchmarks totaling 3.0% to reflect the substantial sponsor investment in the property and its location in a supply-constrained submarket. The Morningstar DBRS concluded value of $604.8 million represents a -50.1% variance from the issuance appraised value of $1.2 billion and implies an all-in LTV of 90.9%.

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

Class X-A 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 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 (December 13, 2024), https://dbrs.morningstar.com/research/444617.

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.

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

-- North American Single-Asset/Single-Borrower Ratings Methodology (December 13, 2024), https://dbrs.morningstar.com/research/444612

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702

-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

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