/raid1/www/Hosts/bankrupt/TCR_Public/231015.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, October 15, 2023, Vol. 27, No. 287
Headlines
AFFIRM ASSET 2023-B: DBRS Finalizes BB Rating on Class E Notes
AGL CLO 23: Fitch Affirms BB-sf Rating on E Notes, Outlook Stable
ASHTON WOODS: S&P Upgrades ICR to 'BB-', Outlook Stable
BAMLL COMMERCIAL 2016-SS1: S&P Lowers F Certs Rating to 'CCC (sf)'
BBCMS 2020-BID: S&P Affirms 'B+ (sf)' Rating on Class HRR Certs
BBCMS MORTGAGE 2023-C21: Fitch Gives 'B-sf' Rating on G-RR Certs
BENCHMARK 2018-B5: Fitch Affirms B-sf Rating on Class G-RR Certs
BRAVO RESIDENTIAL 2023-RPL1: DBRS Gives (P) B(high) on B-2 Notes
BREAN ASSET 2023-SRM1: DBRS Gives Prov. B Rating on Class M5 Notes
BRYANT PARK 2023-21: S&P Assigns BB- (sf) Rating on Class E Notes
CCUBS COMMERCIAL 2017-C1: Fitch Affirms 'BB-' Rating on F-RR Certs
CHASE HOME 2023-RPL2: DBRS Gives Prov. B(high) Rating on B-2 Certs
CITIGROUP 2014-GC21: Fitch Lowers Rating on Class F Notes to 'Csf'
CITIGROUP 2019-C7: DBRS Confirms B(low) Rating on JRR Certs
COLT 2023-3 MORTGAGE: Fitch Gives Final Bsf Rating on Cl. B2 Certs
CONN'S RECEIVABLES 2021-A: Fitch Hikes Rating on C Notes to 'BBsf'
CSAIL 2015-C1: Fitch Affirms Csf Rating on 4 Tranches
CSAIL 2016-C5: Fitch Affirms CCC Rating on 2 Tranches
CSAIL 2019-C16: DBRS Confirms BB Rating on Class F-RR Certs
DBJPM 2016-SFC: S&P Lowers Class X-A Certs Rating to 'BB (sf)'
DBJPM 2017-C6: DBRS Confirms BB(low) Rating on Class F-RR Certs
DIAMOND ISSUER 2021-1: Fitch Affirms 'BB-sf' Rating on Cl. C Notes
EAGLE RE 2023-1: DBRS Gives Prov. B Rating on Class B-1 Notes
ELARA HGV 2023-A: Fitch Assigns Final 'BBsf' Rating on Cl. D Notes
ELARA HGV 2023-A: S&P Assigns BB- (sf) Rating on Class D Notes
ELMWOOD CLO VII: S&P Assigns 'B- (sf)' Rating on Class F-R Notes
GSF 2021-1: DBRS Confirms BB(low) Rating on Class E Notes
HILTON USA 2016-SFP: DBRS Cuts Class F Certs Rating to CCC
JP MORGAN 2023-7: DBRS Gives Prov. BB Rating on Class B-4 Certs
JPMDB COMMERCIAL 2016-C4: Fitch Lowers Rating on Cl. F Certs to CCC
KKR CLO 48: Fitch Gives 'BB+(EXP)sf' Rating on Class E Notes
LCM 40: Fitch Affirms 'BB-sf' Rating on Cl. E Notes, Outlook Stable
MAGNETITE XXXVII: S&P Assigns BB- (sf) Rating on Class E Notes
MF1 2022-FL9: DBRS Confirms B(low) Rating on 3 Classes
MILL CITY: Moody's Hikes Ratings on 21 Bonds Issued in 2019
MORGAN STANLEY I: Fitch Affirms 'B-sf' Rating on Class F-RR Certs
NEUBERGER BERMAN I: Fitch Gives 'BB-(EXP)sf' Rating on Cl. E Notes
NEUBERGER BERMAN I: Fitch Gives Final 'BB-sf' Rating on Cl. E Notes
NEUBERGER BERMAN I: Moody's Assigns B3 Rating to $500,000 F Notes
NEW RESIDENTIAL 2019-RPL2: Moody's Ups Cl. B-2 Notes Rating to B1
NEW RESIDENTIAL 2023-NQM1: Fitch Assigns 'B-sf' Rating on B-2 Notes
OMI TRUST 2001-E: S&P Affirms 'CC (sf)' Rating on Class A-4 Notes
ORION CLO 2023-1: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
OSD CLO 2021-23: Fitch Affirms BB+ Rating on Class E Notes
PALMER SQUARE 2023-4: S&P Assigns BB- (sf) Rating on Cl. E Notes
PRPM 2023-NQM2: Fitch Assigns Final 'B-sf' Rating on Cl. B-2 Certs
REALT 2016-1: DBRS Confirms B Rating on Class G Certs
RR 27 LTD: Fitch Assigns 'BB(EXP)sf' Rating on Class D Notes
SEQUOIA MORTGAGE 2023-4: Fitch Gives BB(EXP) Rating on B-4 Certs
STARWOOD RETAIL 2014-STAR: DBRS Cuts Class F Certs Rating to D
TOWD POINT 2021-HE1: Fitch Assigns 'B-sf' Rating on 7 Tranches
UBS COMMERCIAL 2018-C14: Fitch Lowers Rating on 2 Tranches to BBsf
UNLOCK HEA 2023-1: DBRS Gives Prov. BB(low) Rating on B Notes
WELLS FARGO 2015-C26: Fitch Affirms 'B-sf' Rating on Two Tranches
WELLS FARGO 2017-RC1: DBRS Confirms C Rating on Class F Certs
WELLS FARGO 2019-C53: DBRS Confirms B(low) Rating on K-RR Certs
[*] DBRS Reviews 853 Classes From 49 US RMBS Transactions
[*] DBRS Takes Rating Actions on 10 Flagship Credit Auto Deals
[*] Fitch Affirms 101 Classes From Four 2023 Vintage Conduit Deals
[*] Fitch Affirms 52 Classes From 3 CMBS 2019 Vintage Conduit Deals
[*] Fitch Cuts 25 & Affirms 77 Classes From 13 CBMS Conduit Deals
[*] Moody's Upgrades Ratings on $199MM of US RMBS Issued 2019
*********
AFFIRM ASSET 2023-B: DBRS Finalizes BB Rating on Class E Notes
--------------------------------------------------------------
DBRS, Inc. finalized its provisional ratings on the following notes
issued by Affirm Asset Securitization Trust 2023-B (Affirm
2023-B):
-- $592,720,000 Class A Notes at AAA (sf)
-- $49,580,000 Class B Notes at AA (sf)
-- $42,230,000 Class C Notes at A (sf)
-- $32,540,000 Class D Notes at BBB (sf)
-- $32,930,000 Class E Notes at BB (sf)
The ratings on the notes are based on DBRS Morningstar's review of
the following considerations:
(1) The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary Baseline Macroeconomic Scenarios For
Rated Sovereigns June 2023 Update, published on June 30, 2023.
These baseline macroeconomic scenarios replace DBRS Morningstar's
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
(2) The transaction's form and sufficiency of available credit
enhancement.
-- Subordination, overcollateralization, amounts held in the
Reserve Account, the Yield Supplement Overcollateralization Amount,
and excess spread create credit enhancement levels that are
commensurate with the ratings.
-- Transaction cash flows are sufficient to repay investors under
all AAA (sf), AA (sf), A (sf), BBB (sf), and BB (sf) stress
scenarios in accordance with the terms of the Affirm 2023-B
transaction documents.
(3) Inclusion of structural elements featured in the transaction
such as the following:
-- Eligibility criteria for receivables that are permissible in
the transaction.
-- Concentration limits designed to maintain a consistent profile
of the receivables in the pool.
-- Performance-based Amortization Events that, when breached, will
end the revolving period and begin amortization.
(4) The experience, sourcing, and servicing capabilities of Affirm,
Inc. (Affirm).
(5) The experience, underwriting, and origination capabilities of
Affirm Loan Services LLC (ALS), Cross River Bank (CRB), Celtic
Bank, and Lead Bank.
(6) The ability of Nelnet Servicing to perform duties as a Backup
Servicer.
(7) The annual percentage rate charged on the loans and CRB, Celtic
Bank, and Lead Bank's status as the true lender.
-- All loans in the initial pool included in Affirm 2023-B are
originated by Affirm through its subsidiary ALS or by originating
banks, CRB, Celtic Bank, and Lead Bank, New Jersey, Utah, and
Missouri, respectively, state-chartered FDIC-insured banks.
-- Loans originated by ALS utilize state licenses and
registrations and interest rates are within each state's respective
usury cap.
-- Loans originated by CRB are all within the New Jersey state
usury limit of 30.00%.
-- Loans originated by Celtic Bank are all within the Utah state
usury limit of 36.00%.
-- Loans originated by Lead Bank are originated below 36%.
-- Loans may be in excess of individual state usury laws; however,
CRB, Celtic Bank, and Lead Bank as the true lenders are able to
export rates that preempt state usury rate caps.
-- The loan pool only includes loans made to borrowers in New York
that have Contract Rates below the usury threshold.
-- Loans originated to borrowers in Iowa will be eligible to be
included in the Receivables to be transferred to the Trust. These
loans will be originated under the ALS entity using Affirm's state
license in Iowa.
-- Loans originated to borrowers in West Virginia will be eligible
to be included in the Receivables to be transferred to the Trust.
Affirm has the required licenses and registrations that will enable
it to operate the bank partner platform in West Virginia.
-- Affirm has obtained a supervised lending license from Colorado,
permitting Affirm to facilitate supervised loans in excess of the
Colorado annual rate cap of 12%, outside of the Assurance of
Discontinuance's (AOD's) safe harbor. All loans originated on the
Affirm Platform in Colorado have Contract Rates below the usury
threshold.
-- Loans originated to borrowers in Vermont above the state usury
cap will be eligible to be included in the Receivables to be
transferred to the Trust. Affirm has the required licenses and
registrations in the state of Vermont.
-- Loans originated to borrowers in Connecticut with a Contract
Rate above the state usury cap will be ineligible to be included in
the Receivables to be transferred to the Trust until Affirm obtains
the required licenses and registrations in the state of
Connecticut. Inclusion of these Receivables will be subject to
Rating Agency Condition.
-- Under the loan sale agreement, Affirm is obligated to
repurchase any loan if there is a breach of representation and
warranty that materially and adversely affects the interests of the
purchaser.
(9) The legal structure and legal opinions that address the true
sale of the unsecured consumer loans, the nonconsolidation of the
Trust, and that the Trust has a valid perfected security interest
in the assets and consistency with the DBRS Morningstar "Legal
Criteria for U.S. Structured Finance."
DBRS Morningstar's credit rating on the securities referenced
herein addresses the credit risk associated with the identified
financial obligations in accordance with the relevant transaction
documents. The associated financial obligations for each of the
rated notes are the related Interest Distribution Amount and the
related Note Balance.
DBRS Morningstar's credit rating does not address non-payment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. The associated contractual payment obligation that is
not a financial obligation is the portion of Note Interest
Shortfall attributable to interest on unpaid Note Interest for each
of the rated notes.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar 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 DBRS Morningstar 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.
Notes: All figures are in U.S. dollars unless otherwise noted.
AGL CLO 23: Fitch Affirms BB-sf Rating on E Notes, Outlook Stable
-----------------------------------------------------------------
Fitch Ratings has affirmed the ratings on the class B-1, B-2, C, D
and E notes of AGL CLO 22 Ltd. (AGL 22) and the class A, B, C, D
and E notes of AGL CLO 23, Ltd. (AGL 23). The Rating Outlooks on
all rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
AGL CLO 22 LTD.
B-1 00118XAG1 LT AAsf Affirmed AAsf
B-2 00118XAJ5 LT AAsf Affirmed AAsf
C 00118XAC0 LT Asf Affirmed Asf
D 00118XAE6 LT BBB-sf Affirmed BBB-sf
E 00118YAA2 LT BB-sf Affirmed BB-sf
AGL CLO 23, Ltd.
A 00119EAA5 LT AAAsf Affirmed AAAsf
B 00119EAC1 LT AAsf Affirmed AAsf
C 00119EAE7 LT Asf Affirmed Asf
D 00119EAG2 LT BBB-sf Affirmed BBB-sf
E 00120RAA3 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
AGL 22 and AGL 23 are broadly syndicated collateralized loan
obligations (CLOs) managed by AGL CLO Credit Management LLC. AGL 22
closed in October 2022 and will exit its reinvestment period in
October 2027. AGL 23 closed in December 2022 and will exit its
reinvestment period in January 2028. Both CLOs are secured
primarily by first-lien, senior secured leveraged loans.
KEY RATING DRIVERS
Stable Asset Performance
The affirmations are due to the portfolios' stable performance
since closing. As of August 2023 reporting, the credit quality of
both portfolios is at the 'B'/'B-' rating level. The Fitch weighted
average rating factors (WARF) for AGL 22 and AGL 23 portfolios were
24.5 and 24.1, respectively, compared to 24.1 and 23.5,
respectively, at closing.
The portfolio for AGL 22 consists of 272 obligors, and the largest
10 obligors represent 6.3% of the portfolio. AGL 23 has 266
obligors, with the largest 10 obligors comprising 6.4% of the
portfolio. There are no defaults in either portfolio. Exposure to
issuers with a Negative Outlook and Fitch's watchlist is 18.0% and
4.0%, respectively, for AGL 22 and 18.5% and 3.4%, respectively,
for AGL 23.
On average, first lien loans, cash and eligible investments
comprise 99.9% of the portfolios. Fitch's weighted average recovery
rate (WARR) of the AGL 22 and AGL 23 portfolios was 74.8% and
75.2%, respectively, compared to 74.0% and 74.5%, respectively, at
closing.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for both transactions.
Cash Flow Analysis
Fitch conducted updated cash flow analyses based on newly run Fitch
Stressed Portfolio (FSP) since both transactions are still in their
reinvestment periods. The FSP analysis stressed the current
portfolios from the August trustee reports to account for
permissible concentration and CQT limits. The FSP analysis assumed
weighted average lives of 7.25 years and 7.5 years for AGL 22 and
AGL 23, respectively. Fixed rate assets were also assumed at 2.5%
and 5% for AGL 22 and AGL 23, respectively. The weighted average
spread (WAS), WARR and WARF were stressed to the current Fitch test
matrix points for each transaction.
The ratings are in line with their respective model-implied ratings
(MIRs), as defined in Fitch's CLOs and Corporate CDOs Rating
Criteria. The Stable Outlooks reflect Fitch's expectation that the
notes have sufficient level of credit protection to withstand
potential deterioration in the credit quality of the portfolios in
stress scenarios commensurate with each class' rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement does not compensate for the higher loss
expectation than initially assumed.
A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead to downgrades of up to three
rating notches for AGL 22 and two rating notches for AGL 23, based
on MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
A 25% reduction of the mean default rate across all ratings, along
with a 25% increase of the recovery rate at all rating levels for
the current portfolio, would lead to upgrades of up to five rating
notches for AGL 22 and six rating notches for AGL 23, based on
MIRs, except for the 'AAAsf'-rated debt, which is at the highest
level on Fitch's scale and cannot be upgraded.
ASHTON WOODS: S&P Upgrades ICR to 'BB-', Outlook Stable
-------------------------------------------------------
S&P Global Ratings raised is issuer credit rating on Ashton Woods
USA LLC to 'BB-' from 'B+'. S&P raised its issue level rating to
BB- from B+, the '3' recovery rating is unchanged.
S&P said, "The stable outlook reflects our forecast that Ashton's
debt to EBITDA will remain below 2x for the next 24 months while
its debt to capital trends toward the 40%-50% range. The company's
strong earnings performance and elevated sales backlog as of the
end of fiscal year 2023 and into fiscal year 2024 will help it
sustain its lower than historical leverage.
"We believe Ashton Woods will maintain debt to EBITDA of 1.5x-2.0x
over the next 24 months. We forecast the company will maintain
EBITDA interest coverage of 10x-11x by the end of fiscal year 2024
based on its S&P Global Ratings-adjusted debt of approximately $1.0
billion. We forecast Ashton will generate roughly $565 million of
EBITDA in fiscal year 2024 before expanding to $585 million in
2025. We expect its margins will decline relative to fiscal year
2023 due to softening housing demand in the first half of 2024.
However, Ashton Woods has retained the ability to generate metrics
commensurate with a 'BB-' rating. As macroeconomic uncertainty
subsides and the demand for housing remains, we expect the company
will maintain its current operating performance. This leads us to
forecast its EBITDA margins will decline to approximately 15.0% in
fiscal year 2024 from our calculation of 16.6% as of the end of
fiscal year 2023.
"We anticipate Ashton Woods will finish fiscal year 2024 with
approximately 9,000 home closings. As the company has managed to
significantly decrease its average construction cycle times, we
expect its gross margins will fall slightly due to softer demand,
leading to an increase of approximately 14% in its volume of homes
closed relative to fiscal year 2023. Alternatively, we do expect
Ashton Woods' geographic diversity and closing volumes to remain
below that of its higher rated peers over the next twelve to
twenty-four months. We also anticipate a minimal decrease in home
prices, which--when combined with its elevated closings--will
increase Ashton's revenue by 12.5%. Therefore, we expect its S&P
Global Ratings-adjusted funds from operations (FFO) to debt will
remain near the 50% area in fiscal year 2024 and increase by the
low single digit percent area in fiscal year 2025.
"We expect Ashton's closings and gross margins will be stronger in
the first half of fiscal 2024. Mortgage rates have stabilized at
higher levels for longer, following their significant rise through
the first half of 2023, yet as buyers acclimate to higher interest
rates Ashton Woods continues to use its incentive programs to close
on its new homes sales. Additionally, we expect U.S. housing starts
of about 1.4 million in both 2023 and 2024 (compared with our
previously forecast of 1.3 million). Based on ordinary risks for
our economic baseline forecast, our pessimistic scenario has mild
recession-like dynamics in 2024, while in our optimistic scenario,
the slowdown is shallower, and the unemployment rise starts later
in 2024. Stronger housing demand since the start of 2023, coupled
with a limited resale market, will likely enable Ashton to maintain
its sales and home construction in fiscal 2024. We expect the rate
on the 30-year conventional fixed mortgage will be in the mid- to
high-7% range in 2023 before declining to the high-6% area in
2024.
"The stable outlook reflects our forecast that Ashton's debt to
EBITDA will be below 2x for the next 24 months as its debt to
capital trends toward the 40%-50% range. The company's strong
earnings performance and elevated sales backlog as of the end of
fiscal year 2023 and into 2024 will help it sustain its lower than
historical leverage. Ashton will finance its spending for new
communities beyond 2023 with its operating cash flows, leaving its
S&P Global Ratings-adjusted debt unchanged at $1.0 billion until
its bonds mature.
S&P could downgrade Ashton Woods in the next 12 months if its debt
to EBITDA approaches 3x. This could occur if S&P anticipates the
company's EBITDA will deteriorate below $300 million without a
foreseeable recovery or its adjusted debt balance increases more
than 70% to more than $1.7 billion.
Although unlikely, S&P could raise its issuer credit rating on
Ashton to 'BB' in the next 12 months if:
-- It continues to enhance the scale of its homebuilding
operations while maintaining margins that compare favorably with
those of its peers, and
-- The company sustains debt to EBITDA of below 1.5x to absorb
potentially weaker earnings amid a cyclical downturn.
BAMLL COMMERCIAL 2016-SS1: S&P Lowers F Certs Rating to 'CCC (sf)'
------------------------------------------------------------------
S&P Global Ratings lowered its ratings on five classes of
commercial mortgage pass-through certificates from BAMLL Commercial
Mortgage Securities Trust 2016-SS1, a U.S. CMBS transaction. At the
same time, S&P affirmed its ratings on three other classes from the
transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a fixed-rate, interest-only (IO) mortgage loan secured by the
borrower's fee simple and leasehold interests in an 11-story, class
A, 501,650-sq.-ft. office building located at 1 Iron St. and an
adjacent 965-stall freestanding parking garage at 116 West First
St. in the Seaport office submarket of Boston.
Rating Actions
The downgrades on classes C, D, E, and F reflect:
-- S&P's revised valuation on the property, which is lower than
the valuation it derived in its last published review in September
2018, due primarily to its higher vacancy assumptions.
-- S&P's belief that the property's vacancy rate may increase in
line with the weakened office submarket fundamentals reinforced by
companies continuing to embrace remote and hybrid work arrangements
if the sole tenant, SSB Realty LLC, an affiliate of State Street,
partially or fully vacates upon its Dec. 31, 2029, lease
expiration. According to CoStar, in June 2023, the tenant begun
marketing about 182,485 sq. ft., or 36.4% of the building's net
rentable area (NRA), for sublease.
-- S&P's concerns with the borrower's ability to refinance the
loan at its maturity in December 2025. Currently, there is
uncertainty surrounding the sole tenant's intent at the subject
property upon its lease expiry in 2029.
-- The affirmations on classes A and B consider the comparatively
low to moderate debt per sq. ft. (about $191 per sq. ft. through
class B), among other factors.
The property was built-to-suit in 2014 for State Street Corp.
('A/Stable'). S&P said, "In our last published review on Sept. 25,
2018, since SSB Realty LLC, an affiliate of State Street, leased
and occupied 100% of the building until 2029, we assumed a 4.0%
vacancy rate and 40.9% operating expense ratio to arrive at our
long-term sustainable net cash flow (NCF) of $12.1 million.
However, according to CoStar, in June 2023, the tenant placed four
of its 11 floors totaling 182,485 sq. ft. (36.4% of total NRA) on
the market for sublease beginning in the fourth quarter of 2023. It
is our understanding from the master servicer, Wells Fargo Bank
N.A. (Wells Fargo), that the tenant, which does not have any
termination options, will continue to pay rent on the dark space
until 2029, and there is no indication at this time that State
Street will market additional space for sublease." Wells Fargo did
not yet have an update regarding the space marketed for sublease.
CoStar also noted that the volume of new class A office inventory
that is expected to be added to the submarket will likely outpace
demand, leading to higher vacancies in the coming years. S&P said,
"In our current property-level analysis, considering the amount of
sublet space at the property, new supply, and weakened office
fundamentals, we lowered our long-term sustainable NCF by 16.3% to
$10.1 million. We utilized a higher vacancy rate of 18.0%, in line
with the current office submarket vacancy and availability rates,
an S&P Global Ratings' base rent of $27.50 per sq. ft. and gross
rent of $40.67 per sq. ft., and a 46.8% operating expense ratio to
arrive at our lower NCF. We also increased our S&P Global Ratings'
capitalization rate by 15 basis points to 7.25% from 7.10% in our
last review to account for the higher parking income weight. Our
expected-case value of $141.5 million (or $282 per sq. ft.),
including adding $1.9 million for the present value of future rent
steps for the investment-grade rated tenant, is 18.7% lower than
our last review value of $174.2 million and 56.0% below the
issuance appraised value of $322.0 million." This yielded an S&P
Global Ratings' loan-to-value (LTV) ratio of 117.3% on the trust
balance.
S&P said, "Specifically, we lowered our rating on class F to 'CCC
(sf)' to reflect our view that, due to current market conditions
and its position in the payment waterfall, this class is at a
heightened risk of default and loss.
"Although the model-indicated ratings were lower than the classes'
current or revised ratings, we affirmed our ratings on classes A
and B and tempered our downgrades on classes C, D, and E based on
certain qualitative considerations." These include:
-- The potential that the sponsor, Tishman Speyer Properties L.P.,
can backfill the subleased space in a timely manner despite
weakened office submarket fundamentals and no reserves currently in
place. While we have yet to receive an update on subleasing
activity at the property, according to marketing information, this
space is expected to be available in the fourth quarter of 2023.
-- The loan matures in December 2025;
-- The significant market value decline that would be needed
before these classes experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the payment waterfall.
The downgrade on the class X-B IO certificates and affirmation on
the class X-A IO certificates reflect S&P's criteria for rating IO
securities, in which the rating on the IO securities would not be
higher than that of the lowest-rated reference class. The notional
amount of class X-A references class A, and the notional amount of
class X-B references classes B and C.
The servicer-reported debt service coverage (DSC) was 1.62x for the
six months ended June 30, 2023, and 1.63x as of year-end 2022.
However, S&P notes that the existing mortgage interest rate of
4.24% is well below prevailing rates for office properties. S&P
will continue to monitor interest rates in tandem with the
property's tenancy and performance, as DSC considerations may
constrain the size of a refinance mortgage at the loan maturity in
December 2025.
Property-Level Analysis
The loan collateral consists of One Channel Center, an 11-story,
class A, 501,650-sq.-ft. LEED silver certified office tower located
at 1 Iron St. in the Seaport office submarket of Boston, and an
adjacent 965-stall freestanding parking garage at 116 West First
St. Amenities include a non-collateral 1.6-acre public park, a
cafeteria, a fitness center, and a 130-space bike rack storage.
As S&P previously discussed, the office property was built-to-suit
for State Street in 2014. SSB Realty LLC, an affiliate of State
Street, signed a 15-year triple-net lease at an annual base rent of
$27.50 per sq. ft. until Dec. 31, 2024, which will then increase to
$28.50 per sq. ft. until lease expiration on Dec. 31, 2029. The
tenant has two five-year renewal options with an 18-month notice.
The subject property supports State Street's global headquarters,
which, until recently, was at nearby One Lincoln Street. The tenant
relocated its global headquarters about 1.5 miles northwest in
September 2023 to One Congress Street.
The office collateral is subject to a ground lease between
co-borrowers to satisfy statutory requirements to realize real
estate tax benefits for certain development projects in blighted
areas. S&P viewed the ground rent payments as effectively an
intra-transaction between coborrowers, resulting in zero sum gain.
Consequently, S&P did not include the ground rent payments in its
current analysis, which is like S&P's approach in its past
reviews.
Wells Fargo reported relatively stable NCF at the property: $13.7
million in 2019, $13.4 million in 2020, $13.1 million in 2021,
$11.6 million in 2022, and $5.8 million for the six months ended
June 30, 2023.
According to CoStar, the Seaport office submarket continues to
experience higher vacancy and rent pressure as office utilization
remains below pre-pandemic levels. Vacancy and availability rates
in the submarket continue to climb, and asking rents remain
generally stagnant since the COVID-19 pandemic. In addition, Costar
projects that vacancy and availability rates will remain elevated
because a large pipeline of supply currently under construction
(about 3.7 million sq. ft., or roughly 23% of the submarket's total
inventory as of October 2023), mainly class A quality like the
subject property, is expected to come online in the near term. As
of year-to-date October 2023, the four- and five-star office
properties in the submarket had a $65.56 per sq. ft. asking rent,
12.1% vacancy rate, and 26.1% availability rate, while three-star
office properties had a $42.84 per sq. ft. asking rent, 18.2%
vacancy rate, and 21.9% availability rate. This compares with our
assumed $40.67 per sq. ft. gross rent and 0.0% in place vacancy
rate at the property.
CoStar projects vacancy for four- and five-star office properties
to continue to rise to 20.1% in 2024 and 24.1% in 2025 and asking
rent to contract to $63.08 per sq. ft. and $61.81 per sq. ft. for
the same periods. For three-star office properties, CoStar projects
20.7% vacancy in 2024 and 21.8% in 2025 and asking rents of $41.13
per sq. ft. and $40.31 per sq. ft. for the same periods.
As mentioned, S&P's current analysis considers the current
submarket fundamentals, new supply, subleasing activity, and
uncertainty surrounding State Street's intent in 2029 to arrive at
our revised NCF and valuation.
Transaction Summary
The 10-year, fixed rate, IO mortgage loan had an initial and
current balance of $166.0 million (as of the Sept. 15, 2023,
trustee remittance report), pays an annual fixed rate of 4.24%, and
matures on Dec. 11, 2025. The loan has a reported current payment
status through its September 2023 payment period. To date, the
trust has not incurred any principal losses.
Ratings Lowered
BAMLL Commercial Mortgage Securities Trust 2016-SS1
Class C to 'BBB (sf)' from 'A- (sf)'
Class D to 'BB (sf)' from 'BBB- (sf)'
Class E to 'B (sf)' from 'BB- (sf)'
Class F to 'CCC (sf)' from 'B- (sf)'
Class X-B to 'BBB (sf)' from 'A- (sf)'
Ratings Affirmed
BAMLL Commercial Mortgage Securities Trust 2016-SS1
Class A: AAA (sf)
Class B: AA- (sf)
Class X-A: AAA (sf)
BBCMS 2020-BID: S&P Affirms 'B+ (sf)' Rating on Class HRR Certs
---------------------------------------------------------------
S&P Global Ratings affirmed its ratings on seven classes of
commercial mortgage pass-through certificates from BBCMS 2020-BID
Mortgage Trust, a U.S. commercial mortgage-backed securities (CMBS)
transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a floating-rate, interest-only (IO) mortgage loan secured by the
borrower's fee-simple interest in a 10-story, office property; the
property is located at 1334 York Avenue in the Upper East Side
office submarket, which has one of the tightest vacancy rates in
Manhattan.
Rating Actions
The affirmations on classes A, B, C, D, E, and HRR reflect:
-- S&P's expected-case value, which remains unchanged from
issuance; and
-- S&P's belief that, after accounting for Cornell University's
new lease terms, the multi-year rent abatements, the additional
capital investment, the expected real estate tax exemption, and the
staggered possession and occupancy of the space by Cornell
University, the property's net cash flow and value during the loan
term would be similar to our assumptions at issuance.
At loan origination, the property was solely owner-occupied by
Sotheby's ('B+/Stable'). In June 2023, Sotheby's announced that it
will relocate its global headquarters from the subject property
into the Marcel Breuer building located on 945 Madison Avenue in
2025. On Sept. 28, 2023, Sotheby's partially vacated the property
(totaling 62.1% of net rentable area [NRA]) ahead of its Sept. 29,
2035, lease expiration date. The master servicer confirmed that
Sotheby's is not expected to move out of the remaining space ahead
of the loan maturity (October 2025) because it is utilizing it for
its back-end operations.
As part of Sotheby's partially vacating the property, the borrower
(an entity affiliated with Sotheby's) amended its lease agreement
with Sotheby's and signed a new 30-year triple-net lease agreement
expiring in 2053 with Cornell University ('AA/Stable') to backfill
the vacant space. Cornell University will lease floors five through
nine, as well as certain ground floor, roof spaces, and mezzanine
areas. It also has the option to lease the 10th floor. According to
the servicer, KeyBank Real Estate Capital, Cornell University is
expected to spend approximately $400.0 million ($1,280 per sq. ft.)
to convert the space for general and administrative offices, as
well as clinical, research, laboratory, and other ancillary uses.
Given the substantive nature of the work to be completed, Cornell
University will occupy the various floors in phases over the next
three to four years.
In addition, to mitigate cash flow volatility, Sotheby's will cover
any rental differences that may occur between its contractual
rental obligations on the vacated spaces and Cornell University's
net payment obligations (including initial lower rental rates, rent
gaps, rent free periods, and rent credits) until 2035.
The property will also benefit from a 30-year real estate tax
exemption under Section 420-a of the New York City Real Property
Tax Law from the City of New York because 501(c)(3) non-profit
organizations, such as Cornell University, are exempt from property
taxes on real estate they own. As a result, the fee-simple interest
of Cornell University's space will be bifurcated into fee
condominium and leasehold condominium interest to enable Cornell
University to apply for real estate tax exemption until its lease
expires in 2053. S&P expects Cornell University's space to be
completely exempted from property taxes for the duration of its
lease.
S&P said, "We viewed the above-described events and arrangements to
be credit neutral during the loan's fully extended term. As a
result, we maintained our long-term sustainable net cash flow (NCF)
of $32.5 million, our capitalization rate of 6.50%, and our value
of $500.6 million or $989 per sq. ft. that we derived at issuance.
This yielded a beginning and ending loan-to-value (LTV) ratio of
84.6% on the $423.5 million mortgage loan, based on our value.
Including the $60.0 million mezzanine loan, our LTV ratio increases
to 96.6%."
Nevertheless, the borrower may face headwinds refinancing the
mortgage and mezzanine loans at the final maturity date in October
2025 due to the challenging lending environment within the office
sector, the amount of buildout remaining in 2025 to complete the
conversion of Cornell University's space for its occupancy and use,
and the possibility of additional vacancy if Sotheby's revisits its
footprint strategy at the subject, particularly when its new
headquarters is ready in 2025.
S&P said, "We will continue to monitor Sotheby's tenancy and the
progress of Cornell University's tenant improvement work and
occupancy. If we receive information that differs materially from
our expectations, we may revisit our analysis and take rating
actions, as warranted.
"The affirmation on the class X-EXT IO certificates reflects our
criteria for rating IO securities, in which the rating on the IO
securities would not be higher than that of the lowest-rated
reference class. The notional amount of class X-EXT references
class A; however, class X-EXT is also entitled to receive the
differences between the SOFR floor rate and the actual SOFR rate
that accrued on the class A, B, C, and D certificates."
Property-Level Analysis
The loan collateral consists of a 10-story, 506,074-sq.-ft.
gallery, auction, and office property, located at 1334 York Avenue
between East 71st and East 72nd Streets in the Upper East Side
office submarket of Manhattan. The property, built in 1925,
features a glass façade, a nine-story interior atrium, 24-foot
ceilings, a multi-story lobby with escalators up to the seventh
floor, retail and restaurant space, and views of the East River and
Upper East Side. The property also includes large floor plates,
oversized loading docks, and large freight elevators.
Sotheby's used the property as its global headquarters since 1980
and spent over $229.5 million ($453 per sq. ft.) to convert it into
an auction house. It purchased the property in 2009 for $370.0
million (or $731 per sq. ft.). The tenant most recently invested an
additional $53.6 million in 2018 and 2019 to create new
state-of-the-art galleries and public and client exhibition
spaces.
The property, adjacent to Weill Cornell Medical campus (founded in
1898) and its affiliate, New York-Presbyterian Hospital, is
situated in an area surrounded by a high concentration of
healthcare and medical tenants, including Hospital for Special
Surgery, Memorial Sloan-Kettering Cancer Center, Rockefeller
Hospital and North Well Health–Lenox Hill Hospital, among
others.
At issuance, Sotheby's executed a 15-year triple-net lease (until
Sept. 29, 2035) at $79.04 per sq. ft. base rent and $113.65 per sq.
ft. gross rent, with three 10-year extension options for the entire
space. After vacating 314,170 sq. ft. in late September 2023,
Sotheby's now occupies 191,904 sq. ft. (37.9% of NRA) at the
property. As S&P previously discussed, the borrower amended its
lease with Sotheby's and signed a new lease with Cornell University
to occupy the vacant space. The terms include, among other items:
-- A 30-year lease term (2023-2053) with renewal options up to
additional 20 years.
-- Floors five and six to be delivered on or about Nov. 1, 2023,
and floors seven, eight, and nine on or about July 1, 2027.
-- An initial base rent of $68.50 per sq. ft., then increasing to
$74.50 per sq. ft. on the fifth anniversary of each rent
commencement date, $77.00 per sq. ft. on the 8.5-year anniversary
for each rent commencement date, $83.00 per sq. ft. on the 10th
anniversary of each rent commencement date, and thereafter,
increasing by $6.00 per sq. ft. per year every five years.
-- Fifteen months of free rent after delivery of floors five and
six and 12 months for floors seven, eight, and nine.
-- The tenant to pay 100% of operating expenses and real estate
taxes, if exemption is not granted.
-- Tenant allowance of $8.0 million per floor ($40.0 million in
aggregate) as rent credit.
According to CoStar, the Upper East Side office submarket has a low
overall vacancy and availability rates of 2.1% and 2.7%,
respectively, as of year-to-date October 2023. This is driven by
the abundance of medical facilities located in the surrounding area
and the need for affiliated medical office space. The submarket
asking rent is $66.61 per sq. ft., a 1.3% increase from $65.76 per
sq. ft. in 2022. CoStar projects the overall vacancy rate to rise
to 11.7% in 2024 and 6.7% in 2025 and asking rent to fall slightly
to $64.18 per sq. ft. and $63.06 per sq. ft. for the same periods.
KeyBank reported stable NCF at the property: $41.5 million in 2021
and 2022, and $20.8 million as of year-to-date June 30, 2023. S&P's
current analysis considers the tenancy movements, Cornell
University's new lease terms and structure, and market conditions
to arrive at our NCF and valuation, which are unchanged from
issuance.
Transaction Summary
The floating-rate, IO mortgage loan had an initial and current
balance of $423.5 million (as of the Sept. 15, 2023, trustee
remittance report), pays a floating interest rate currently indexed
to one-month SOFR plus a 3.64% spread, and originally matured on
Oct. 9, 2022. The borrower exercised one of its three one-year
extension options to extend the loan's maturity to Oct. 9, 2023.
KeyBank stated that the borrower exercised its second one-year
extension option to extend the maturity to Oct. 9, 2024, which has
been conditionally approved, subject to the delivery of a
replacement interest rate cap agreement. The borrower has one
one-year extension option remaining, with the loan's final maturity
date on Oct. 9, 2025. The current interest rate cap agreement,
which expires on Oct. 15, 2023, was structured with a 3.00% strike
rate. To exercise its extension options, the loan agreement
requires, among other conditions, the borrower to purchase a
replacement interest rate cap agreement. According to KeyBank, the
borrower is expected to obtain a replacement interest rate cap
agreement with a strike rate of 2.72% and a counterparty rating
replacement trigger of 'A-'.
The servicer reported a debt service coverage (DSC) of 1.80x for
2021, 1.43x for 2022, and 0.94x for the six months ended June 30,
2023. S&P said, "Using a one-month SOFR of 5.447% (according to the
September 2023 trustee remittance report) and the annualized
year-to-date June 30, 2023, servicer-reported NCF, we calculated a
DSC of 1.06x on the trust balance and 0.86x on the total debt.
Using a strike rate of 3.0%, we calculated a DSC of 1.46x on the
trust balance and 1.15x on the total debt."
Ratings Affirmed
BBCMS 2020-BID Mortgage Trust
Class A: AAA (sf)
Class B: AA- (sf)
Class C: A- (sf)
Class D: BBB- (sf)
Class E: BB- (sf)
Class HRR: B+ (sf)
Class X-EXT: BBB- (sf)
BBCMS MORTGAGE 2023-C21: Fitch Gives 'B-sf' Rating on G-RR Certs
----------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to BBCMS Mortgage Trust 2023-C21, Commercial Mortgage
Pass-Through Certificates, Series 2023-C21.
- $1,970,000 class A-1 'AAAsf'; Outlook Stable;
- $100,130,000 class A-2 'AAAsf'; Outlook Stable;
- $59,700,000 class A-3 'AAAsf'; Outlook Stable;
- $310,590,000a class A-5 'AAAsf'; Outlook Stable;
- $475,482,000b class X-A 'AAAsf'; Outlook Stable;
- $3,092,000 class A-SB 'AAAsf'; Outlook Stable;
- $84,058,000 class A-S 'AAAsf'; Outlook Stable;
- $29,718,000 class B 'AA-sf'; Outlook Stable;
- $24,623,000 class C 'A-sf'; Outlook Stable;
- $7,642,000cd class D-RR 'BBB+sf'; Outlook Stable;
- $13,585,000cd class E-RR 'BBB-sf'; Outlook Stable;
- $12,736,000cd class F-RR 'BB-sf'; Outlook Stable;
- $8,491,000cd class G-RR 'B-sf'; Outlook Stable.
Fitch does not expect to rate the following class:
- $22,925,690cd class H-RR;
a) Since Fitch published its expected ratings on Sept. 11, 2023,
the balance for class A-5 was finalized. At the time the expected
ratings were published, the initial certificate balances of classes
A-4 and A-5 were expected to be $310,590,000 in aggregate, subject
to a 5% variance. The classes above reflect the final ratings and
deal structure.
b) Notional amount and interest-only.
c) Privately placed and pursuant to Rule 144A.
d) Represents the "eligible horizontal interest" comprising at
least 5.0% of the pool.
TRANSACTION SUMMARY
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 25 loans secured by 152
commercial properties having an aggregate principal balance of
$679,260,690 as of the cut-off date. The loans were contributed to
the trust by Barclays Capital Real Estate Inc., 3650 Real Estate
Investment Trust 2 LLC, Citi Real Estate Funding Inc., Bank of
Montreal, and German American Capital Corporation. The master
servicer is expected to be Midland Loan Services, a Division of PNC
Bank, National Association and the special servicer is expected to
be 3650 REIT Loan Servicing LLC.
Fitch has withdrawn the expected rating of 'AAAsf(Exp)' for class
A-4 because the class was cancelled and will not be issued. The
classes above reflect the final ratings and deal structure.
KEY RATING DRIVERS
Leverage In line with Recent Transactions: The pool's Fitch
loan-to-value ratio (LTV) of 89.3% is in line with the YTD 2023
average of 88.4% and below the 2022 average of 99.3%. The pool's
Fitch net cash flow (NCF) debt yield (DY) of 10.9% is higher than
the YTD 2023 and 2022 averages of 10.8% and 9.9%, respectively.
Excluding credit opinion loans, the pool's Fitch LTV and DY are
96.3% and 10.3%, respectively, in line with the YTD 2023 LTV and DY
averages of 95.2% and 10.5%, respectively.
Investment-Grade Credit Opinion Loans: The pool includes three
loans, representing 18.9% of the total cutoff balance, that
received investment-grade credit opinions. This is below the YTD
2023 average of 20.3% and above the 2022 average of 14.4%. The
Fashion Valley Mall loan (9.2% of the pool) received a standalone
credit opinion of 'AAAsf'. The CX - 250 Water Street loan (7.8%)
received a standalone credit rating of 'BBBsf'. The Back Bay Office
loan (1.8%) received a standalone credit opinion of 'AAAsf'.
Limited Amortization: Based on the scheduled balances at maturity,
the pool is scheduled pay down by 0.8%, which is below both the
2023 YTD and 2022 averages of 1.8% and 3.3%, respectively. The pool
has 22 interest-only loans, or 92.2% of the pool by balance, which
is higher than both the 2023 YTD and 2022 averages of 81.0% and
77.5%, respectively.
Higher Pool Concentration: The pool is more concentrated than
recently rated Fitch transactions. The top 10 loans in the pool
make up 69.0% of the pool, which is greater than the 2023 YTD and
2022 average of 63.2% and 55.2%, respectively. The pool's effective
loan count of 21.1 is greater than the 2023 YTD average of 20.5 and
below the 2022 average of 25.9.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow decreases property value and capacity to meet
debt service obligations. The table below indicates the
model-implied rating sensitivity to changes in one variable, Fitch
NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBB+sf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% Decline to Fitch NCF:
'AA-sf'/'A-sf'/'BBBsf'/'BBB-sf'/'BBsf'/'B-sf'/ less than 'CCCsf'.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Improvement in cash flow increases property value and capacity to
meet debt service obligations. The table below indicates the
model-implied rating sensitivity to changes to in one variable,
Fitch NCF:
- Original Rating:
'AAAsf'/'AA-sf'/'A-sf'/'BBB+sf'/'BBB-sf'/'BB-sf'/'B-sf';
- 10% Increase to Fitch NCF:
'AAAsf'/'AA+sf'/'Asf'/'A-sf'/'BBBsf'/'BBsf'/'Bsf'.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BENCHMARK 2018-B5: Fitch Affirms B-sf Rating on Class G-RR Certs
----------------------------------------------------------------
Fitch Ratings has affirmed 14 classes and revised three Rating
Outlooks of Benchmark 2018-B5 Mortgage Trust Commercial Mortgage
Pass-Through Certificates. The Rating Outlook has been revised to
Negative from Stable on classes E-RR, F-RR and G-RR. The under
criteria observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
Benchmark 2018-B5
A-2 08160BAD6 LT AAAsf Affirmed AAAsf
A-3 08160BAC8 LT AAAsf Affirmed AAAsf
A-4 08160BAB0 LT AAAsf Affirmed AAAsf
A-S 08160BAH7 LT AAAsf Affirmed AAAsf
A-SB 08160BAE4 LT AAAsf Affirmed AAAsf
B 08160BAJ3 LT AA-sf Affirmed AA-sf
C 08160BAK0 LT A-sf Affirmed A-sf
D 08160BAL8 LT BBBsf Affirmed BBBsf
E-RR 08160BAQ7 LT BBB-sf Affirmed BBB-sf
F-RR 08160BAS3 LT BB-sf Affirmed BB-sf
G-RR 08160BAU8 LT B-sf Affirmed B-sf
X-A 08160BAF1 LT AAAsf Affirmed AAAsf
X-B 08160BAG9 LT AA-sf Affirmed AA-sf
X-D 08160BAN4 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The affirmations reflect the impact of the updated criteria and
stable pool performance since the prior rating action. The Negative
Outlooks are based on performance concerns and an additional
sensitivity scenario that incorporated an increased probability of
default on the 215 Lexington Avenue loan (2.7% of the pool). Seven
loans (22.2%) are considered Fitch Loans of Concern (FLOCs),
including two in special servicing (10.5%). Fitch's current ratings
incorporate a 'Bsf' rating case loss of 4.0%.
The 215 Lexington Avenue loan was flagged as a FLOC due to a
continued decline in occupancy and upcoming rollover risk. It is
secured by a 120,677-sf office property located in the Murray Hill
neighborhood of Manhattan, NY. Major tenants include Noteleaf
(10.8% NRA; expires May 6, 2024), GRACE Communications Foundation
(10.8%; expires Feb. 28, 2030) and Arms, Inc. (9.3%; expired July
31, 2023). Two tenants vacated in 2022 ahead of their 2023 lease
expiration dates. The property was 49.5% occupied at YE 2022, down
from 61.6% at YE 2021 and 67.1% at YE 2020. Approximately 13% of
the NRA expires in 2023 and 2024, including two of the top three
tenants. Debt service coverage ratio (DSCR) was a reported 1.99x at
YE 2022. Fitch's 'Bsf' rating case loss (prior to concentration
adjustments) of 7.4% reflects a 9.5% cap rate and a 20% stress at
YE 2022 NOI. For the Negative Outlooks, Fitch factored in a 75%
probability of default on the loan.
The largest contributor to loss expectations, First Place Tower
(2.7%), is secured by a 594,984-sf office property located in the
downtown Tulsa, OK CBD. The property was built in 1956 and
subsequently renovated in 1995. Major tenants include One Gas, Inc.
(24% NRA; expires June 30, 2029), Matrix Service Company (10.3%;
expires Dec. 31, 2031) and Conner & Winters LLP (5.8%; expires
April 30, 2036). The loan was flagged as a FLOC due to declining
DSCR and near-term rollover concerns. The servicer-reported
occupancy and NOI DSCR were 80% and 1.22x, respectively, as of
March 2023, compared to 72% and 1.78x as of YE 2021. Upcoming
rollover includes 10.1% of the NRA in 2023, 9% in 2024 and 5.1% in
2025. Fitch's 'Bsf' rating case loss (prior to concentration
adjustments) of 17.7% factors in an increased probability of
default, a 10% cap rate and a 10% stress to the YE 2022 NOI.
The second largest contributor to loss expectations, Overland Park
Xchange (2.6%), is secured by a 733,400-sf office property located
in Overland Park, KS, approximately 15 miles southwest of downtown
Kansas City. The loan was flagged as FLOC due to a decline in
occupancy following the loss of a large tenant. Black & Veatch
(27.6% NRA; 30% of rents) vacated prior to its April 2026 lease
expiration. As a result, occupancy declined to 72.1% at YE 2022
from 99.7% the prior year. The NOI DSCR was reported at 2.44x for
YE 2022. Two tenants remain at the property, including
UnitedHealthcare (rated AA-/Stable; 44.7% of NRA; expires Dec. 31,
2026) and Select Quote (27.4%; expires July 31, 2029). Fitch's
'Bsf' rating case loss (prior to concentration adjustments) of
18.3% factors in an increased probability of default, a 10% cap
rate and a 20% stress to the YE 2022 NOI to account for the loss of
the large tenant.
Specially Serviced Loans: The eBay North First Commons (5.3%) and
Workspace (5.2%) loans transferred to special servicing in March
and May 2023, respectively, due to imminent balloon/maturity
default. The loans did not repay at their scheduled 2023 maturity
dates, and were subsequently modified to extend their maturities by
24 to 36 months. The loans are pending return to the master
servicer.
Increasing CE: As of the September 2023 distribution date, the
pools' aggregate balance has been paid down by 7.2% to $964 million
from $1.04 billion at issuance. Four loans (1.4%) are defeased.
There have been no realized losses to date and $56,521 of interest
shortfalls are affecting the non-rated class NR-RR. Twenty-three
loans (63.2%), including 10 of the top 15 loans, are full-term IO,
and 17 loans (20.2%) were structured with a partial IO period, all
of which have begun to amortize.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would be triggered by an increase in pool-level losses
from underperforming and/or specially serviced loans. In addition,
downgrades to classes with Negative Outlooks are expected with
higher losses on FLOCs, most notably if 215 Lexington Avenue fails
to stabilize.
Downgrades to classes rated 'AAAsf' and 'AA-sf' are not expected
due to their high CE and continued expected amortization and
paydown but could occur if interest shortfalls affect these classes
or if expected losses increase significantly.
Downgrades to classes rated 'A-sf', 'BBBsf' and 'BBB-sf' would
occur should expected losses for the pool increase significantly,
and/or performing FLOCs begin to experience performance decline
beyond expectations.
Classes rated 'BB-sf' and 'Bsf' would be downgraded with a greater
certainty of losses and/or as losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AA-sf' to 'A-sf' rated classes would only occur with
significant improvement in CE and/or defeasance, and the
performance stabilization of FLOCs, most notably 215 Lexington
Avenue, First Place Tower and Overland Park Xchange.
Upgrades to 'BBBsf' and 'BBB-sf' rated classes may occur as the
number of FLOCs are reduced and/or loss expectations improve.
Classes would not be upgraded above 'Asf' if there were likelihood
of interest shortfalls.
Upgrades to 'BB-sf' and 'B-sf' rated classes are not likely until
the later years of the transaction and only if the performance of
the remaining pool stabilizes and there is sufficient CE to the
classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
BRAVO RESIDENTIAL 2023-RPL1: DBRS Gives (P) B(high) on B-2 Notes
----------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Mortgage-Backed Notes, Series 2023-RPL1 (the Notes) to be issued by
BRAVO Residential Funding Trust 2023-RPL1 (the Trust):
-- $342.3 million Class A-1 at AAA (sf)
-- $34.4 million Class A-2 at AA (high) (sf)
-- $376.7 million Class A-3 at AA (high) (sf)
-- $405.1 million Class A-4 at A (high) (sf)
-- $425.8 million Class A-5 at BBB (high) (sf)
-- $28.4 million Class M-1 at A (high) (sf)
-- $20.7 million Class M-2 at BBB (high) (sf)
-- $14.0 million Class B-1 at BB (high) (sf)
-- $11.5 million Class B-2 at B (high) (sf)
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
The AAA (sf) credit rating on the Class A-1 Notes reflects 31.35%
of credit enhancement provided by subordinated notes. The AA (high)
(sf), A (high) (sf), BBB (high) (sf), BB (high) (sf), and B (high)
(sf) credit ratings reflect 24.45%, 18.75%, 14.60%, 11.80%, and
9.50% of credit enhancement, respectively.
This transaction is a securitization of a portfolio of seasoned
reperforming, first-lien, residential mortgages funded by the
issuance of the Notes. The Notes are 7,781 loans with a total
principal balance of $498,581,961 as of the Cut-Off Date (August
31, 2023).
The portfolio is approximately 192 months seasoned on a
weighted-average (WA) basis and contains 69.8% modified loans. The
modifications happened more than two years ago for 64.9% of the
modified loans. Within the pool, 3,848 mortgages have
non-interest-bearing deferred amounts, which equate to
approximately 7.6% of the total principal balance.
As of the Cut-Off Date, 89.3% of the pool is current, including 64
loans (1.2%) that are current and in active bankruptcy, while 10.7%
of the pool is 30 days delinquent, including 20 loans (0.4%) in
active bankruptcy loans under the Mortgage Bankers Association
(MBA) delinquency method. Approximately 40.4%, 59.7%, and 74.7% of
the mortgage loans by balance have been current for the past 24,
12, and six months, respectively, under the MBA delinquency
method.
The majority of the pool (93.3%) is not subject to the Consumer
Financial Protection Bureau Ability-to-Repay (ATR)/Qualified
Mortgage (QM) rules. The remaining 6.7% of the pool may be subject
to the ATR rules but a designation was not provided. As such, DBRS
Morningstar assumed these loans to be non-QM in its analysis.
PIF Residential Funding V Ltd., an affiliate of Loan Funding
Structure III LLC (the Sponsor), will acquire the loans and
contribute them to the Trust. The Sponsor or one of its
majority-owned affiliates will acquire and retain a 5% eligible
vertical interest in the offered Notes, consisting of 5% of each
class to satisfy the credit risk retention requirements.
The mortgage loans will be serviced by Nationstar Mortgage LLC
doing business as (dba) Rushmore Servicing (Rushmore; 55.0%), Fay
Servicing, LLC (Fay; 26.4%) and Select Portfolio Servicing, Inc.
(SPS; 18.6%). For this transaction, the aggregate servicing fee
paid from the Trust will be 0.40%. In August 2023, Mr. Cooper Group
Inc. (the parent of Nationstar Mortgage LLC dba Mr. Cooper)
acquired investment management firm Roosevelt Management Company,
LLC and its affiliated subsidiaries including Rushmore Loan
Management Services (i.e., Rushmore is now part of Mr. Cooper).
There will not be any advancing of delinquent principal or interest
on any mortgages by the Servicers or any other party to the
transaction; however, the Servicers are obligated to make advances
in respect of homeowner association fees, taxes, and insurance as
well as reasonable costs and expenses incurred in the course of
servicing and disposing of properties.
When the aggregate pool balance is reduced to less than 10% of the
balance as of the Cut-Off Date, the holder of the Trust
certificates may purchase all of the mortgage loans and real estate
owned (REO) properties from the Issuer at a price equal to the sum
of principal balance of the mortgage loans; accrued and unpaid
interest thereon; the fair market value of REO properties net of
liquidation expenses; unpaid servicing advances; and any fees,
expenses, or other amounts owed to the transaction parties
(optional termination).
The transaction employs a sequential-pay cash flow structure.
Principal proceeds and excess interest can be used to cover
interest shortfalls on the Notes, but such shortfalls on the Class
M-1 and more subordinate Notes will not be paid from principal
proceeds until the Class A-1 and A-2 Notes are retired. The Class
A1 Notes are entitled to receive Net WAC shortfall amounts that
would otherwise be used to pay current interest or any interest
shortfall amount to the Class B-3, Class B-4, or Class B-5 Notes
reverse sequentially.
Notes: All figures are in U.S. dollars unless otherwise noted.
BREAN ASSET 2023-SRM1: DBRS Gives Prov. B Rating on Class M5 Notes
------------------------------------------------------------------
DBRS, Inc. assigned provisional credit ratings to the following
Mortgage-Backed Notes, Series 2023-SRM1 (the Notes) to be issued by
Brean Asset Backed Securities Trust 2023-SRM1:
-- $109.3 million Class A at AAA (sf)
-- $11.5 million Class M1 at AA (sf)
-- $11.5 million Class M2 at A (sf)
-- $15.7 million Class M3 at BBB (sf)
-- $15.8 million Class M4 at BB (sf)
-- $15.7 million Class M5 at B (sf)
The AAA (sf) credit rating reflects credit enhancement of 46.3% for
Class A, AA (sf) credit rating reflects credit enhancement of 40.7%
for Class M1, A (sf) credit rating reflects credit enhancement of
35.1% for Class M2, BBB (sf) credit rating reflects credit
enhancement of 27.3% for Class M3, BB (sf) credit rating reflects
credit enhancement of 19.6% for Class M4, and B (sf) credit rating
reflects credit enhancement of 11.9% for Class M5.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
Lenders typically offer reverse mortgage loans to people who are at
least 62 years old. Through reverse mortgage loans, borrowers have
access to home equity through a lump sum amount or a stream of
payments without periodically repaying principal or interest,
allowing the loan balance to accumulate over a period of time until
a maturity event occurs. Loan repayment is required (1) if the
borrower dies, (2) if the borrower sells the related residence, (3)
if the borrower no longer occupies the related residence for a
period (usually a year), (4) if it is no longer the borrower's
primary residence, (5) if a tax or insurance default occurs, or (6)
if the borrower fails to properly maintain the related residence.
In addition, borrowers must be current on any homeowner's
association dues, if applicable. Reverse mortgages are typically
nonrecourse; borrowers don't have to provide additional assets in
cases where the outstanding loan amount exceeds the property's
value (the crossover point). As a result, liquidation proceeds will
fall below the loan amount in cases where the outstanding balance
reaches the crossover point, contributing to higher loss severities
for these loans.
As of the August 31, 2023, cut-off date, the collateral has
approximately $203.70 million in current unpaid principal balance
(UPB) from 189 active and 46 inactive reverse mortgage loans
secured by first liens on single-family residential properties,
condominiums, multifamily (two- to four-family) properties, and
co-operatives. The loans were all originated in 2006 and 2007 and
were originally securitized in the SASCO 2007-RM1 transaction. All
loans in this pool are floating-rate assets with an 8.79%
weighted-average coupon.
As of the cut-off date, the loans in this transaction are both
performing and nonperforming (i.e., active and inactive). There are
189 performing loans, representing 79.85% of the total UPB. As for
the 46 nonperforming loans, 19 loans are referred for foreclosure
or in foreclosure (9.62% of the balance), eight are in default
(2.50%), seven are liquidated/held for sale (3.21%), and 12 are
called due following recent maturity (4.82%). None of the loans are
insured by the United States Department of Housing and Urban
Development (HUD); therefore, inactive loans (including the
currently inactive loans) do not benefit from the typical insurance
claim that HUD-insured loans experience.
The transaction uses a structure in which cash distributions are
made sequentially to each rated note until the rated amounts with
respect to such notes are paid off. No subordinate note shall
receive any payments until the balance of senior notes has been
reduced to zero.
DBRS Morningstar's credit ratings on the Notes address the credit
risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated Notes are the related
Note Amount and Interest Accrual Amounts.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar 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.
Notes: All figures are in U.S. dollars unless otherwise noted.
BRYANT PARK 2023-21: S&P Assigns BB- (sf) Rating on Class E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Bryant Park Funding
2023-21 Ltd./Bryant Park Funding 2023-21 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Marathon Asset Management L.P.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Bryant Park Funding 2023-21 Ltd./Bryant Park Funding 2023-21 LLC
Class A-1, $240.0 million: AAA (sf)
Class A-2, $12.0 million: AAA (sf)
Class B, $52.0 million: AA (sf)
Class C (deferrable), $24.0 million: A+ (sf)
Class D (deferrable), $22.0 million: BBB- (sf)
Class E (deferrable), $13.2 million: BB- (sf)
Subordinated notes, $37.4 million: Not rated
CCUBS COMMERCIAL 2017-C1: Fitch Affirms 'BB-' Rating on F-RR Certs
------------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of CCUBS Commercial Mortgage
Trust 2017-C1, commercial mortgage pass-through certificates. In
addition, the Rating Outlooks on classes D-RR and E-RR were revised
to Negative from Stable. The Outlook on class F-RR remains
Negative. The under criteria observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CCUBS 2017-C1
A-2 12508GAR7 LT AAAsf Affirmed AAAsf
A-3 12508GAT3 LT AAAsf Affirmed AAAsf
A-4 12508GAU0 LT AAAsf Affirmed AAAsf
A-S 12508GAX4 LT AAAsf Affirmed AAAsf
A-SB 12508GAS5 LT AAAsf Affirmed AAAsf
B 12508GAY2 LT AA-sf Affirmed AA-sf
C 12508GAZ9 LT A-sf Affirmed A-sf
D 12508GAA4 LT BBBsf Affirmed BBBsf
D-RR 12508GAC0 LT BBB-sf Affirmed BBB-sf
E-RR 12508GAE6 LT BB+sf Affirmed BB+sf
F-RR 12508GAG1 LT BB-sf Affirmed BB-sf
G-RR 12508GAJ5 LT CCCsf Affirmed CCCsf
X-A 12508GAV8 LT AAAsf Affirmed AAAsf
X-B 12508GAW6 LT AA-sf Affirmed AA-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria,"
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The affirmations reflect the impact of the updated criteria and
generally stable performance since the prior rating action. Fitch's
current ratings reflect a 'Bsf' rating case loss of 5.3%. Five
loans (21.7% of pool) were flagged as Fitch Loans of Concern
(FLOCs), including two office loans in the top 15 with upcoming
rollover concerns and declining performance, as well as two loans
in special servicing, Marriott Grand Cayman (3.8%) and 130 Bowery
(2.1%).
The Negative Outlooks reflect downgrades concerns due to the
deteriorating performance of the FLOCs, particularly, 16 Court
Street (7.7%), and uncertainties surrounding the recovery prospects
of the specially serviced 130 Bowery loan (2.1%).
The largest contributor to loss expectations is the 16 Court Street
(7.7%), which is the second largest loan in the pool. The loan is
secured by a 36-story, 325,510-sf, office building with ground
floor retail located in Brooklyn, New York. The property's largest
include The City University of New York (14.3% of NRA, leased
through August 2024) and Michael Van Valkenburgh Associates (7.7%,
October 2025). All other tenants comprise less than 6% of NRA
individually.
The property's occupancy was 72.2% as of June 2023 rent roll,
compared to 70.1% at YE 2022, 81% at YE 2021, 85% at YE 2020 and
93% at issuance. Occupancy declined since issuance due to several
tenants vacating upon lease expiration. The servicer-reported NOI
DSCR declined to 0.94x as of March 2023, from 1.15x at YE 2022,
1.59x at YE 2021 and 2.10x at YE 2020. Per the servicer, the loan
is currently being cash managed. Near-term rollover includes 2.9%
of NRA in 2023, 27.7% in 2024 and 0.7% in 2025. According to
CoStar, the property lies within the Downtown Brooklyn office
submarket. As of 3Q 2023, the average asking rental rates and
vacancy for the submarket were $49.73 psf and 19.6%, respectively.
Fitch's 'Bsf' case loss of 21.6% (prior to a concentration
adjustment) is based on a 9.25% cap rate and 10% stress to the YE
2022 NOI.
The second largest contributor to loss expectations is the
specially serviced 130 Bowery loan (2.1%), which is secured by
two-story, 32,700-sf, commercial building located in Manhattan that
is 100% leased to a borrower affiliated tenant, which rents out the
property as a ballroom, concert hall, or event space. The loan
transferred to special servicing in June 2020 due to payment
default.
The borrower filed for bankruptcy in August 2022, and the special
servicer has been working through the bankruptcy process. The
debtor has submitted to the court its plan to sell the property and
the special servicer has not objected to the plan for a collateral
sale, which is anticipated to close in October 2023.
Fitch's 'Bsf' case loss of 20.0% (prior to a concentration
adjustment) is based on a haircut to the August 2021 appraisal.
Increasing CE: As of the September 2023 distribution date, the
pool's aggregate balance has been paid down by 16.7% to $580.3
million from $696.7 million at issuance. No loans have defeased
since issuance and four loans have paid off (13.4% of original pool
balance). Seventeen loans (68.3%) are interest-only for the full
term. An additional six loans (14.5%) were structured with partial
interest-only periods. The specially serviced Marriott Grand Cayman
(3.8%) which defaulted at maturity in July 2022 was modified with
an extended maturity date of July 2025. All other remaining loans
in the pool are scheduled to mature in 2027. To date, the trust has
not incurred any realized losses.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from concerns with potential further declines in performance that
could result in higher expected losses on FLOCs. If expected losses
do increase, downgrades to these classes are anticipated.
Downgrades to the classes rated 'AAAsf' and 'AA-sf' are not
expected due to continued amortization and increasing CE relative
to loss expectations, but may occur should interest shortfalls
affect these classes. Downgrades to classes C and D may occur if
overall pool performance declines or loss expectations increase
significantly. Downgrades to classes D-RR, E-RR and F-RR may occur
if performance of the FLOCs, particularly 16 Court Street fail to
stabilize, or with lower recovery expectations and/or a prolonged
workout on 130 Bowery. A downgrade to class G-RR would occur with a
greater certainty of losses and/or as losses are realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Sensitivity factors that lead to upgrades would occur with stable
to improved performance coupled with paydown and/or defeasance.
Upgrades to classes B and C could occur with stabilization of the
FLOCs, particularly 16 Court Street and 130 Bowery, but would be
limited based on concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood of interest shortfalls.
Upgrades of classes D, D-RR and E-RR would only occur with
significant improvement in CE and stabilization of the FLOCs.
Upgrades to classes F-RR and G-RR are not likely unless resolution
of the specially serviced loan is better than expected and/or
recoveries on the FLOCs are significantly better than expected, and
there is sufficient CE to the classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CHASE HOME 2023-RPL2: DBRS Gives Prov. B(high) Rating on B-2 Certs
------------------------------------------------------------------
DBRS, Inc. assigned the following provisional credit ratings to the
Mortgage Certificates, Series 2023-RPL2 (the Certificates) to be
issued by Chase Home Lending Mortgage Trust 2023-RPL2 (CHASE
2023-RPL2 or the Trust):
-- $376.8 million Class A-1-A at AAA (sf)
-- $27.8 million Class A-1-B at AAA (sf)
-- $404.6 million Class A-1 at AAA (sf)
-- $22.6 million Class A-2 at AA (low) (sf)
-- $13.0 million Class M-1 at A (low) (sf)
-- $10.1 million Class M-2 at BBB (low) (sf)
-- $6.8 million Class B-1 at BB (low) (sf)
-- $3.5 million Class B-2 at B (high) (sf)
The AAA (sf) credit rating on the Class A-1-A, Class A-1-B, and
Class A-1 Certificates reflects 14.10% of credit enhancement,
provided by subordinated notes in the transaction. The AA (low)
(sf), A (low) (sf), BBB (low) (sf), BB (low) (sf), and B (high)
(sf) credit ratings reflect 9.30%, 6.55%, 4.40%, 2.95%, and 2.20%
of credit enhancement, respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of primarily
seasoned performing and reperforming first-lien residential
mortgages and funded by the issuance of mortgage certificates (the
Certificates). The Certificates are backed by 2,149 loans with a
total principal balance of $495,814,766 as of the Cut-Off Date
(August 31, 2023).
JPMorgan Chase Bank, N.A. (JPMCB) will serve as the Sponsor and
Mortgage Loan Seller of the transaction. JPMCB will act as the
Representing Party, Servicer, and Custodian. DBRS Morningstar rates
JPMCB's Long-Term Issuer Rating and Long-Term Senior Debt at AA and
its Short-Term Instruments rating R-1 (high), all with Stable
trends.
The loans are approximately 207 months seasoned on average. As of
the Cut-Off Date, 99.7% of the pool is current under the Mortgage
Bankers Association (MBA) delinquency method, and 0.3% is in
bankruptcy. All the bankruptcy loans are currently performing.
Approximately 98.7% and 77.0% of the mortgage loans have been zero
times (x) 30 days delinquent for the past 12 months and 24 months,
respectively, under the MBA delinquency method.
Within the portfolio, 99.0% of the loans are modified. The
modifications happened more than two years ago for 92.9% of the
modified loans. Within the pool, 968 mortgages have
non-interest-bearing deferred amounts, which equates to 11.8% of
the total principal balance. Unless specified otherwise, all
statistics on the mortgage loans in the related report are based on
the current balance, including the applicable non-interest-bearing
deferred amounts.
One of the Sponsor's majority-owned affiliates will acquire and
retain a 5% vertical interest in the transaction, consisting of an
uncertificated interest in the issuing entity, to satisfy the
credit risk retention requirements. Such uncertificated interest
represents the right to receive at least 5% of the amounts
collected on the mortgage loans (net of fees, expenses, and
reimbursements).
There will not be any advancing of delinquent principal or interest
on any mortgage by the Servicer or any other party to the
transaction; however, the Servicer is generally obligated to make
advances in respect of taxes, and insurance as well as reasonable
costs and expenses incurred in the course of servicing and
disposing of properties.
For this transaction, the servicing fee payable for the mortgage
loans is composed of three separate components: the base servicing
fee, the delinquent servicing fee, and the additional servicing
fee. These fees vary based on the delinquency status of the related
loan and will be paid from interest collections before distribution
to the securities.
On any Distribution Date when the aggregate unpaid principal
balance (UPB) of the mortgage loans is less than 10% of the
aggregate Cut-Off Date UPB, the Servicer (and its successors and
assigns) will have the option to purchase all of the mortgage loans
at a purchase price equal to the sum of the UPB of the mortgage
loans, accrued interest, the appraised value of the real estate
owned properties, and any unpaid expenses and reimbursement
amounts.
The transaction employs a sequential-pay cash flow structure.
Principal proceeds can be used to cover interest shortfalls on the
Certificates, but such shortfalls on Class M-1 and more subordinate
bonds will not be paid from principal proceeds until Class A-1-A,
A-1-B, and A-2 are retired.
The credit ratings reflect transactional strengths that include the
following:
-- Credit quality relative to reperforming pools,
-- Seasoning,
-- Current delinquency status,
-- Satisfactory third-party due-diligence review,
-- Structural features, and
-- Representations and warranties standard.
The transaction also includes the following challenges:
-- No servicer advances of delinquent principal and interest, and
-- Assignments and endorsements.
DBRS Morningstar's credit rating on the Notes addresses the credit
risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for the rated notes are the Interest Payment
Amount and the Class Principal Balance.
DBRS Morningstar's credit ratings do not address nonpayment risk
associated with contractual payment obligations contemplated in the
applicable transaction document(s) that are not financial
obligations. For example, in this transaction, DBRS Morningstar's
ratings do not address the payment of any Cap Carryover Amount
based on its position in the cash flow waterfall.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar 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.
Notes: All figures are in U.S. dollars unless otherwise noted.
CITIGROUP 2014-GC21: Fitch Lowers Rating on Class F Notes to 'Csf'
------------------------------------------------------------------
Fitch Ratings has downgraded two classes, affirmed 11 classes of
Citigroup Commercial Mortgage Trust 2014-GC21. The Outlooks on four
classes remain Negative. The Under Criteria Observation (UCO) has
been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CGCMT 2014-GC21
A-4 17322MAV8 LT AAAsf Affirmed AAAsf
A-5 17322MAW6 LT AAAsf Affirmed AAAsf
A-AB 17322MAX4 LT AAAsf Affirmed AAAsf
A-S 17322MAY2 LT AAAsf Affirmed AAAsf
B 17322MAZ9 LT Asf Affirmed Asf
C 17322MBA3 LT BBBsf Affirmed BBBsf
D 17322MAA4 LT CCCsf Affirmed CCCsf
E 17322MAC0 LT CCsf Downgrade CCCsf
F 17322MAE6 LT Csf Downgrade CCCsf
PEZ 17322MBD7 LT BBBsf Affirmed BBBsf
X-A 17322MBB1 LT AAAsf Affirmed AAAsf
X-B 17322MBC9 LT BBBsf Affirmed BBBsf
X-C 17322MAJ5 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria,"
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The downgrades to the distressed classes reflect their exposure to
the Maine Mall and Greene Town Center, as well as concerns with the
remaining loans' upcoming maturity dates and refinance challenges
in the current environment.
The affirmations reflect the updated criteria and continued stable
performance from a majority of the loans in the pool.
Fitch's current ratings incorporate a 'Bsf' ratings case loss of
8.66%
Largest Contributors to Loss Expectations: Maine Mall (18.5%),
which is secured by a 747,660-sf portion of a 1,022,208-sf regional
mall located approximately six miles southwest of Portland, ME. The
loan is sponsored by Brookfield. Non-collateral anchors include
Macy's and a dark anchor box previously occupied by Sears.
Collateral anchors include Jordan's Furniture (which backfilled the
majority of the former Bon-Ton space that closed in August 2017;
16.0% of collateral NRA; expiry 2030) and JCPenney (11.5%; expiry
July 2028). Junior anchors include Best Buy, Round 1 Bowling &
Amusement, H&M and Old Navy. The mall also features the only Apple
store in the state of Maine.
The collateral was 92% occupied as of June 2023, compared to 91.1%
at YE 2021, 93.9% at YE 2020 and 76% at YE 2019. There is upcoming
lease rollover of 8% in 2023, 14% in 2024 and 9% in 2025. The
servicer reported YTD June 2022 NOI debt service coverage ratio
(DSCR) was 1.41x in line with 1.40x YE 2021, 1.45x at YE 2020 and
1.70x at YE 2019.
Fitch's loss expectation of approximately 29% (prior to
concentration add-ons) reflects a cap rate of 12% and a 15% haircut
to the YE 2022 NOI and included a higher probability of default to
account for the property's secondary location, upcoming rollover
and refinancing concerns as the loan approaches maturity in April
2024.
The next largest contributor to loss is the Greene Town Center loan
(6%), which is an open-air, mixed-use lifestyle center located in
Beavercreek, OH. The collateral consists of retail (566,634 sf),
office (143,343 sf) and residential space (206 units totaling
199,248 sf). Non-collateral anchors include Von Maur (ground lease,
130,000-sf) and a 14-screen Cinemark movie theater. The loan was
designated a Fitch Loan of Concern due to performance declines and
upcoming loan maturity.
Largest collateral tenants include LA Fitness (7.2% of NRA; lease
expires Nov. 30, 2026), Nordstrom Rack (4.9%; Sept. 30, 2024),
Books & Co. (4.8%; Jan. 31, 2027), University of Dayton (4.1% of
NRA; May 2026) and Forever 21 (2.9% of NRA; Jan. 2024). Forever 21
signed a one-year extension since Fitch's prior rating action.
Occupancy was 91% as of YE 2022 with a 1.33x NOI DSCR. Fitch's
analysis includes a 12% cap rate and a 15% stress to the YE 2022
NOI. An increased probability of default was applied to account for
the loan's heightened maturity default risk. Loss expectations
reach approximately 16% (prior to concentration add-ons) at the
'Bsf' ratings case.
Increasing Credit Enhancement: Credit enhancement (CE) has improved
since Fitch's prior rating action due to amortization, prepayment
and additional defeasance. The pool balance has been reduced by
35.9% since issuance. Twenty-three loans (29%) are defeased
compared to sixteen loans at Fitch's prior review. To date, the
trust has incurred $16.3 million in realized losses (1.6% of the
original pool balance).
Maturity Concentration: With the exception of Green Town Center
(6.1% of the pool), which matures in December 2023, all of the
remaining loans in the pool are scheduled to mature within the
first half of 2024. The Negative Outlooks on classes B, C, X-D and
PEZ reflect maturity concentration concerns in 2024 and ability for
office properties and regional malls to refinance given the current
economic environment.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes A-4 through A-S, while not likely, are
possible should performance of the FLOCs continue to decline,
particularly if Maine Mall and/or Green Town Center experience
additional declines default at maturity. Further downgrades to
classes B may occur should pool level losses continue to increase,
or should the FLOCs exhibit further performance declines.
Downgrades to the distressed classes will occur as losses are
realized or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to the class B certificates are not expected, but may
occur with significant improvement in CE, paydown and/or
defeasance.
Upgrades to the 'BBBsf' category rated classes are considered
unlikely, but may occur if Maine Mall and Greene town repay at
maturity. Classes will not be upgraded above 'Asf' if there is a
likelihood of interest shortfalls.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CITIGROUP 2019-C7: DBRS Confirms B(low) Rating on JRR Certs
-----------------------------------------------------------
DBRS Limited confirmed its credit ratings on the following
Commercial Mortgage Pass-Through Certificates, Series 2019-C7
issued by Citigroup Commercial Mortgage Trust 2019-C7:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- 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 AAA (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BBB (low) (sf)
-- Class X-G at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (high) (sf)
-- Class X-H at BB (low) (sf)
-- Class H at B (high) (sf)
-- Class J-RR at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect DBRS Morningstar's outlook
for the transaction, which remains relatively unchanged from the
last rating action in November 2022. The stable performance of the
pool is illustrated by the most recent year-end financials, which
reported a weighted-average (WA) debt service coverage ratio (DSCR)
for the pool of nearly 2.25 times (x). Per the September 2023
reporting, all of the original 55 loans remain in the pool, with an
aggregate principal balance of $1.25 billion, representing a
negligible collateral reduction of just 1.3% since issuance as a
result of scheduled loan amortization. One loan, representing 1.3%
of the pool, is fully defeased. While there are no loans in special
servicing, there are 13 loans, representing 25.1% of the pool, on
the servicer's watchlist; however, only nine loans, representing
15.0% of the pool, are being monitored for credit-related reasons.
The pool is concentrated by property type, with loans backed by
office or mixed-use properties (with large office components),
representing more than 35.0% of the pool. In general, the office
sector has been challenged, given the low investor appetite for the
property type and high vacancy rates in many submarkets. However,
of the 14 loans secured by office or mixed-use properties, only
four exhibited performance that suggested increased credit risk
since issuance. In its analysis for this review, DBRS Morningstar
applied stressed loan-to-value ratios (LTVs) or increased
probability of default assumptions for three loans backed by office
properties exhibiting declines in performance, resulting in a WA
expected loss (EL) that was about 2.5x the pool average. At
issuance, DBRS Morningstar shadow-rated two loans backed by office
properties as investment grade: 650 Madison Avenue – Trust
(Prospectus ID#2, 4.5% of the pool) and 805 Third Avenue – Pooled
(Prospectus ID#3, 4.5% of the pool). With this review, DBRS
Morningstar has removed the shadow ratings for these loans, as
discussed in further detail below.
The 650 Madison Avenue – Trust loan is secured by a Class A
office and retail tower at 650 Madison Avenue in the Plaza district
of New York City. The property consists of approximately 544,000
square feet (sf) of office space, 22,000 sf of ground-floor retail
space, and 34,000 sf of storage and flex space. The loan is pari
passu with other pieces of the whole loan secured in several
transactions, including four other transactions that are also rated
by DBRS Morningstar. While the trust's reporting indicates the loan
is not on the servicer's watchlist, the lead note secured in the
MAD 2019-650M transaction reports that the loan has been on the
servicer's watchlist since March 2023 because of a drop in DSCR,
which was mainly driven by the departure of the former
second-largest tenant, Memorial Sloan Kettering Cancer Center, upon
its lease expiration in June 2022. As a result, the occupancy rate
dropped to 77.6%, according to the January 2023 rent roll, compared
with 90.2% at YE2021 and 97.0% at issuance. In addition, the lease
for the current second-largest tenant, BC Partners Inc. (11.7% of
the net rentable area (NRA)) was set to expire in June 2023, but
the company appears to have remained at the subject property as the
location is still listed on its website. While there is minimal
rollover risk through the next 12 months, the lease of the largest
tenant, Ralph Lauren (40.7% of the NRA), is scheduled to expire in
December 2024. The loan is structured with a cash flow sweep in the
event that the tenant does not provide written notice of renewing
its lease 18 months prior to expiration. The amount to be swept is
$80 per square foot (psf) or approximately $20.0 million. According
to The Real Deal, Ralph Lauren is planning to reduce its North
American footprint by 30% in the coming years, and may downsize or
vacate the subject property. DBRS Morningstar has requested an
update from the servicer and a response is pending as of the date
of this press release.
According to the most recent financials for the trailing 12 months
ended March 31, 2023, net cash flow (NCF) was $37.8 million
(reflecting a DSCR of 1.77x on the senior debt; 1.39x on the whole
loan), compared with the YE2021 NCF of $63.2 million (DSCR of 2.82x
on the senior debt; 2.23x on the whole loan), and the DBRS
Morningstar NCF of $50.8 million (DSCR of 2.45x on the senior
debt). Reis, Inc. reports the property's average base rent of
$89.36 psf for office space as of January 2023 is below the current
average rental rate of $95.31 psf for Class A office space within a
one-mile radius. However, leases that were executed at the subject
in 2022 have rates that are well above $100 psf, with rental
abatements provided and contributing to the lower YE2022 NCF. At
issuance, the loan was shadow-rated investment grade primarily
because of the low A-note LTV of 32.1% and high DBRS Morningstar
Term DSCR; however, given the declines in occupancy rate and NCF
and the increased rollover risk, DBRS Morningstar removed the
shadow rating for this review. DBRS Morningstar will continue to
closely monitor this loan.
The 805 Third Avenue loan is secured by a 596,100-sf office
property and a 30,659-sf three-story retail pavilion in the Plaza
district in New York. The loan is pari passu with other pieces of
the whole loan secured in two transactions, both of which are also
rated by DBRS Morningstar. The loan has been on the watchlist since
September 2020 because of the challenges faced during the
Coronavirus Disease (COVID-19) pandemic, but the borrower received
relief where monthly tax and replacement reserve deposits were
waived until September 2020 with the expectation that the deferred
amounts will be repaid in increments. The loan remains on the
watchlist for the low DSCR, primarily driven by a drop in occupancy
rate in recent years. Several tenants have vacated the subject,
including the former second- and fourth-largest tenants, Toyota
Tsusho America, Inc. (6.9% of the NRA; expired in November 2022)
and Yes Network, LLC (4.0% of the NRA; expired in May 2022). As of
the January 2023 rent roll, the subject was 59.8% occupied. Based
on the most recent financials, the loan reported a YE2022 DSCR of
1.05x on the senior debt; however, the whole-loan DSCR is below
breakeven. The loan is currently delinquent, with the last payment
received in May 2023. However, DBRS Morningstar observed reporting
discrepancies between the subject transaction and the other
companion transactions and clarification from the servicer was
requested.
At issuance, the loan was shadow-rated investment grade primarily
because of the building's quality, granular lease rollover,
excellent location, and high-quality sponsor. However, given the
substantially low performance of the subject, the generally
challenged office submarket in New York, and the loan being
delinquent on its payments, DBRS Morningstar removed the shadow
rating and increased the probability of default in its analysis.
This resulted in a loan-level EL that was more than 3.0x the pool's
average.
Notes: All figures are in U.S. dollars unless otherwise noted.
COLT 2023-3 MORTGAGE: Fitch Gives Final Bsf Rating on Cl. B2 Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed certificates to be issued by COLT 2023-3 Mortgage
Loan Trust (COLT 2023-3).
Entity/Debt Rating Prior
----------- ------ -----
COLT 2023-3
A1 LT AAAsf New Rating AAA(EXP)sf
A2 LT AAsf New Rating AA(EXP)sf
A3 LT Asf New Rating A(EXP)sf
AIOS LT NRsf New Rating NR(EXP)sf
B1 LT BBsf New Rating BB(EXP)sf
B2 LT Bsf New Rating B(EXP)sf
B3 LT NRsf New Rating NR(EXP)sf
M1 LT BBBsf New Rating BBB(EXP)sf
R LT NRsf New Rating NR(EXP)sf
X LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has rated the residential mortgage-backed certificates to be
issued by COLT 2023-3 Mortgage Loan Trust as indicated. The
certificates are supported by 684 nonprime loans with a total
balance of approximately $348 million as of the cutoff date.
Loans in the pool were originated by multiple originators,
including Change Lending, HomeXpress Mortgage Corp. and others. For
details regarding Fitch's view of Change Lending, please see the
presale. Loans were aggregated by Hudson Americas L.P. Loans and
are currently serviced by Select Portfolio Servicing, Inc., Fay
Servicing, or Northpointe Bank.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 7% above a long-term sustainable level (versus 7.6%
on a national level as of 1Q23, down 0.2% since last quarter).
Housing affordability is the worst it has been in decades, driven
by both high interest rates and elevated home prices driving
national overvaluation. Home prices have increased 1.0% YoY
nationally as of August 2023, despite regional declines, but are
still being supported by limited inventory.
NQM Credit Quality (Negative): The collateral consists of 684
loans, totaling $348 million and seasoned approximately two months
in aggregate. The borrowers have a moderate credit profile of a 737
model FICO and leverage with a 76.1% sustainable loan-to-value
ratio (sLTV) and 70.8% combined original LTV (cLTV).
The pool consists of 51.1% of loans where the borrower maintains a
primary residence, while 41.0% comprise an investor property.
Additionally, 30.7% are nonqualified mortgages (NQM), 1.0% are
qualified mortgages (SHQM), and 0.0% are high-priced qualified
mortgages (HPQM). The QM rule does not apply to the remainder.
Fitch's expected loss in the 'AAAsf' stress is 20.75%. This is
mainly driven by the NQM collateral and the significant investor
cash flow product concentration.
Loan Documentation (Negative): Around 90.3% of loans in the pool
were underwritten to less than full documentation and 52.7% were
underwritten to a bank statement program for verifying income,
which is not consistent with Appendix Q standards and Fitch's view
of a full documentation program. A key distinction between this
pool and legacy Alt-A loans is these loans adhere to underwriting
and documentation standards required under the Consumer Financial
Protections Bureau's (CFPB) Ability to Repay Rule (ATR Rule), or
the Rule.
This reduces risk of borrower default arising from lack of
affordability, misrepresentation or other operational quality risks
due to rigor of the Rule's mandates with respect to the
underwriting and documentation of a borrower's ATR. Fitch's
treatment of alternative loan documentation increased 'AAAsf'
expected losses by 558 bps, compared with a deal of 100% fully
documented loans.
High Percentage of DSCR Loans (Negative): There are 348 debt
service coverage ratio (DSCR) products in the pool (32.5% by UPB).
These business purpose loans are available to real estate investors
that are qualified on a cash flow basis, rather than debt to income
(DTI), and borrower income and employment are not verified.
Compared with standard investment properties for DSCR loans, Fitch
converts the DSCR values to a DTI and treats the loan as low
documentation. Fitch's treatment for DSCR loans results in a higher
Fitch reported non-zero DTI. Fitch's average expected losses for
DSCR loans is 35.9% in the 'AAAsf' stress.
Modified Sequential-Payment Structure with Limited Advancing
(Mixed): The structure distributes principal pro rata among the
senior certificates while shutting out the subordinate bonds from
principal until all senior classes are reduced to zero. If a
cumulative loss trigger event, delinquency trigger event or credit
enhancement (CE) trigger event occurs in a given period, principal
will be distributed sequentially to class A-1, A-2 and A-3
certificates until they are reduced to zero.
Advances of delinquent P&I will be made on the mortgage loans for
the first 90 days of delinquency, to the extent such advances are
deemed recoverable. If the P&I advancing party fails to make a
required advance, the master servicer and then securities
administrator will be obligated to make such an advance.
The limited advancing reduces loss severities, as a lower amount is
repaid to the servicer when a loan liquidates and liquidation
proceeds are prioritized to cover principal repayment over accrued
but unpaid interest. The downside to this is the additional stress
on the structure, as there is limited liquidity in the event of
large and extended delinquencies.
COLT 2023-3 has a step-up coupon for the senior classes (A-1, A-2
and A-3). After four years, the senior classes pay the lesser of a
100 bps increase to the fixed coupon or the net weighted average
coupon (WAC) rate. Any class B-3 interest distribution amount will
be distributed to the class A-1, A-2 and A-3 certificates on and
after the step-up date if the cap carryover amount is greater than
zero. This increases the P&I allocation for the senior classes.
As additional analysis to Fitch's rating stresses, Fitch considered
a WAC deterioration that varied by rating stress. The WAC cut was
derived by assuming a 2.5% cut (based on the most common historical
modification rate) on 40% (historical Alt-A modification
percentage) of the performing loans. Although the WAC reduction
stress is based on historical modification rates, Fitch did not
include the WAC reduction stress in its testing of the delinquency
trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut
given the ongoing macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired but will not
ultimately default due to modifications and reduced P&I.
Furthermore, this approach had the largest impact on the
back-loaded benchmark scenario.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analysis was conducted at the
state and national level to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 39.6% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. A 10% additional
decline in home prices would lower all rated classes by one full
category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analysis was conducted at the state and national level
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes. A 10% gain
in home prices would result in a full category upgrade for the
rated class excluding those assigned 'AAAsf' ratings.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Consolidated Analytics, SitusAMC, Canopy, Clayton,
Evolve, Selene, and Stonehill. The third-party due diligence
described in Form 15E focused on credit, compliance and property
valuation review. Fitch considered this information in its analysis
and, as a result, Fitch made the following adjustment to its
analysis: a 5% credit at the loan level for each loan where
satisfactory due diligence was completed. This adjustment resulted
in 43bps reduction to 'AAAsf' losses.
DATA ADEQUACY
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5 designated website. The loan-level
information Fitch received was provided in the American
Securitization Forum's data layout format.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CONN'S RECEIVABLES 2021-A: Fitch Hikes Rating on C Notes to 'BBsf'
------------------------------------------------------------------
Fitch Ratings has upgraded the outstanding class C notes of Conn's
Receivables Funding 2021-A, LLC (Conn's 2021-A) to 'BBsf' from
'Bsf'. The upgrade reflects increased credit enhancement (CE) since
closing on account of the class A and B notes paying in full and
the class C notes now receiving principal payments. Despite the
lifetime base case default assumption revision to 30% from 25%
assigned at closing the CE provides sufficient support to the
outstanding class C notes at the upgraded rating level. The Rating
Outlook is Stable following the upgrade.
Entity/Debt Rating Prior
----------- ------ -----
Conns Receivables
Funding 2021-A,
LLC
C 20825GAC9 LT BBsf Upgrade Bsf
KEY RATING DRIVERS
Subprime Collateral Quality: At closing, the Conn's 2021-A
receivables pool had a weighted average FICO score of 613 and 8.1%
of the loans had scores below 550 or no score. For the current
review, given the cumulative gross defaults have reached 25.7%,
Fitch has revised the lifetime base case default assumption to 30%
from 25% based on projected performance for the remaining life of
the loans. Fitch applied 1.5x stress to the 30% default assumption
at the 'BBsf' level. The default multiple reflects the high
absolute value of the historical defaults, the variability of
default performance in recent years and the high geographical
concentration of the portfolio.
Rating Cap at 'BBBsf': The rating cap reflects the subprime
credit-risk profile of the customer base; higher loan defaults in
the years prior to the coronavirus pandemic; the high concentration
of receivables from Texas; the disruption in servicing in 2020
contributing to increased defaults in impacted securitized
vintages; and servicing collection risk, albeit reduced in recent
years, due to a portion of customers making in-store payments.
Payment Structure -- Sufficient CE: CE has built for class C notes
to a degree sufficient to cover Fitch's stressed cash flow
assumptions at the upgraded rating levels. As of the latest payment
date, the transaction was in breach of the cumulative net loss
trigger resulting is sequential principal distribution. This has
led to the senior notes being completely paid-off and only class C
notes outstanding. The turbo nature of the transaction has also
increased the CE for the notes.
Adequate Servicing Capabilities: Conn Appliances, Inc. (Conn's) has
a long track record as an originator, underwriter and servicer. The
credit-risk profile of the entity is mitigated by the backup
servicing provided by Systems & Services Technologies, Inc. (SST),
which has committed to a servicing transition period of 30 days.
Fitch considers all parties to be adequate servicers for this pool
at the current rating level. Fitch evaluated the servicers'
business continuity plan as adequate to minimize disruptions in the
collection process during the pandemic.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults or chargeoffs
could produce loss levels higher than the base case, and would
likely result in declines of CE and remaining net loss coverage
levels available to the notes. Decreased CE may make certain
ratings on the notes susceptible to potential negative rating
actions, depending on the extent of the decline in coverage.
Fitch conducts sensitivity analysis by stressing a transaction's
initial base case default assumption by an additional 10% and 25%,
and examining the rating implications. These increases of the base
case default rate are intended to provide an indication of the
rating sensitivity of the notes to unexpected deterioration of
performance. A more prolonged disruption from the pandemic is
accounted for in the downside stress of a 50% increase in the base
case default rate.
- Default increase 10%: class C 'BBsf';
- Default increase 25%: class C 'B+sf';
- Default increase 50%: class C 'B-sf'.
During the sensitivity analysis, Fitch examines the magnitude of
the multiplier compression by projecting the expected cash flows
and loss coverage levels over the life of investments under higher
than the initial base case default assumptions. Fitch models cash
flows with the revised default estimates while holding constant all
other modeling assumptions.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades for notes currently rated below the 'BBBsf'
cap. Fitch conducted a sensitivity analyses by decreasing the base
case default rate for each trust by 10%, 25% and 50%, resulting in
the below model implied ratings:
- Default decrease 10%: class C 'BB+sf';
- Default decrease 25%: class C 'BBBsf';
- Default decrease 50%: class C 'BBBsf'.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CSAIL 2015-C1: Fitch Affirms Csf Rating on 4 Tranches
-----------------------------------------------------
Fitch Ratings has affirmed 14 classes of CSAIL 2015-C1 Commercial
Mortgage Trust and 15 classes of CSAIL 2015-C4 Commercial Mortgage
Trust. The Rating Outlooks were revised to Stable from Positive for
two classes in CSAIL 2015-C4. The Under Criteria Observation (UCO)
has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CSAIL 2015-C1
A-3 126281AY0 LT AAAsf Affirmed AAAsf
A-4 126281AZ7 LT AAAsf Affirmed AAAsf
A-S 126281BD5 LT AAAsf Affirmed AAAsf
A-SB 126281BA1 LT AAAsf Affirmed AAAsf
B 126281BE3 LT Asf Affirmed Asf
C 126281BF0 LT BBBsf Affirmed BBBsf
D 126281AL8 LT CCCsf Affirmed CCCsf
E 126281AN4 LT Csf Affirmed Csf
F 126281AQ7 LT Csf Affirmed Csf
X-A 126281BB9 LT AAAsf Affirmed AAAsf
X-B 126281BC7 LT Asf Affirmed Asf
X-D 126281AC8 LT CCCsf Affirmed CCCsf
X-E 126281AE4 LT Csf Affirmed Csf
X-F 126281AG9 LT Csf Affirmed Csf
CSAIL 2015-C4
A-3 12635RAW8 LT AAAsf Affirmed AAAsf
A-4 12635RAX6 LT AAAsf Affirmed AAAsf
A-S 12635RBB3 LT AAAsf Affirmed AAAsf
A-SB 12635RAY4 LT AAAsf Affirmed AAAsf
B 12635RBC1 LT AAsf Affirmed AAsf
C 12635RBD9 LT Asf Affirmed Asf
D 12635RBE7 LT BBBsf Affirmed BBBsf
E 12635RBF4 LT BBB-sf Affirmed BBB-sf
F 12635RAL2 LT BB-sf Affirmed BB-sf
G 12635RAN8 LT B-sf Affirmed B-sf
X-A 12635RAZ1 LT AAAsf Affirmed AAAsf
X-B 12635RBA5 LT AAsf Affirmed AAsf
X-D 12635RAA6 LT BBB-sf Affirmed BBB-sf
X-F 12635RAE8 LT BB-sf Affirmed BB-sf
X-G 12635RAG3 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria,"
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's last
rating action.
Alternative Loss Scenario; Maturity Concentration: Given the
scheduled maturity concentration of both transactions within the
next one to two years, Fitch's ratings are based on a look-through
analysis. This analysis groups loans by projected ability to
refinance to determine the loans' expected recoveries and losses
relative to credit enhancement (CE).
The affirmations in CSAIL 2015-C1 and CSAIL 2015-C4 reflect
generally stable pool performance since the prior rating actions,
as well as the impact of the updated criteria. Fitch's current
ratings on CSAIL 2015-C1 incorporate a 'Bsf' rating case loss of
8.2%. Fitch has identified 15 Fitch Loans of Concern (FLOCs; 23.4%
of the pool balance), including one loan in special servicing
(2.6%). Fitch's current ratings on CSAIL 2015-C4 incorporate a
'Bsf' rating case loss of 2.4%. Fitch has identified 10 Fitch Loans
of Concern (FLOCs; 12% of the pool balance), including two loans in
special servicing (1.3%).
The Negative Outlooks on classes B, X-B and C in CSAIL 2015-C1
reflect exposure to FLOCs including regional malls. The Outlook
revisions to Stable from Positive for classes B and X-B in CSAIL
2015-C4 reflect refinancing concerns for loans with lower DSCR.
Fitch Loans of Concern/Specially Serviced Loans: The largest
contributors to overall loss expectations in CSAIL 2015-C1 are the
Westfield Trumbull (FLOC, 7.6%), Westfield Wheaton (FLOC, 4.2%),
777 East 10th Street (SS, FLOC, 2.6%) and Bayshore Mall (FLOC, 2%)
loans. In its analysis of the Westfield Trumbull and Westfield
Wheaton mall loans, Fitch considered an elevated probability of
default and applied 15% cap rates for each loan considering
property performance declines resulting in 'Bsf' rating case losses
(prior to concentration adjustments) of 45% and 36%, respectively.
The third largest contributor to loss is the specially serviced 777
East 10th Street loan secured by a mixed-use property in the
Garment District of Downtown, Los Angeles. The loan transferred to
special servicing in May 2020 for payment default, becoming REO in
March 2022 and the property is currently being marketed for sale.
Fitch's analysis reflects a haircut to the most recent servicer
reported appraisal value, which equates to a value of $243 psf.
The fourth largest contributor to loss, Bayshore Mall, is secured
by a 515,920-sf, one-story enclosed regional mall in Eureka, CA.
The loan was previously in special servicing, transferring in
October 2020 for payment default and returning to the master
servicer in August 2022. The property continues to experience
performance declines since issuance with trust collateral occupancy
falling to 54.9% as of June 2023 from 66.7% at YE 2022 and 83% at
issuance while the YE 2022 NOI is 40% below YE 2019 NOI and 23%
below the issuers NOI at underwriting. Fitch's 'Bsf' rating case
loss (prior to concentration adjustments) of 44% reflects a 20% cap
rate given the tertiary location and regional mall status as well
as a 7.5% stress to the YE 2022 NOI.
The two largest drivers of expected losses in CSAIL 2015-C4 are
specially serviced loans. Dorsey Business Center III (SS, FLOC,
0.7%) is a 54,381-sf office building in Elkridge, Maryland and the
loan transferred to the special servicer in August 2021 for payment
default. Property performance declined after the largest tenant,
University of Maryland College Park (previously 50% NRA), vacated
in January 2020, brining occupancy down to 42% where its remained.
Per servicer updates, a receiver is in place and a buyer is
currently negotiating the purchase and sale agreement and may close
by the end of October. Fitch's 'Bsf' rating case losses (prior to
concentration adjustments) of 61% reflect a discount to the recent
servicer reported appraisal value.
Richmond Highlands Center (SS, FLOC, 0.6%) consists of a 20,002-sf
office building and a 12,002-sf retail strip center in Warrenville,
Ohio. The loan was transferred to special servicing in October 2021
for payment default. Performance significantly declined in the 1H
2021 due to significant tenant departures, brining occupancy down
to 41% by YE 2021 from 93% at YE 2020. Occupancy was at 39% as of
YE 2022. Per the latest servicer updates, the servicer engaged
legal counsel and filed a foreclosure complaint and receivership
motion in May 2023 and is reviewing a proposal to purchase the note
at a discount from the borrower. Fitch's 'Bsf' rating case loss
(prior to concentration adjustments) of 61% reflects a discount to
the recent servicer reported appraisal value.
Increase in CE: As of the September 2023 distribution date, CSAIL
2015-C1 and CSAIL 2015-C4 have paid down by 16% and 12%,
respectively. CSAIL 2015-C1 has 29 defeased loan representing 28%
of the pool and CSAIL 2015-C4 has 22 defeased loans representing
21%. Cumulative interest shortfalls are currently affecting the
class NR in both transactions. CSAIL 2015-C1 and CSAIL 2015-C4 have
realized losses of 1.3% and 0.18%, respectively, of the original
pool balance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would be triggered by an increase in pool-level losses
from underperforming or specially serviced loans.
Downgrades to 'AAAsf', 'AAsf' and 'Asf' category rated classes
could occur if deal-level expected losses increase significantly
and/or interest shortfalls occur. For 'AAAsf' rated bonds,
additional stresses applied to defeased collateral due to the U.S.
sovereign rating being lower than 'AAA' could also contribute to
downgrades.
Classes rated in the 'BBBsf' to 'Bsf' rating category would be
downgraded should overall pool losses increase and/or one or more
of the larger FLOCs have an outsized loss, which would erode CE.
Downgrades to the classes in the 'CCCsf' to 'Csf' rating categories
would occur with a greater certainty of losses and/or as losses are
realized.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would occur with stable to improved asset performance,
coupled with additional paydown and/or defeasance. Upgrades to the
'AAsf' to 'BBBsf' rating categories could occur with significant
improvement in CE and/or defeasance and with the stabilization of
properties currently designated as FLOCs.
Upgrades to the 'BBsf' to 'Bsf' rating categories are not likely
until the later years in the transaction and only if the
performance of the remaining pool is stable and/or properties
vulnerable to the pandemic stabilize, and there is sufficient CE.
Upgrades to the distressed 'CCCsf' to 'Csf' rating categories are
not expected, but possible with better than expected recoveries on
specially serviced loans or significantly higher values on FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CSAIL 2016-C5: Fitch Affirms CCC Rating on 2 Tranches
-----------------------------------------------------
Fitch Ratings has affirmed 14 classes of CSAIL 2016-C5 Commercial
Mortgage Trust commercial mortgage pass-through certificates. The
Rating Outlooks on classes D and X-D have been revised to Negative
from Stable, Classes E and X-E have been revised to Negative from
Positive. In addition, the Rating Outlooks on classes B and X-B
have been revised to Stable from Positive. The under criteria
observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
CSAIL 2016-C5
A-4 12636LAX8 LT AAAsf Affirmed AAAsf
A-5 12636LAY6 LT AAAsf Affirmed AAAsf
A-S 12636LBC3 LT AAAsf Affirmed AAAsf
A-SB 12636LAZ3 LT AAAsf Affirmed AAAsf
B 12636LBD1 LT AAsf Affirmed AAsf
C 12636LBE9 LT Asf Affirmed Asf
D 12636LAG5 LT BBB-sf Affirmed BBB-sf
E 12636LAL4 LT B-sf Affirmed B-sf
F 12636LAN0 LT CCCsf Affirmed CCCsf
X-A 12636LBA7 LT AAAsf Affirmed AAAsf
X-B 12636LBB5 LT AAsf Affirmed AAsf
X-D 12636LAJ9 LT BBB-sf Affirmed BBB-sf
X-E 12636LAA8 LT B-sf Affirmed B-sf
X-F 12636LAC4 LT CCCsf Affirmed CCCsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Higher Loss Expectations: Loss expectations for the pool have
increased since Fitch's prior rating action. Eight loans (22.6% of
pool) were flagged as Fitch Loans of Concern (FLOCs). There are
currently two loans in special servicing, Sheraton Lincoln Harbor
Hotel (3.2%) and Frisco Plaza (1.9%). Fitch's current ratings
reflect a 'Bsf' rating case loss of 6.6%.
The revised Negative Outlooks on classes D, E, X-D and X-E reflect
the expected performance decline of the 401 Market (8.6%) loan,
which is the third largest loan in the pool and largest contributor
to loss expectations.
The 401 Market (8.6%) loan is secured by a 484,643-sf multi-tenant
office located in Philadelphia PA. The property is currently 100%
occupied by two tenants, Wells Fargo (71.7% of NRA; 34.8% of gross
rent) leased through September 2024 and American Bible Society
(28.1% of NRA; 65.2% of gross rent) leased through October 2041.
According to the servicer, Wells Fargo will not be renewing their
lease at the property in September 2024. The tenant is moving
forward with plans for a staged exit of the building to two other
locations. Following the departure of Wells Fargo, the property's
occupancy will decline to 28.9% from 100% as of June 2023. The loan
reported a total of $4.9 million or $9.65 psf in total reserves as
of the September 2023 loan level reserve report.
According to CoStar, the property lies within the Independence Hall
Office Submarket of the Philadelphia market. As of 3Q 2023, the
average asking rental rates for the submarket and market were
$31.22 psf and $27.69 psf; respectively. Vacancy rates for the
submarket and market were 12.5% and 18.8%; respectively. As of the
rent roll dated June 2023, Wells Fargo is paying $6.22 psf, which
is below the submarket.
Fitch's 'Bsf' case loss of 23.0% (prior to a concentration
adjustment) is based on an 9.50% cap rate and 35% stress to the YE
2022 NOI, and factors in an increased probability of default due to
the expected occupancy decline and the loan's heightened maturity
default risk.
The second largest contributor to loss expectations is the
specially serviced, Sheraton Lincoln Harbor Hotel (3.2%) loan,
which is secured by a 358 key full-service hotel in Weehawken, NJ
approximately 1/2 mile south of the Lincoln Tunnel. The loan was
transferred to special servicing in January 2021 for imminent
default. The sponsor cooperated with a consensual foreclosure
action in March 2021, and a receiver was appointed in April 2021.
According to the special servicer, the receiver listed the property
for sale in 2022 and early 2023, but no acceptable bids were
received. The property has been taken off the market and the
receiver will continue to operate the property until more favorable
market conditions are available to relaunch marketing.
Per the TTM March 2023 STR report, occupancy was 84.8% with an ADR
of $174 and a RevPAR of $148 compared to its comp set of 71.9%,
$207 and $149.
Fitch's 'Bsf' case loss of 44.9% (prior to concentration
adjustment) is based on additional stresses to the most recent
August 2022 appraisal valuation.
The third largest contributor to loss expectations is the specially
serviced, Frisco Plaza (1.9%), which is a 61,453-sf retail property
located in Frisco, TX. The property was 22.5% occupied as of the
March 2023 rent roll. The largest tenants include; Verizon (5.9% of
NRA) leased through November 2027; Great Outdoors Sub Shop (3.3%)
leased through May 2024 and Unbelievabowl (3.3%), leased through
February 2027. Additional tenants at the property include Frisco
Gold & Silver Exchange, Wingstop and DFW Vapor. The loan became REO
in February 2022.
As of September 2023, the special servicer is working on filling
vacancies including a 45,000-sf standalone building formerly
occupied by LA Fitness, with an expected sale in the third-quarter
2024.
Fitch's 'Bsf' case loss of 40.2% (prior to concentration
adjustment) is based on additional stresses to the most recent
November 2022 appraisal valuation.
Increased Credit Enhancement: As of the September 2023 distribution
date, the pool's aggregate principal balance has been reduced by
33.9% to $619.4 million from $936.4 million at issuance. Nineteen
loans in the pool (26.4% of the pool) are fully defeased. Three
loans, representing 25.5% of the pool, are full-term, interest-only
loans; 23 loans (44.7%) are partial interest-only and 22 loans
(29.7%) have a balloon payment. All of the loans in the pool mature
in 2025. To date, the trust has incurred $6.3 million in realized
losses which has been absorbed by the NR class.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades would occur with an increase in pool-level losses from
underperforming or specially serviced loans. Downgrades to classes
A-4, A-5, A-SB, A-S, B, X-A and X-B are not likely due to the
position in the capital structure but may occur should interest
shortfalls affect these classes.
Downgrades to classes C, D and X-D may occur should expected pool
losses increase significantly and/ or the FLOCs, particularly 401
Market, suffer higher than expected losses.
Downgrades to classes E and X-E are possible should loss
expectations increase from continued performance decline of the
FLOCs, office loans particularly 401 Market do not stabilize and/or
deteriorate further, additional loans default or transfer to
special servicing and/or higher realized losses than expected on
the specially serviced loans.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades would occur with stable to improved asset performance,
particularly on the FLOCs, coupled with additional paydown and/or
defeasance. Upgrades to classes B, C, and X-B would only occur with
significant improvement in CE, defeasance, and/or performance
stabilization of FLOCs. Classes would not be upgraded above 'Asf'
if there were likelihood of interest shortfalls.
Upgrades to classes D and X-D may occur as the number of FLOCs are
reduced, or if the office loans in the pool stabilize and there is
sufficient CE to the classes.
Upgrades to classes E, F, X-E and X-F are unlikely absent
significant performance improvement on the FLOCs and substantially
higher recoveries than expected on the specially serviced loans,
and there is sufficient CE to the classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
CSAIL 2019-C16: DBRS Confirms BB Rating on Class F-RR Certs
-----------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of Commercial
Mortgage Pass-Through Certificates issued by CSAIL 2019-C16
Commercial Mortgage Trust as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E-RR at BBB (low) (sf)
-- Class F-RR at BB (sf)
-- Class G-RR at B (high) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
the transaction since the last rating action in November 2022.
There are increased risks for a few loans, including one loan,
representing 1.1% of the pool balance, that recently transferred to
special servicing; however, servicer-reported performance metrics
for the majority of the pool have been strong, evidenced by the
pool's healthy weighted average (WA) debt service coverage ratio
(DSCR) of 1.97 times (x). In addition, the increased risk profile
for the loans of concern is mitigated by the majority of the loans
being secured by lodging and retail property types, which account
for more than half of the pool balance, that have reported improved
performance metrics over the last several months, demonstrating
continued improvement and stabilization since the onset of the
Coronavirus Disease (COVID-19) pandemic.
The pool is concentrated by property type, with hotel, retail, and
office representing 30.1%, 30.3%, and 22.0% of the pool balance,
respectively. While DBRS Morningstar anticipates upward pressure on
vacancy rates in the broader office market, the majority of the
loans secured by office properties have reported healthy
performance metrics, demonstrated by the WA DSCR of 2.64x as of
YE2022. In the analysis for this review, DBRS Morningstar
identified nine loans representing 14.8% of the pool as exhibiting
declines in performance and/or demonstrating increased risks from
issuance. These loans were analyzed with stressed loan-to-value
ratios or increased probability of default assumptions to increase
the expected losses as applicable. The primary drivers behind DBRS
Morningstar's expected losses for the pool are cash flow declines
for both retail and hospitality properties, generally related to
the effects of the pandemic.
As of August 2023 remittance, all of the original 47 fixed-rate
loans secured by 96 commercial and multifamily properties remain in
the pool with a trust balance of $772.6 million, representing a
collateral reduction of approximately 1.9% since issuance as a
result of scheduled loan amortization. Two loans, representing 1.5%
of the pool balance, are secured by defeased collateral. Two loans,
representing 5.5% of the trust balance, are in special servicing,
and an additional 13 loans, representing 34.0% of the trust
balance, on the servicer's watchlist.
The largest specially serviced loan, Santa Fe Portfolio (Prospectus
ID#6; 4.4% of the pool), is secured by an 11-property mixed-use
portfolio totaling approximately 218,000 square feet, located
primarily in downtown Santa Fe, New Mexico. The portfolio has a
high concentration of art gallery tenants, many of which are
affiliates of the sponsor. The loan transferred to special
servicing in August 2022 after becoming delinquent. The loan had
previously transferred to special servicing in June 2020, also for
payment default, and was modified in June 2021. The portfolio was
performing below issuance expectations prior to the onset of the
pandemic, compounding the risks of an extended delinquency. An
updated December 2022 appraisal valued the property at $43.4
million, reflecting a slight value decline from the August 2020
appraisal of $44.5 million, and a variance of -17.5% from the
issuance figure. While the loan is full recourse to the guarantor,
the servicer commentary indicates the sponsor has not been in
compliance with the modification agreement. However, the most
recent value suggests a loss in the event of a liquidation would be
relatively small.
At issuance, DBRS Morningstar shadow-rated two loans, 3 Columbus
Circle (Prospectus ID#1; 6.5% of the pool) and 787 Eleventh Avenue
(Prospectus ID#9; 3.9% of the pool), investment grade, supported by
their strong credit metrics, strong sponsorship strength, and
historically stable collateral performance. With this review, DBRS
Morningstar confirms that the characteristics of these loans remain
consistent with the investment-grade shadow rating.
Notes: All figures are in U.S. dollars unless otherwise noted.
DBJPM 2016-SFC: S&P Lowers Class X-A Certs Rating to 'BB (sf)'
--------------------------------------------------------------
S&P Global Ratings lowered its ratings on five classes of
commercial mortgage pass-through certificates from DBJPM 2016-SFC
Mortgage Trust, a U.S. CMBS transaction.
This U.S. stand-alone (single-borrower) CMBS transaction is backed
by a portion of a fixed-rate, interest-only (IO) mortgage whole
loan secured by the borrower's fee simple and leasehold interests
in Westfield San Francisco Centre and San Francisco Emporium, a
1.45 million-sq.-ft. mixed-use (urban retail mall and class B
office) property, 749,521 sq. ft. of which serves as collateral, in
the Union Square neighborhood of San Francisco.
Rating Actions
The downgrades on classes A, B, C, and D reflect:
-- S&P's revised valuation, which is lower than the valuation it
derived in its last review, in March 2023, due primarily to
declining occupancy and net cash flow (NCF) at the property;
-- S&P's belief that the property's performance will continue to
deteriorate due to the recent closure of the Nordstrom's flagship
store and other retailers, stemming partly from high crime, open
drug use, and homelessness plaguing the city, which have raised
public safety concerns and deterred tourists and shoppers from
going to the downtown area; and
-- S&P's concerns with the borrower's ability to make its debt
service payments timely if the property's NCF continues to decline.
The loan was transferred to special servicing in June 2023 due to
delinquent payments and was subsequently accelerated. The sponsors
publicly stated in June 2023 that they will give the property back
to the lender.
S&P said, "Since our last review, in March 2023, the property's
occupancy dropped further from our assumed 51.8% to 35.0%, after
considering the recent departures of Century Theatre (6.7% of net
rentable area [NRA]), Bespoke (5.1%), and Express (2.0%), among
other tenants. As we previously discussed, noncollateral anchor
Nordstrom vacated in late August 2023, which we believe may lead
additional retailers to exit the property in the coming months.
According to the Dec. 31, 2022, rent roll, 11.0% of NRA rolls in
2024.
"In our current property-level analysis, considering the continued
decline in the property's performance partly due to local
government policies that have negatively affected downtown San
Francisco, we lowered our long-term sustainable NCF further by
26.7% to $16.5 million from $22.5 million in our last review. We
utilized an in-place occupancy rate of 35.0%, an S&P Global
Ratings' base rent of $76.78 per sq. ft. and gross rent of $114.12
per sq. ft., and a 62.0% operating expense ratio to arrive at our
lower NCF. We also increased our S&P Global Ratings' capitalization
rate by 100 basis points from 7.00% in our last review to 8.00% to
account for the adverse social conditions in downtown San Francisco
that are driving retail tenants to move out and no clear catalyst
to reverse course; additional pressure comes from stressed office
submarket fundamentals as companies adopt hybrid or remote work
arrangements, which has led to a lack of momentum in office
leasing. Our expected-case value of $205.9 million or $275 per sq.
ft. is 35.8% lower than our last review value of $320.9 million and
83.1% below the issuance appraisal value of $1.2 billion. This
yielded an S&P Global Ratings' loan-to-value ratio of 271.0% on the
whole loan balance.
"Specifically, the downgrades on class C to 'CCC (sf)' and class D
to 'CCC- (sf)' reflect our view that, due to current market
conditions and their position in the payment waterfall, these
classes are at a heightened risk of default and loss."
Although the model-indicated ratings were lower than the revised
ratings on classes A and B, S&P tempered its downgrades on these
classes because it weighed certain qualitative considerations.
These included:
-- The potential that the property's operating performance could
improve above our revised expectations;
-- The 2016 appraised land value of $280.0 million;
-- The significant market value decline based on the $1.2 billion
issuance appraisal value that would be needed before these classes
experience principal losses;
-- The liquidity support provided in the form of servicer
advancing; and
-- The relative position of the classes in the waterfall.
S&P Said, "As we discussed, the loan, which has a current payment
status, was transferred to the special servicer, Midland Loan
Services, on June 21, 2023, due to payment default. The sponsors
did not make their June 2023 and July 2023 debt service payments.
While they have repaid all the past servicing advances in September
2023 and are current on their debt service payments, the sponsors
are relinquishing their ownership of the property due to declining
sales and performance. According to Midland, it has filed for
foreclosure and is seeking to appoint a receiver.
"We will continue to monitor the status of the property and loan.
If we receive information that differs materially from our
expectations, such as an updated value that is at or substantially
below our expectations, reported negative changes in the
performance beyond what we have already considered, or a workout
strategy that negatively affects the transaction's liquidity and
recovery, we may revisit our analysis and take further rating
actions.
"We lowered our rating on the class X-A IO certificates based on
our criteria for rating IO securities, in which the rating on the
IO security would not be higher than that of the lowest-rated
reference class. Class X-A's notional amount references classes A
and B."
Property-Level Analysis
The loan collateral, Westfield San Francisco Centre and San
Francisco Emporium, is a 1.45 million-sq.-ft. mixed-use property,
located at 865 Market Street in downtown San Francisco, comprising
1.2 million sq. ft. of retail (553,366 sq. ft. of which is
collateral) and 241,255 sq. ft. of class B office space. The
Westfield San Francisco Centre portion was originally developed in
1988. The San Francisco Emporium portion, which was a redevelopment
of the Emporium department store that dated back to the 1890s, was
co-developed by the sponsors in 2006 into retail and class B office
space. The mall is anchored by Bloomingdale's (338,928 sq. ft.,
noncollateral). Nordstrom, which occupied the other noncollateral
anchor space totaling 312,000 sq. ft., recently vacated, in August
2023. A 186,200-sq.-ft. portion of the Westfield San Francisco
Centre is subject to a ground lease, with San Francisco Unified
School District as the ground lessor, and the borrowers as the
ground lessee. The ground lease is from July 1, 1983, to June 30,
2043, with one 15-year extension option. At issuance, the annual
minimum ground rent was $3.3 million and is adjusted every five
years based on a percentage of the ground lessee's gross revenues
or cost of living index increases. The loan sponsors are Westfield
America Inc., an affiliate of Unibail-Rodamco-Westfield, and Forest
City Realty Trust Inc., which was acquired by Brookfield Asset
Management.
The servicer reported that NCF has fallen since the pandemic from
$42.8 million in 2019 to $32.4 million in 2020, $20.2 million in
2021, and $20.3 million in 2022. The reported NCF was $4.3 million
for the three months ended March 31, 2023. As of the Dec. 31, 2022,
rent roll, the property was 52.8% leased. After considering the
aforementioned vacated tenants, we calculated that occupancy has
dropped to approximately 35.0% currently. According to Midland, the
borrowers do not have any prospective tenants to backfill the
vacant spaces at this time.
The five largest tenants include:
-- Zara (3.5% of NRA, 8.5% of S&P Global Ratings' gross rent,
March 2027 lease expiry);
-- H&M (3.2%, 5.5%, January 2024);
-- Burke Williams Beyond the Spa (2.0%, 2.5%, May 2025);
-- American Eagle Outfitters/Aeri (1.6%, 4.5%, January 2028); and
-- Aritzia (1.4%, 5.4%, March 2028).
The property faces staggered tenant rollover except in 2024, when
11.0% of NRA rolls.
According to CoStar, the Yerba Buena office submarket, in which the
property is situated, is one of the smaller office submarkets in
San Francisco. It has the highest vacancy rate in the city due to
weak office demand brought on by remote work arrangements from the
COVID-19 pandemic. Vacancy levels, net absorption, and rental
growth have been negatively affected in the past three years. As of
October 2023, three star office properties in the submarket had a
market rent of $45.93 per sq. ft., vacancy rate of 25.4%, and
availability rate of 31.4%. This compares with a $73.62 per sq. ft.
market rent and 5.8% vacancy rate prior to the pandemic, in 2019.
CoStar expects the submarket vacancy rate to rise to 34.2% in 2024
and 38.5% in 2025 and forecasts that asking rent will fall to
$39.52 per sq. ft. and $36.43 per sq. ft. for the same periods.
Per CoStar, the Yerba Buena retail mall submarket faces similar
challenges, with a 34.3% vacancy rate and $37.56 per sq. ft. market
rent as of October 2023. CoStar expects elevated vacancy of 33.6%
in 2024 and 31.5% in 2025 and flat market rent of $37.78 per sq.
ft. and $38.56 per sq. ft. for the same periods.
S&P's analysis considers the current property performance and
market conditions to arrive at our revised NCF and valuation.
Transaction Summary
The 10-year, fixed-rate, IO mortgage whole loan had an initial and
current balance of $558.0 million, pays an annual fixed interest
rate of 3.39%, and matures on Aug. 10, 2026.
The whole loan comprises 28 promissory notes:
-- 24 senior pari passu A notes totaling $433.1 million; and
-- Four junior trust B notes totaling $124.9 million.
The senior A notes are pari passu to each other and are senior to
the $124.9 million subordinate B notes.
The trust loan, totaling $306.9 million (as of the Sept. 12, 2023,
trustee remittance report), consists of eight of the senior notes
totaling $182.0 million and the four junior B notes totaling $124.9
million. The remaining portion of the whole loan, totaling $251.1
million, is in five U.S. CMBS transactions:
-- JPMCC Commercial Mortgage Securities Trust 2016-JP3 ($60.0
million);
-- JPMDB Commercial Mortgage Securities Trust 2016-C4 ($23.6
million);
-- CD 2016-CD1 Mortgage Trust ($60.0 million);
-- COMM 2016-COR1 Mortgage Trust ($23.5 million); and
-- DBJPM 2016-C3 Mortgage Trust ($84.0 million).
The master servicer, Wells Fargo Bank N.A., reported a debt service
coverage of 0.91x for the three months ended March 31, 2023, down
from 1.05x in 2022 and 2021, and 1.68x in 2020. To date, the trust
has not incurred any principal losses.
Ratings Lowered
DBJPM 2016-SFC Mortgage Trust
Class A to 'BBB+ (sf)' from 'A (sf)'
Class B to 'BB (sf)' from 'BBB- (sf)'
Class C to 'CCC (sf)' from 'B (sf)'
Class D to 'CCC- (sf)' from 'CCC (sf)'
Class X-A to 'BB (sf)' from 'BBB- (sf)'
DBJPM 2017-C6: DBRS Confirms BB(low) Rating on Class F-RR Certs
---------------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of the Commercial
Mortgage Pass-Through Certificates, Series 2017-C6 issued by DBJPM
2017-C6 Mortgage Trust as follows:
-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class X-D at BBB (high) (sf)
-- Class D at BBB (sf)
-- Class E-RR at BB (high) (sf)
-- Class F-RR at BB (low) (sf)
All trends are Stable.
The rating confirmations reflect DBRS Morningstar's stable outlook
and loss expectations for the transaction, which have not
materially changed from the last rating action in November 2022. No
loans have been defeased, repaid, or liquidated since the last
rating action, but the largest loan in the pool, 245 Park Avenue
(Prospectus ID#1, 9.8% of the pool), which was previously in
special servicing, has since been returned to the master servicer.
As of the September 2023 remittance report, 34 of the original 41
loans remain in the pool, representing a collateral reduction of
16.0% since issuance. Three loans, representing 8.7% of the pool,
are fully defeased. In addition, eight loans, representing 32.0% of
the pool, are on the servicer's watchlist and two loans,
representing 1.7% of the pool, are in special servicing.
The largest loan on the servicer's watchlist, 245 Park Avenue, is
secured by a high-rise Class A, 1.8 million square feet (sf) office
tower in Midtown Manhattan. The loan is pari passu with
accompanying notes secured in several transactions, including six
other transactions that are also rated by DBRS Morningstar. The
loan previously transferred to special servicing in November 2021
after the original sponsor (PWM Property Management LLC, an
affiliate of HNA Group Co.) filed for Chapter 11 bankruptcy.
According to servicer documents, SL Green Realty Corp. (SL Green)
purchased the property and assumed the debt in late 2022. The loan
was returned to the master servicer in November 2022 following the
loan assumption.
Occupancy has been declining in recent years because of the
departure of several tenants at lease expiration, the most notable
of which was major tenant Major League Baseball (MLB; previously
12.7% of the net rentable area (NRA)). MLB vacated in January 2020
prior to its October 2022 lease expiration, and back-filling the
space has been challenging. According to the June 2023 rent roll,
the property was 73.4% occupied, down from 78.8% at YE2022, 83.3%
at YE2021, and 92.2% at issuance. There is moderate rollover risk
in the near term as leases representing approximately 9.7% of the
NRA are scheduled to expire through the next 12 months. While JP
Morgan Chase Bank (previously 45.4% of the NRA) did not renew at
its lease expiration in October 2022, two subtenants, Societe
Generale (29.4% of the NRA) and Houlihan Lowkey (10.3% of the NRA),
have executed direct leases through October 2032 and October 2033,
respectively, according to the servicer's latest commentary.
Additionally, the average rental rate of leases that were executed
in 2022 was $79.94 per sf (psf) with rental abatements provided,
which is above the Q2 2023 Grand Central average effective and
asking rental rate of $59.20 psf and $75.62 psf, respectively, per
Reis.
According to the most recent financials, the YE2022 net cash flow
(NCF) was reported at $92.3 million (reflecting a debt service
coverage ratio (DSCR) of 2.30 times (x) on the senior debt; 2.07x
on the whole loan), compared with the YE2021 NCF of $94.4 million
(DSCR of 2.35x on the senior debt; 2.11x on the whole loan) and the
DBRS Morningstar NCF of $89.1 million (DSCR of 2.22x on the senior
debt). According to The Real Deal, SL Green sold 50.0% of its stake
in the subject property to Mori Trust in a deal implying a property
value of approximately$2.0 billion, which is 9.5% below the
issuance value of $2.2 million. As such, for this review, DBRS
Morningstar applied a loan-to-value (LTV) stress to this loan to
account for the slight decline in implied value, resulting in an
expected loss that remains lower than that of the pool's average.
The two specially serviced loans in the pool transferred between
May 2020 and June 2020 and are delinquent. Both of the underlying
properties are in receivership. The receiver assigned to the Long
Meadow Farms loan (Prospectus ID#31; 1.0% of the pool) has been
working on stabilizing the property's occupancy. As of March 2023,
the property was 62.1% occupied, and, according to the special
servicer's latest update, there have been two new leases executed
since then. The special servicer and borrower remain in
negotiations regarding the workout strategy. The smaller of the two
specially serviced loans, Union Hotel – Brooklyn (Prospectus
ID#34; 0.7% of the pool), is in foreclosure proceedings. The
updated appraisals for these loans indicate an average value
decline of 25.5% since issuance. DBRS Morningstar projects $5.8
million in expected loss between these two assets, which is
contained to the nonrated Class G-RR certificate.
The pool is concentrated by property type, where loans secured by
office and retail properties each represent more than 20.0% of the
current pool balance. In general, the office sector has been
challenged, given the low investor appetite for the property type
and high vacancy rates in many submarkets. However, of the five
nondefeased office loans (21.8% of the pool), only three (17.8% of
the pool) exhibited performance that suggested increased credit
risk since issuance and were stressed in the analysis for this
review, which resulted in a weighted-average expected loss that
remained below the pool average.
The above noted concerns are mitigated by the overall stable
performance of the majority of the pool. The 10 largest nondefeased
loans represent 62.2% of the pool balance and are generally
out-performing issuance expectations as of the most recent year-end
reporting. Additionally, the second- and third-largest loans
Gateway Net Lease Portfolio – Trust (Prospectus ID#2; 8.6% of the
pool) and Olympic Tower – Trust (Prospectus ID#3; 8.4% of the
pool) were shadow-rated investment grade at issuance. These
assessments were supported by the loans' strong credit metrics,
sponsorship strength, and historically stable performance. DBRS
Morningstar confirms that, as of this review, the characteristics
of these loans remain consistent with the investment-grade shadow
rating.
Notes: All figures are in U.S. dollars unless otherwise noted.
DIAMOND ISSUER 2021-1: Fitch Affirms 'BB-sf' Rating on Cl. C Notes
------------------------------------------------------------------
Fitch Ratings has affirmed Diamond Issuer LLC's fixed-rate Cellular
Site revenue notes, Series 2021-1.
Entity/Debt Rating Prior
----------- ------ -----
Diamond Issuer LLC
Fixed Rate Cellular
Site Revenue Notes,
Series 2021-1
Class A 25267TAN1 LT Asf Affirmed Asf
Class B 25267TAQ4 LT BBB-sf Affirmed BBB-sf
Class C 25267TAS0 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
The transaction is an issuance of notes backed by mortgages
representing over 90% of the annualized run rate net cash flow
(ARRNCF) on the tower sites, and guaranteed by the direct parent of
the borrower issuer. This guarantee is secured by a pledge and
first-priority-perfected security interest in 100% of the equity
interest of the borrowers, which own or lease 1,087 wireless
communication sites (towers and the tenant leases) and mortgages on
applicable sites and the capacity use and service agreements and
any and all associated rights, remedies and proceeds, including the
exclusive and perpetual relationship with FirstEnergy Corp.'s (FE)
10 utility subsidiaries to sublease FE transmission and
communication towers, and FE controlled property.
The ratings reflect a structured finance analysis of the cash flows
from the ownership interest in cellular sites, not an assessment of
the corporate default risk of the ultimate parent, Diamond
Communications LLC not rated (NR) by Fitch, which is also the
transaction manager. This transaction is the fifth ABS transaction
managed by Diamond.
KEY RATING DRIVERS
Net Cash Flow and Trust Leverage: The issuer net cash flow (NCF) on
the pool is $39.5 million, up 15.1% since issuance. This increase
included organic cash flow growth and additional site acquisitions,
as contemplated by the site acquisition account. The debt multiple
relative to Issuer NCF on the rated classes is 11.0x, down from
12.1x as of issuance. Fitch has not redetermined Fitch Net Cash
Flow and Maximum Potential Leverage as there have not been material
migrations in the performance, cash flow and collateral asset
characteristics.
Credit Risk Factors: The major factors impacting Fitch's
determination of cash flow and Maximum Potential Leverage (MPL)
include: the large and diverse collateral pool, creditworthy
customer base with limited historical churn, market position of the
operator, capability of the operator, limited operational
requirements, high barriers to entry and transaction structure.
Technology-Dependent Credit: Due to the specialized nature of the
collateral and potential for changes in technology to affect
long-term demand for tower space, similar to most wireless tower
transactions, the senior classes of this transaction do not achieve
ratings above 'Asf'. The securities have a rated final payment date
over 25 years after closing, and the long-term tenor of the
securities increases the risk that an alternative technology —
rendering obsolete the current transmission of wireless signals
through cellular sites — will be developed. Wireless service
providers (WSPs) currently depend on towers to transmit their
signals and continue to invest in this technology.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Declining cash flow as a result of higher site expenses or lease
churn, or the development of an alternative technology for the
transmission of wireless signal could lead to downgrades.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Increasing cash flow without an increase in corresponding debt,
from contractual lease escalators, new tenant leases, or lease
amendments could lead to upgrades.
Upgrades are unlikely for these transactions given the provision
for the issuer to issue additional notes, which rank pari passu or
subordinate to existing notes, without the benefit of additional
collateral. In addition, the transaction is capped in the 'Asf'
category, given the risk of technological obsolescence.
ESG CONSIDERATIONS
Diamond Issuer LLC Fixed Rate Cellular Site Revenue Notes, Series
2021-1 has an ESG Relevance Score of '4' for Transaction &
Collateral Structure due to several factors, including the issuer's
ability to issue additional notes, which has a negative impact on
the credit profile, and is relevant to the rating in conjunction
with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
EAGLE RE 2023-1: DBRS Gives Prov. B Rating on Class B-1 Notes
-------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Mortgage Insurance-Linked Notes, Series 2023-1 (the Notes) to be
issued by Eagle Re 2023-1 Ltd. (EMIR 2023-1 or the Issuer):
-- $93.8 million Class M-1A at BBB (low) (sf)
-- $123.8 million Class M-1B at BB (sf)
-- $41.3 million Class M-1B-1 at BB (high) (sf)
-- $41.3 million Class M-1B-2 at BB (high) (sf)
-- $41.3 million Class M-1B-3 at BB (sf)
-- $63.8 million Class M-2 at B (high) (sf)
-- $18.8 million Class B-1 at B (sf)
The BBB (low) (sf) credit rating reflects 6.00% of credit
enhancement, provided by subordinated notes in the transaction. The
BB (high) (sf), BB (sf), B (high) (sf), and B (sf) credit ratings
reflect 4.90%, 4.35%, 3.50%, and 3.25% of credit enhancement,
respectively.
Other than the classes specified above, DBRS Morningstar does not
rate any other classes in this transaction.
EMIR 2023-1 is Radian Guaranty Inc.'s (Radian Guaranty or the
Ceding Insurer) seventh rated mortgage insurance (MI)-linked note
transaction. The Notes are backed by reinsurance premiums, eligible
investments, and related account investment earnings, in each case
relating to a pool of MI policies linked to residential loans. The
Notes are exposed to the risk arising from losses the Ceding
Insurer pays to settle claims on the underlying MI policies. As of
the Cut-off Date, the pool of insured mortgage loans consists of
131,258 fully amortizing first-lien fixed- and variable-rate
mortgages. They all have been underwritten to a full documentation
standard, have original loan-to-value ratios (LTVs) less than or
equal to 97%, have never been reported to the Ceding Insurer as 60
or more days delinquent, and have never been reported to be in a
payment forbearance plan as of the Cut-off Date. The mortgage loans
have MI policies activated on or after April 2022 and on or before
December 2022.
On March 1, 2020, a new master policy was introduced to conform to
government-sponsored enterprises' revised rescission relief
principles under the Private Mortgage Insurer Eligibility
Requirements guidelines (see the Representations and Warranties
section of the related report for more details). All of the
mortgage loans were originated under the new master policy.
On the Closing Date, the Issuer will enter into the Reinsurance
Agreement with the Ceding Insurer. As per the agreement, the Ceding
Insurer will get protection for the funded portion of the MI
losses. In exchange for this protection, the Ceding Insurer will
make premium payments related to the underlying insured mortgage
loans to the Issuer.
The Issuer is expected to use the proceeds from the sale of the
Notes to purchase certain eligible investments that will be held in
the reinsurance trust account. The eligible investments are
restricted to U.S. Treasury money-market funds and securities rated
Aaa-mf by Moody's or AAAm by S&P. Unlike other residential
mortgage-backed security (RMBS) transactions, cash flow from the
underlying loans will not be used to make any payments; rather, in
MI-linked note transactions, a portion of the eligible investments
held in the reinsurance trust account will be liquidated to make
principal payments to the noteholders and to make loss payments to
the Ceding Insurer when claims are settled with respect to the MI
policy.
The Issuer will use the investment earnings on the eligible
investments, together with the Ceding Insurer's premium payments,
to pay interest to the noteholders.
The calculation of principal payments to the Notes will be based on
the reduction in the aggregate exposed principal balance on the
underlying MI policy that is allocated to the Notes. The
subordinate Notes will receive their pro rata share of available
principal funds if the minimum credit enhancement test and the
delinquency test are satisfied. The minimum credit enhancement test
has been set to fail at the closing date, thus locking out the
rated classes from initially receiving any principal payments until
the subordinate percentage grows to 7.75% from 7.25%. The
delinquency test will be satisfied if the three-month average of
the 60+ days delinquency percentage is below 75% of the subordinate
percentage. Additionally, if these performance tests are met and
subordinate percentage is above 7.75%, then the subordinate Notes
will be entitled to accelerated principal payments equal to two
times the subordinate principal reduction amount, until the
subordinate percentage comes down to the target CE of 7.75%. See
the Cash Flow Structure and Features section of the related report
for more details.
The coupon rates for the Notes issued by EMIR 2023-1 are based on
the Secured Overnight Financing Rate (SOFR). There are replacement
provisions in place in the event that SOFR is no longer available;
please see the Offering Circular for more details. DBRS Morningstar
did not run interest rate stresses for this transaction as the
interest is not linked to the performance of the underlying loans.
Instead, interest payments are funded via (1) premium payments that
the Ceding Insurer must make under the reinsurance agreement and
(2) earnings on eligible investments.
On the Closing Date, the Ceding Insurer will establish a cash and
securities account, the premium deposit account. In case of the
Ceding Insurer's default in paying coverage premium payments to the
Issuer, the amount available in this account will be used to make
interest payments to the noteholders. The premium deposit account
will not be funded at closing. The Ceding Insurer will make a
deposit into this account up to the applicable target balance only
when one of several Premium Deposit Events occur. Please refer to
the related report for more details.
The EMIR 2023-1 transaction is issued with a 10-year term. The
Notes are scheduled to mature on September 26, 2033, but will be
subject to early redemption at the option of the Ceding Insurer (1)
for a 10% clean-up call or (2) on or following the payment date in
September 2028, among other options The Notes are also subject to
mandatory redemption before the scheduled maturity date upon the
termination of the Reinsurance Agreement. Additionally, there is a
provision for the Ceding Insurer to issue a tender offer to reduce
all or a portion of the outstanding Notes.
Radian Guaranty will be the Ceding Insurer. The Bank of New York
Mellon (rated AA (high) with a Stable trend by DBRS Morningstar)
will act as the Indenture Trustee, Paying Agent, Note Registrar,
and Reinsurance Trustee.
Notes: All figures are in U.S. dollars unless otherwise noted.
ELARA HGV 2023-A: Fitch Assigns Final 'BBsf' Rating on Cl. D Notes
------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Outlooks to Elara HGV
Timeshare Issuer 2023-A LLC (2023-A) notes.
Entity/Debt Rating Prior
----------- ------ -----
Elara HGV
Timeshare Issuer
2023-A, LLC
A LT AAAsf New Rating AAA(EXP)sf
B LT A-sf New Rating A-(EXP)sf
C LT BBB-sf New Rating BBB-(EXP)sf
D LT BBsf New Rating BB(EXP)sf
KEY RATING DRIVERS
Borrower Risk - Marginally Stronger Collateral: The 2023-A pool has
a weighted average (WA) Fair Isaac Corp. (FICO) score of 744, up
slightly from 741 in 2021-A. The WA seasoning is 17 months, down
from 22 months in 2021-A. Overall, Fitch considers the pool's
credit quality to be stable. Furthermore, the concentration of
large original balance (greater than $100,000) loans increased to
13.7% from 12.1% in 2021-A. The share of upgraded loans declined to
64.1% from 68.5% in 2021-A.
Forward-Looking Approach on CGD Proxy - Stabilizing Performance:
The outstanding ABS transactions and the Elara managed portfolio
have experienced elevated defaults since 2016. However, the default
growth rates for 2016-2019 vintages have slowed slightly in recent
periods. The more recent 2020-2022 vintages are tracking generally
in line with earlier vintages. Fitch's initial base case cumulative
gross default (CGD) proxy for 2023-A is 17.0%, down slightly from
17.5% in 2021-A.
Single Timeshare Site: The loans are associated with a single
resort, Elara, in Las Vegas. However, these owners have the same
usage and exchange rights as other Hilton Resorts Corporation (HRC)
timeshare owners and become club members within HRC's system. As
such, the risk associated with a single-site property is
mitigated.
Structural Analysis - Adequate CE: Initial hard credit enhancement
(CE) is 54.15%, 25.80%, 11.15% and 7.25% for class A, B, C and D
notes, respectively. CE is higher for class A and D notes,
increasing from 52.4% and 3.80%, respectively, but down for class B
and C notes, decreasing from 26.80% and 12.90%, respectively. Soft
CE is also provided by excess spread and is expected to be 6.68%
per annum. Available CE is sufficient to support stressed multiples
of 3.50x, 2.25x, 1.58x and 1.25x at 'AAAsf', 'A-sf', 'BBB-sf' and
'BBsf' rating levels for class A, B, C and D notes, respectively.
Originator Seller/Servicer - Quality of Origination/Servicing: LV
Tower and HRC have demonstrated sufficient abilities as originator
and servicer of timeshare loans, respectively. This is evidenced by
the historical delinquency and loss performance of HRC's managed
portfolio and previous transactions.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Unanticipated increases in the frequency of defaults could produce
CGD levels higher than the base case and would likely result in
declines of CE and remaining default coverage levels available to
the notes. Additionally, unanticipated increases in prepayment
activity could also result in a decline in coverage. Declining
default coverage may make certain note ratings susceptible to
potential negative rating actions, depending on the extent of the
decline in coverage.
Hence, Fitch conducts sensitivity analysis by stressing both a
transaction's initial base case CGD and prepayment assumptions and
examining the rating implications on all classes of issued notes.
The CGD sensitivity stresses the CGD proxy to the level necessary
to reduce each rating by one full category, to
non-investment-grade, 'BBsf' and to 'CCCsf' based on the break-even
loss coverage provided by the CE structure. The prepayment
sensitivity includes 1.5x and 2.0x increases to the prepayment
assumptions representing moderate and severe stresses,
respectively. These analyses are intended to provide an indication
of the rating sensitivity of notes to unexpected deterioration of a
trust's performance.
Additionally, Fitch conducts increases of 1.5x and 2.0x to the CGD
proxy, which represents moderate and severe stresses, respectively.
These analyses are intended to provide an indication of the rating
sensitivity of notes to unexpected deterioration of a trust's
performance.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Stable to improved asset performance driven by stable delinquencies
and defaults would lead to increasing CE levels and consideration
for potential upgrades. If the CGD is 20% less than the projected
proxy, the expected ratings would be maintained for class A notes
at a stronger rating multiple. For class B, C and D notes the
multiples would increase, resulting in potential upgrades of three
notches, two notches and one rating category, respectively.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
ELARA HGV 2023-A: S&P Assigns BB- (sf) Rating on Class D Notes
--------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Elara HGV
Timeshare Issuer 2023-A LLC's fixed-rate timeshare loan-backed
notes.
The note issuance is an ABS securitization backed by vacation
ownership interval (timeshare) loans.
The ratings reflect S&P's view of:
-- The credit enhancement available in the form of subordination,
overcollateralization, a reserve account, and available excess
spread.
-- Grand Vacation Services LLC's servicing ability and experience
in the timeshare market.
-- The transaction's ability to pay timely interest and ultimate
principal by the notes' legal maturity under S&P's stressed cash
flow recovery rate and sensitivity scenarios.
Ratings Assigned
Elara HGV Timeshare Issuer 2023-A LLC
Class A, $95.61 million: AAA (sf)
Class B, $57.86 million: A- (sf)
Class C, $29.90 million: BBB- (sf)
Class D, $7.96 million: BB- (sf)
ELMWOOD CLO VII: S&P Assigns 'B- (sf)' Rating on Class F-R Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to the class A-R, B-R, C-R,
D-R, E-R, and F-R replacement debt from Elmwood CLO VII
Ltd./Elmwood CLO VII LLC, a CLO originally issued in 2020 that is
managed by Elmwood Asset Management LLC. At the same time, S&P
withdrew its ratings on the original class A, B, C, D, E, and F
debt following payment in full on the Oct. 5, 2023, refinancing
date.
The replacement debt were issued via a supplemental indenture,
which outlines the terms of the replacement debt. According to the
supplemental indenture:
-- The non-call period was extended by approximately one year to
Oct. 5, 2024.
-- The reinvestment period, legal final maturity date, and
weighted average life test were not extended.
-- No additional assets were purchased on the Oct. 5, 2023,
refinancing date, and the target initial par amount remains at
$500,000,000. There is no additional effective date or ramp-up
period, and the first payment date following the refinancing is
Jan. 17, 2024.
-- The required minimum overcollateralization coverage ratios were
amended.
-- Subordination levels were amended from original structure.
-- No additional subordinated notes were issued on the refinancing
date.
Replacement And Original Debt Issuances
Replacement debt
-- Class A-R, $320.00 million: Three-month CME term SOFR + 1.63%
-- Class B-R, $60.00 million: Three-month CME term SOFR + 2.20%
-- Class C-R, $30.00 million: Three-month CME term SOFR + 2.70%
-- Class D-R, $30.00 million: Three-month CME term SOFR + 4.15%
-- Class E-R, $18.75 million: Three-month CME term SOFR + 6.75%
-- Class F-R, $5.75 million: Three-month CME term SOFR + 7.5%
Original debt
-- Class A, $300.00 million: Three-month CME term SOFR + 1.39% +
CSA(i)
-- Class B, $80.00 million: Three-month CME term SOFR + 1.70% +
CSA(i)
-- Class C, $30.00 million: Three-month CME term SOFR + 2.25% +
CSA(i)
-- Class D, $28.75 million: Three-month CME term SOFR + 3.60% +
CSA(i)
-- Class E, $16.25 million: Three-month CME term SOFR + 7.10% +
CSA(i)
-- Class F, $7.5 million: Three-month CME term SOFR + 8.01% +
CSA(i)
(i)CSA--Credit spread adjustment = 0.26161%.
S&P said, "Our review of this transaction included a cash flow
analysis, based on the portfolio and transaction data in the
trustee report, to estimate future performance. In line with our
criteria, our cash flow scenarios applied forward-looking
assumptions on the expected timing and pattern of defaults and the
recoveries upon default under various interest rate and
macroeconomic scenarios. Our analysis also considered the
transaction's ability to pay timely interest and/or ultimate
principal to each of the rated tranches. The results of the cash
flow analysis (and other qualitative factors, as applicable)
demonstrated, in our view, that the outstanding rated classes all
have adequate credit enhancement available at the rating levels
associated with the rating actions.
"We will continue to review whether, in our view, the ratings
assigned to the debt remain consistent with the credit enhancement
available to support them and take rating actions as we deem
necessary."
Ratings Assigned
Elmwood CLO VII Ltd./Elmwood CLO VII LLC
Class A-R, $320.00 million: 'AAA (sf)'
Class B-R, $60.00 million: 'AA (sf)'
Class C-R (deferrable), $30.00 million: 'A (sf)'
Class D-R (deferrable), $30.00 million: 'BBB- (sf)'
Class E-R (deferrable), $18.75 million: 'BB- (sf)'
Class F-R (deferrable), $5.75 million: 'B- (sf)'
Ratings Withdrawn
Elmwood CLO VII Ltd./Elmwood CLO VII LLC
Class A to NR from 'AAA (sf)'
Class B to NR from 'AA (sf)'
Class C to NR from 'A (sf)'
Class D to NR from 'BBB- (sf)'
Class E to NR from 'BB- (sf)'
Class F to NR from 'B- (sf)'
Other Outstanding Classes
Elmwood CLO VII Ltd./Elmwood CLO VII LLC
Subordinated notes, $39.00 million: NR
NR--Not rated.
GSF 2021-1: DBRS Confirms BB(low) Rating on Class E Notes
---------------------------------------------------------
DBRS Limited confirmed its ratings on the following classes of
notes issued by GSF 2021-1 (the Issuer):
-- Class A-1 Notes at AAA (sf)
-- Class A-2 Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class X Notes at A (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (low) (sf)
-- Class E Notes at BB (low) (sf)
All trends are Stable.
The rating confirmations and Stable trends reflect the continued
performance of the underlying collateral, which remains in line
with issuance expectations evidenced by steady financial
performance for the majority of loans and a well-rounded favorable
property type mix in the pool.
As of the August 2023 remittance, the pool consisted of 23
performing loans, secured by traditional commercial real estate
properties with a combined balance of $496.5 million. There were no
loans on the servicer's watchlist or in special servicing. At
closing, in November 2021, the transaction featured a funding
period whereby the Issuer could contribute loans to the pool up to
the expected maximum balance of $500.0 million. The pool was
originally intended to be funded within the first year with an
allowable six-month extension option. Although the Issuer did not
fund the pool within the originally expected time frame, the 100%
funding target was reached with the July 2023 remittance, when the
trust reached a balance of $496.6 million, representing 99.3% of
the originally planned $500 million pool balance. The transaction
now pays sequentially. DBRS Morningstar notes one guardrail has
been broken as the pool's current top 10 loan concentration of
66.7% exceeds the 50% guardrail as defined in the indenture. The
fully funded transaction is concentrated by property type with
office, multifamily, and industrial properties representing 23.9%,
22.9%, and 19.2% of the current pool balance, respectively.
The six loans contributed since the previous DBRS Morningstar
rating action in February 2023 are backed by a mix of property
types, including industrial, self-storage, and a parking facility
representing 9.6%, 12.0%, and 2.5% of the pool, respectively. Those
same loans reported a weighted-average (WA) issuance loan-to-value
ratio (LTV) of 58.4% and WA DBRS Morningstar net cash flow (NCF)
variance of -14.7%. All of the newly contributed loans were
structured with some sort of interest-only (IO) provisions.
DBRS Morningstar notes an elevated risk profile for the Westview
(Prospectus ID#12, 7.9% of the pool) loan, which is secured by a
100,182-square-foot (sf) office building in Austin, adjacent to the
Texas State Capitol. In 2018, the subject property underwent a
$32.0 million capital expenditure program to modernize the
exterior, add 75,000 sf, renovate, and install creative office
space. As of March 2023 reporting, the subject remains 92.0%
occupied, which remains in line with the rate at the loan's
contribution to the trust. As noted at issuance, the largest tenant
at the collateral is WeWork, which occupies three floors at the
subject, accounting for 46.3% of the net rentable area (NRA) with a
lease expiry in January 2032. Recent news articles have stated that
WeWork is seeking to renegotiate the vast majority of its leases
around the world but expects to remain in most of its locations.
The impact to the subject property is unknown at this time;
however, WeWork has seven additional locations in the Austin
metropolitan statistical area, and the March 2023 asset summary
report provided by the servicer noted the subject property is one
of the top performers in the Austin market. The tenants at the
subject WeWork location are satellite offices for larger companies,
most of which signed for longer than six months in duration. The
lease was structured with a $3.5 million guarantee for the first
six years, which declines to $2.0 million thereafter to the end of
the lease in 2032. In addition, there is a $1.5 million letter of
credit, which reduces to $1.0 million in February 2025 and expires
in February 2026, providing an additional layer of security in the
near to medium term.
Financial performance remains steady to date as the loan reported a
trailing 12 months ended March 31, 2023, NCF of $3.6 million,
compared with the DBRS Morningstar NCF of $2.9 million. There is
marginal rollover risk with only one tenant, representing 5.9% of
the NRA, that has an upcoming lease expiration in the next 12
months. According to a Q2 2023 Reis report, the Austin central
business district submarket reported a vacancy rate of 22.5%, which
is expected to grow to 23.8% by YE2023. Although the subject is
noted as one of WeWork's top-performing locations in the Austin
submarket, in the event WeWork does reject its lease, the lease
guarantee and letter of credit are risk mitigants. The soft
submarket, however, may prove difficult for the borrower to
effectively lease-up any future vacant space in a timely manner.
The loan was analyzed with an elevated probability of default to
account for the elevated credit risk profile given the tenancy
concerns.
The largest newly contributed loan, East Dallas Industrial
(Prospectus ID#20, 8.1% of the pool) is secured by a portfolio of
five industrial assets situated across the Dallas-Fort Worth area
specifically in Dallas, Mesquite, and Garland, Texas. The sponsor,
Mavik Capital, acquired the portfolio in December 2022 in an
all-cash transaction for a purchase price of $78.5 million. The
portfolio was originally constructed between 1970 and 1980 but was
recently renovated between 2020 and 2022 with the seller having
completed a $3.6 million capital improvement plan. The loan is
structured with individual release provisions at a release price of
115% of the respective property allocated loan amount; however, the
remaining properties must have in-place metrics that are equal to
or greater than the closing figures. As of the provided July 2023
rent roll, the portfolio was 100% occupied at an average rental
rate of $5.14 per sf. Only one tenant, representing 7.8% of the
portfolio NRA, has an upcoming lease expiration within the next 12
months. The largest tenants across the portfolio include Prolift
Rigging Company (25.7% of the NRA, lease expiry in May 2029) and
ADCO Industries (21.2% of the NRA, lease expiry in February 2027).
The loan is IO for the full five-year term but also benefits from a
low issuance LTV of 49.5%.
Notes: All figures are in U.S. dollars unless otherwise noted.
HILTON USA 2016-SFP: DBRS Cuts Class F Certs Rating to CCC
----------------------------------------------------------
DBRS Limited downgraded its ratings on six classes of the
Commercial Mortgage Pass-Through Certificates, Series 2016-SFP
issued by Hilton USA Trust 2016-SFP as follows:
-- Class B to AA (low) (sf) from AA (sf)
-- Class C to A (low) (sf) from A (sf)
-- Class X-NCP to BBB (low) (sf) from A (low) (sf)
-- Class D to BB (high) (sf) from BBB (high) (sf)
-- Class E to B (high) (sf) from BBB (low) (sf)
-- Class F to CCC (sf) from B (high) (sf)
In addition, DBRS Morningstar confirmed its rating on the following
class:
-- Class A at AAA (sf)
DBRS Morningstar also discontinued and withdrew its rating on Class
X-E, as the lowest referenced obligation was downgraded to CCC
(sf). DBRS Morningstar changed the trends on all classes to
Negative from Stable, with the exception of Class F, which has a
rating that does not typically carry a trend in commercial
mortgage-backed securities (CMBS) ratings. As of this review, DBRS
Morningstar removed the transaction from Under Review with Negative
Implications where it had been placed on June 16, 2023.
The rating downgrades and trend changes reflect DBRS Morningstar's
deteriorated view of this transaction given the expectation that
the as-is values have declined sharply for the underlying
collateral, two full-service hotels in San Francisco's Union
Square. At the last review in June 2023, DBRS Morningstar placed
all ratings Under Review with Negative Implications following the
announcement from the loan's sponsor, Park Hotels & Resorts Inc.,
that the collateral hotels would be dropped from the sponsor's
portfolio and loan payments would no longer be made. As
anticipated, the loan was subsequently transferred to special
servicing for imminent default. The loan has a scheduled maturity
in November 2023.
Given the sustained performance declines since 2020 and the
distressed San Francisco market, DBRS Morningstar believes that the
collateral's as-is value has likely declined significantly with a
loan-to-value ratio (LTV) in excess of 100%. To analyze the impact
of a liquidation scenario, which seems likely given the sponsor's
lack of commitment to the collateral portfolio, DBRS Morningstar
conducted a recoverability analysis based on a newly derived DBRS
Morningstar value, which suggests that Classes D, E, and F would be
most exposed to the increased possibility of loss, supporting the
downgrades to below investment grade on those classes. While the
recoverability analysis suggests that Classes A through C are
currently insulated from losses, the as-is value decline suggests
significant deterioration in the credit quality of the transaction
as a whole, driving the downgrade actions taken with this review.
The Negative trends reflect the potential for further value
deterioration given the significant market contraction and the
potential for a prolonged workout, which could result in accruing
advances (or decreased willingness to advance interest given the
uncertainties) and increased credit risk to those bonds.
When ratings were assigned in September 2020, the DBRS Morningstar
value considered a 45.0% decline to the issuance appraised value of
$1.56 billion, to account for the impact of the Coronavirus Disease
(COVID-19) pandemic. With loan performance still not at
pre-pandemic levels and declining demand in the San Francisco
lodging market for the foreseeable future, DBRS Morningstar derived
an updated value based on a newly derived as-is net cash flow (NCF)
of $47.2 million and a stressed cap rate of 10.0%, resulting in an
updated DBRS Morningstar value of $472.6 million ($160,578 per key)
for this review. DBRS Morningstar's as-is NCF incorporates the
portfolio's trailing 12 months (T-12) ended March 30, 2023, revenue
per available room (RevPAR) of $126 while maintaining a total
expense ratio of 70.7%, in line with the DBRS Morningstar NCF
derived when ratings were assigned in 2020. The DBRS Morningstar
value implies an LTV of 153.4%, compared with the LTV of 84.4% when
ratings were assigned in 2020. DBRS Morningstar made positive
qualitative adjustments to the final LTV sizing benchmarks,
totaling 0.5% to account for property quality. A previous 1.5%
adjustment for market fundamentals was removed with this review
because of the stress currently facing the San Francisco market.
The results of the LTV sizing suggested significant downgrade
pressure across the capital stack, further supporting the
downgrades with this review.
The certificates are backed by a $725 million, seven-year,
interest-only (IO), fixed-rate, first-mortgage loan secured by the
borrower's fee and leasehold interest and the operating lessees'
leasehold interest in two full-service hotels: Hilton San Francisco
Union Square (Union Square) and Hilton Parc 55 San Francisco (Parc
55). The hotels are well located in San Francisco's Tenderloin
District, just off Market Street and less than 0.5 miles from the
Moscone Center. The Hilton Union Square property is a 1,919-room,
convention-oriented hotel that includes 130,000 square feet (sf) of
meeting space. The hotel is the largest in San Francisco and
derives about 40% of its demand from the meetings and group
segment. The 32-story Parc 55 property is the fourth-largest
full-service hotel in San Francisco, with 1,024 guest rooms and
28,000 sf of meeting space. After acquiring the property in 2015,
the sponsor invested $5.5 million in upgrades to meet Hilton
standards.
The coronavirus pandemic caused economic strain on both hotels for
most of 2020, 2021, and 2022 as bookings declined substantially
given the reliance on business and corporate as well as leisure
travel, which have all been slower to recover relative to other
markets. Conferences and large groups drive demand for these hotels
as they are within walking distance of the Moscone Center, where
most events were cancelled from 2020 to 2021. Demand has not
recovered to pre-pandemic levels as only 33 events were booked in
2022. According to the San Francisco Travel Association, in 2023,
hotel rooms associated with Moscone Center events are projected to
total approximately 663,000 across 36 events, as compared with
968,000 room nights across 49 events in 2019. While bookings are up
from 2022, the San Francisco Travel Association does not project
bookings and visitor numbers to reach pre-pandemic levels until
2024 or 2025. Recently, however, it was announced that Alphabet
would be moving its high-profile Google Cloud Next conference to
Las Vegas next year, with other major conferences, such as
Salesforce's Dreamforce, potentially soon to follow.
Although both properties reported notable performance increases in
2022, the Parc 55 hotel did not reopen until May 2022 and the loan
continued to produce negative cash flow as of the T-12 ended March
30, 2023. According to the STR report for the T-12 ended March 30,
2023, the properties reported a weighted-average occupancy rate of
52.9%, an average daily rate of $232, and RevPAR of $126,
representing significant increases from March 2022 figures, but
well below DBRS Morningstar figures assumed when assigning ratings
in 2020 of 87.7%, $253, and $222, respectively.
The DBRS Morningstar ratings assigned to Classes A, B, C, D, and E
are higher than the results implied by the LTV sizing benchmarks by
three or more notches. The variances are warranted given the
uncertain loan level event risk, which is compounded by the loan's
recent transfer to special servicing in June 2023 and uncertainty
surrounding the collateral's value. In addition, DBRS Morningstar
notes that the hypothetical liquidation scenario considered as part
of this review suggests liquidated losses would be contained to the
Class D certificate, indicating cushion for Class C and above
should a liquidation be realized in the near to medium term.
Notes: All figures are in U.S. dollars unless otherwise noted.
JP MORGAN 2023-7: DBRS Gives Prov. BB Rating on Class B-4 Certs
---------------------------------------------------------------
DBRS, Inc. assigned the following provisional ratings to the
Mortgage Pass-Through Certificates, Series 2023-7 (the
Certificates) to be issued by J.P. Morgan Mortgage Trust 2023-7
(JPMMT 2023-7):
-- $270.8 million Class A-2 at AAA (sf)
-- $270.8 million Class A-3 at AAA (sf)
-- $270.8 million Class A-3-X at AAA (sf)
-- $203.1 million Class A-4 at AAA (sf)
-- $203.1 million Class A-4-A at AAA (sf)
-- $203.1 million Class A-4-X at AAA (sf)
-- $67.7 million Class A-5 at AAA (sf)
-- $67.7 million Class A-5-A at AAA (sf)
-- $67.7 million Class A-5-X at AAA (sf)
-- $21.8 million Class A-6 at AAA (sf)
-- $21.8 million Class A-6-A at AAA (sf)
-- $21.8 million Class A-6-X at AAA (sf)
-- $292.6 million Class A-X-1 at AAA (sf)
-- $9.9 million Class B-1 at AA (low) (sf)
-- $6.8 million Class B-2 at A (low) (sf)
-- $4.5 million Class B-3 at BBB (low) (sf)
-- $2.1 million Class B-4 at BB (sf)
-- $1.4 million Class B-5 at B (low) (sf)
Classes A-3-X, A-4-X, A-5-X, A-6-X, and A-X-1 are interest-only
(IO) certificates. The class balances represent notional amounts.
Classes A-2, A-3, A-3-X, A-4, A-5, and A-6 are exchangeable
certificates. These classes can be exchanged for combinations of
depositable certificates as specified in the offering documents.
Classes A-2, A-3, A-4, A-4-A, A-5, and A-5-A are super senior
certificates. These classes benefit from additional protection from
the senior support certificates (Class A-6 and A-6-A certificates)
with respect to loss allocation.
The AAA (sf) ratings on the Certificates reflect 8.15% of credit
enhancement provided by subordinated certificates. The AA (low)
(sf), A (low) (sf), BBB (low) (sf), BB (sf), and B (low) (sf)
ratings reflect 5.05%, 2.90%, 1.50%, 0.85%, and 0.40% of credit
enhancement, respectively.
Other than the specified classes above, DBRS Morningstar does not
rate any other classes in this transaction.
This transaction is a securitization of a portfolio of first-lien,
fixed-rate prime residential mortgages funded by the issuance of
the Certificates. The Certificates are backed by 309 loans with a
total principal balance of $318,577,659 as of the Cut-Off Date
(September 1, 2023).
The pool consists of fully amortizing fixed-rate mortgages with
original terms to maturity of primarily 30 years and a
weighted-average loan age of five months. Approximately 90.7% of
the loans are traditional, nonagency, prime jumbo mortgage loans.
The remaining 9.3% of the pool are conforming mortgage loans that
were underwritten using an automated underwriting system designated
by Fannie Mae or Freddie Mac and were eligible for purchase by such
agencies. Details on the underwriting of conforming loans can be
found in the Key Probability of Default Drivers section of the
related Presale Report. In addition, all of the loans in the pool
were originated in accordance with the new general qualified
mortgage rule.
United Wholesale Mortgage, LLC originated 45.8% of the pool.
Various other originators, each comprising less than 15%,
originated the remainder of the loans. The mortgage loans will be
serviced or subserviced, as applicable, by Cenlar FSB (47.1%), JP
Morgan Chase Bank (JPMCB; 40.8%), and loanDepot.com, LLC (10.5%).
For the JPMCB-serviced loans, Shellpoint Mortgage Servicing will
act as interim servicer until the loans transfer to JPMCB on the
servicing transfer date (December 1, 2023).
For this transaction, generally, the servicing fee payable for
mortgage loans is made up of three separate components: the base
servicing fee, the delinquent servicing fee, and the additional
servicing fee. These fees vary, based on the delinquency status of
the related loan, and will be paid from interest collections before
distribution to the securities.
Nationstar Mortgage LLC will act as the Master Servicer. Citibank,
N.A. (rated AA (low) with a Stable trend by DBRS Morningstar) will
act as Securities Administrator and Delaware Trustee. Computershare
Trust Company, N.A. will act as Custodian. Pentalpha Surveillance
LLC will serve as the Representations and Warranties Reviewer.
The transaction employs a senior-subordinate, shifting-interest
cash flow structure that is enhanced from a precrisis structure.
DBRS Morningstar's credit ratings on the Certificates address the
credit risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated Certificates are the
related Interest Distribution Amounts, the related Interest
Shortfalls, and the related Class Principal Amounts (for non-IO
Certificates).
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar 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.
Notes: All figures are in U.S. dollars unless otherwise noted.
JPMDB COMMERCIAL 2016-C4: Fitch Lowers Rating on Cl. F Certs to CCC
-------------------------------------------------------------------
Fitch Ratings has downgraded four and affirmed eight classes of
JPMDB Commercial Mortgage Securities Trust 2016-C4 commercial
mortgage pass-through certificates. In addition, Fitch revised the
Rating Outlook to Negative from Stable on one of the affirmed
classes and assigned Negative Rating Outlooks to three classes
following their downgrades. The Under Criteria Observation (UCO)
has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
JPMDB 2016-C4
A-2 46646RAH6 LT AAAsf Affirmed AAAsf
A-3 46646RAJ2 LT AAAsf Affirmed AAAsf
A-S 46646RAN3 LT AAAsf Affirmed AAAsf
A-SB 46646RAK9 LT AAAsf Affirmed AAAsf
B 46646RAP8 LT AA-sf Affirmed AA-sf
C 46646RAQ6 LT A-sf Affirmed A-sf
D 46646RAB9 LT BB+sf Downgrade BBB-sf
E 46646RAC7 LT Bsf Downgrade BB-sf
F 46646RAD5 LT CCCsf Downgrade B-sf
X-A 46646RAL7 LT AAAsf Affirmed AAAsf
X-B 46646RAM5 LT AA-sf Affirmed AA-sf
X-C 46646RAA1 LT BB+sf Downgrade BBB-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
5.0%. Eight loans (25.0% of the pool) are considered Fitch Loans of
Concern (FLOCs), two (4.7%) of which are in special servicing.
The downgrades reflect the impact of the updated criteria and
increased pool loss expectations since the prior rating action,
driven primarily by the two specially serviced loans, Riverwood
Corporate Center I & III (2.2%) and Westfield San Francisco Centre
(2.4%). In addition, one loan, 100 East Wisconsin Avenue, was
disposed with a loss of $9.3 million since Fitch's prior rating
action, which was higher than expected.
The Negative Outlooks reflect performance and refinance concerns,
and incorporate an additional sensitivity analysis that factors a
heightened probability of default on three loans, including Fresno
Fashion Fair Mall (6.2%), Shops at Avenue North (2.5%) and Beacon
South Beach (1.7%). In affirming the senior classes, Fitch also
considered higher stressed losses on the Westfield San Francisco
Centre of 50%.
Fitch Loans of Concern: The largest contributor to overall loss
expectations is the Riverwood Corporate Center I & III loan, which
is secured by a suburban office property totaling 180,198-sf
located in Pewaukee, WI. The largest tenants include Engineered
Components & Systems LLC (9.0% of NRA; expiring August 2025),
RGN-Pewaukee LLC (7.2%; June 2026), Merrill Lynch (6.1%; June 2026)
and Ehlers Companies (5.6%; August 2028).
The loan transferred to special servicing in May 2023 for imminent
default as the borrower noted that they would no longer be able to
fund shortfalls. According to the servicer, the loan has been in a
full cash management following a tenant trigger event in April 2017
and was reported as 60+ days delinquent as of the September 2023
reporting. The lender continues to discuss workout alternatives
with the borrower.
Occupancy was 58% as of YE 2022, compared with 48% at YE 2021, 70%
at YE 2020 and 62% in YE 2019. The servicer-reported NOI debt
service coverage ratio (DSCR) was 0.58x as of YE 2022, compared
with 0.68x at YE 2021, 1.09x at YE 2020, and 1.06x at YE 2019.
Fitch's 'Bsf' rating case loss (prior to concentration add-ons) of
approximately 68% reflects a discount to the most recently
available appraisal.
The second largest contributor to overall loss expectations is the
Westfield San Francisco Centre loan, which is secured by a 1.4
million-sf super regional mall with an office component located in
San Francisco's Union Square neighborhood. The loan transferred to
the special servicer in June 2023 following an announcement that
the non-collateral Nordstrom store would be closing. According to
the servicer, the lender is seeking to appoint a receiver and file
a foreclosure action. The loan was reported as 60+ days delinquent
in August 2023, but was brought current in September 2023 with
lockbox funds.
Collateral occupancy declined to 46.1% as of March 2023, down from
73.9% at YE 2021. This decline is primarily driven by office
tenants vacating at their lease expirations. The most recent
departure was San Francisco State University (previously 15.8% of
NRA and 52.0% of the office segment) following their lease
expiration in January 2022. The office segment is currently 94.6%
vacant, compared with 41.4% vacant in September 2021. Upcoming
rollover is as follows: 2023: 20 tenants (16.9% collateral NRA);
2024: 33 tenants (12.1% NRA); and 2025: nine tenants (2.8% NRA).
Sales were $850 psf for inline tenants less than 10,000 sf, $164
psf for inline tenant's larger than 10,000 sf, and total property
sales were $276 psf. All of these were up from YE 2021 but remain
below the $1,048 psf, $278 psf, and $423 psf figures respectively
from YE 2019.
Collateral performance has continued its downward trend, posting a
YTD March 2023 NOI DSCR of 1.00x, compared with 1.15x at YE 2022,
1.14x at YE 2021, 1.77x at YE 2020, and 2.32x at YE 2019. The YE
2022 NOI reflects a 50.7% decline from YE 2019, and a 61.1% decline
from the issuer's underwritten expectations. At issuance, Fitch
assigned this loan a credit opinion of 'Asf*'; however, given
declining occupancy and NOI, Fitch no longer considers the loan as
credit opinion.
Fitch's analysis includes an 10% cap rate to the YE 2022 NOI with a
7.5% stress, resulting in a 37% 'Bsf' rating case loss (prior to
concentration add-ons).
The third largest contributor to loss is the Fresno Fashion Fair
Mall loan, which is secured by a 561,989-sf portion of an
835,416-sf super-regional mall located in Fresno, CA.
Non-collateral tenants include Macy's (Women's & Home, and Men's &
Children's Stores), BJ's Restaurant and Brewhouse, Chick-fil-A and
Fleming's. The largest collateral tenants include JCPenney (27.4%
of NRA, lease expiry in March 2028), H&M (3.4%, January 2027),
Victoria's Secret (2.6%, January 2027), Cheesecake Factory (1.8%,
January 2026) and ULTA Beauty (1.8%, August 2027).
Performance has continued its upward trend following the trough
performance in 2020, with occupancy at 96.8% per the March 2023
rent roll and a NOI DSCR of 2.31x YE 2022. This compares to 93% and
2.20x for YE 2021, and 85% and 1.86x for YE 2020. Sales have
declined slightly to $961 psf ($786 psf excluding Apple) for YE
2022, from $973 psf ($794 psf excluding Apple) for TTM June 2022
but remain well above $689 psf ($607 psf excluding Apple) for TTM
June 2021.
Fitch's 'Bsf' rating case loss of 7.4% (prior to concentration
add-ons) reflects an 11% cap rate on the YE 2021 NOI.
Increasing CE: As of the September 2023 distribution date, the
pool's aggregate principal balance has been reduced by 14.5% to
$961.6 million from $1.1 billion at issuance. Of the current pool,
eight loans (43.8%) are full-term IO, and one loan has a
partial-term IO period remaining. Since issuance, two loans (6.1%
of original pool) repaid and two loans (4.0%) incurred a loss at
disposition. Five loans (11.2%) are fully defeased. Cumulative
interest shortfalls totaling $112,983 and realized losses of $12.0
million are currently affecting class NR. All the loans in the pool
are scheduled to mature between 2026 and 2028.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to classes A-2, A-3, A-SB, A-S, and X-A are not expected
due to continued amortization and increasing CE relative to loss
expectations but may occur should interest shortfalls affect these
classes. Downgrades to classes B, C, and X-B may occur should the
FLOCs, particularly the specially serviced loans, Riverwood
Corporate Center I & III and Westfield San Francisco Centre,
experience further performance deterioration and/or larger FLOCs,
including Fresno Fashion Fair Mall, Shops at Avenue North and
Beacon South Beach, experience outsized losses, transfer to special
servicing and/or default at or prior to maturity. Further
downgrades to classes D, X-C, E, and F would occur as losses are
realized and/or become more certain.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to classes B, C, and X-B may occur with significant
improvement in CE and/or defeasance, as well as with the
stabilization of performance on the FLOCs, particularly the
specially serviced loans, Riverwood Corporate Center I & III and
Westfield San Francisco Centre, and with greater certainty of
refinanceability on the Fresno Fashion Fair Mall, Shops at Avenue
North and Beacon South Beach loans. Upgrades to classes D, X-C, and
E are unlikely but would be limited based on concentrations or the
potential for future concentration. Classes would not be upgraded
above 'Asf' if interest shortfalls were likely. Upgrades to the
distressed class F are not likely unless resolution of the
specially serviced loans are better than expected and/or recoveries
on the FLOCs are significantly better than expected, and there is
sufficient CE to the classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
KKR CLO 48: Fitch Gives 'BB+(EXP)sf' Rating on Class E Notes
------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
KKR CLO 48, Ltd.
Entity/Debt Rating
----------- ------
KKR CLO 48 Ltd.
A-1 LT NR(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
B LT AA(EXP)sf Expected Rating
C LT A(EXP)sf Expected Rating
D-1 LT BBB+(EXP)sf Expected Rating
D-2 LT BBB-(EXP)sf Expected Rating
E LT BB+(EXP)sf Expected Rating
F LT NR(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
KKR CLO 48, Ltd. (the issuer) is an arbitrage cash flow
collateralized loan obligation (CLO) that will be managed by KKR
Financial Advisors II, LLC. Net proceeds from the issuance of the
secured and subordinated notes will provide financing on a
portfolio of approximately $400 million of primarily first lien
senior secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
98.6% first-lien senior secured loans and has a weighted average
recovery assumption of 75.51%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 39.0% of the portfolio balance in aggregate while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The WAL used for the transaction stress portfolio is 12 months less
than the WAL covenant to account for structural and reinvestment
conditions after the reinvestment period. In Fitch's opinion, these
conditions would reduce the effective risk horizon of the portfolio
during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-2, between
'BB+sf' and 'A+sf' for class B, between 'B+sf' and 'BBB+sf' for
class C, between less than 'B-sf' and 'BBB-sf' for class D-1,
between less than 'B-sf' and 'BB+sf' for class D-2, and between
less than 'B-sf' and 'BB-sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-2 notes; and as
these notes are in the highest rating category of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class B, 'A+sf' for class C, 'A+sf' for
class D-1, 'A+sf' for class D-2, and 'BBB+sf' for class E.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
Securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, Fitch's assessment of the asset pool information relied
upon for its rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
LCM 40: Fitch Affirms 'BB-sf' Rating on Cl. E Notes, Outlook Stable
-------------------------------------------------------------------
Fitch Ratings has affirmed the ratings on the class A-1, A-2, B-1,
B-2, C, D and E notes of LCM 39 Ltd. (LCM 39) and the class B-1,
B-2, C, D-1, D-2 and E notes of LCM 40 Ltd. (LCM 40). The Rating
Outlooks on all rated tranches remain Stable.
Entity/Debt Rating Prior
----------- ------ -----
LCM 40 Ltd.
B-1 50190KAC4 LT AAsf Affirmed AAsf
B-2 50190KAJ9 LT AAsf Affirmed AAsf
C 50190KAE0 LT Asf Affirmed Asf
D-1 50190KAG5 LT BBB+sf Affirmed BBB+sf
D-2 50190KAL4 LT BBB-sf Affirmed BBB-sf
E 50190MAA4 LT BB-sf Affirmed BB-sf
LCM 39 Ltd.
A-1 50204NAA6 LT AAAsf Affirmed AAAsf
A-2 50204NAC2 LT AAAsf Affirmed AAAsf
B-1 50204NAE8 LT AAsf Affirmed AAsf
B-2 50204NAG3 LT AAsf Affirmed AAsf
C 50204NAJ7 LT Asf Affirmed Asf
D 50204NAN8 LT BBB-sf Affirmed BBB-sf
E 50204QAA9 LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
LCM 39 and LCM 40 are arbitrage collateralized loan obligations
(CLOs) managed by LCM EURO II LLC, an affiliate of LCM Asset
Management LLC (LCM). LCM 39 closed in October 2022 and will exit
its reinvestment period in October 2027. LCM 40 closed in December
2022 and will exit its reinvestment period in January 2028. Both
CLOs are secured primarily by first-lien, senior secured leveraged
loans.
KEY RATING DRIVERS
STABLE COLLATERAL PERFORMANCE
The affirmations are driven by sufficient credit enhancement to
withstand further future portfolio deterioration. The credit
quality of both portfolios as of the most recent trustee reports is
at the 'B'/'B-' level, compared to the 'B' level at closing. The
Fitch weighted average rating factors (WARF) for LCM 39 and LCM 40
portfolios were 25.1 and 24.9 respectively, compared to 24.0 and
23.5 respectively, at closing.
The portfolio for LCM 39 consists of 301 obligors, and the largest
10 obligors represent 8.5% of the portfolio. LCM 40 has 267
obligors, with the largest 10 obligors comprising 9.4% of the
portfolio. There were no defaulted assets in either portfolio.
Exposure to issuers with a Negative Outlook and Fitch's watchlist
is 19.0% and 3.9%, respectively, for LCM 39 and 23.6% and 4.5%,
respectively, for LCM 40.
On average, first-lien loans, cash and eligible investments
comprise 99.9% of the portfolios. Fitch's weighted average recovery
rate of the portfolios was 75.8% on average, compared to average
76.4% at closing.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for both transactions.
SUFFICIENT CREDIT ENHANCEMENT
Fitch conducted updated cash flow analyses based on newly run Fitch
Stressed Portfolio (FSP) since both transactions are still in their
reinvestment periods. The FSP analysis stressed the current
portfolios from the latest trustee reports to account for
permissible concentration and CQT limits. The FSP analysis assumed
weighted average lives of 7.50 years for both transactions.
The FSP analysis for LCM 39 also assumed 10% non-senior secured
assets, 3.60% WAS, 2.5% fixed rate assets and 7.5% 'CCC' assets.
For LCM 40, the weighted average spread (WAS), WARR and WARF were
stressed to all points within the Fitch Test Matrix. Fixed rate and
'CCC' assets were also assumed at 5.0% and 7.5%, respectively.
The ratings for both transactions are in line with their respective
model-implied ratings (MIRs), as defined in Fitch's CLOs and
Corporate CDOs Rating Criteria. The Stable Outlooks reflect Fitch's
expectation that the notes have sufficient level of credit
protection to withstand potential deterioration in the credit
quality of the portfolios in stress scenarios commensurate with
each class' rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed.
- A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead to downgrades of up to one notch
for LCM 39 and up to three notches for LCM 40, based on MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades may occur in the event of better-than-expected portfolio
credit quality and transaction performance.
- Except for the 'AAAsf' rated notes, which are at the highest
level on Fitch's scale and cannot be upgraded, a 25% reduction of
the mean default rate across all ratings, along with a 25% increase
of the recovery rate at all rating levels for the current
portfolio, would lead to upgrades of up to eight notches for LCM 39
and up to seven notches for LCM 40, based on the MIRs.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
MAGNETITE XXXVII: S&P Assigns BB- (sf) Rating on Class E Notes
--------------------------------------------------------------
S&P Global Ratings assigned its ratings to Magnetite XXXVII Ltd.'s
floating-rate notes.
The note issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by BlackRock Financial Management Inc.
The ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Magnetite XXXVII Ltd./Magnetite XXXVII LLC
Class A, $320.00 million: AAA (sf)
Class B, $60.00 million: AA (sf)
Class C (deferrable), $30.00 million: A (sf)
Class D (deferrable), $30.00 million: BBB- (sf)
Class E (deferrable), $17.00 million: BB- (sf)
Subordinated notes, $46.70 million: Not rated
MF1 2022-FL9: DBRS Confirms B(low) Rating on 3 Classes
-------------------------------------------------------
DBRS, Inc. confirmed its credit ratings on all classes of notes
issued by MF1 2022-FL9, Ltd. as follows:
-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (high) (sf)
-- Class F-E Notes at BB (high) (sf)
-- Class F-X Notes at BB (high) (sf)
-- Class G Notes at BB (low) (sf)
-- Class G-E Notes at BB (low) (sf)
-- Class G-X Notes at BB (low) (sf)
-- Class H Notes at B (low) (sf)
-- Class H-E Notes at B (low) (sf)
-- Class H-X Notes at B (low) (sf)
All trends are Stable.
The credit rating confirmations reflect the overall stable
performance of the transaction, which has remained in line with
DBRS Morningstar's expectations since issuance. The underlying pool
has not materially changed since issuance, with 44 of the original
45 loans (representing 96.6% of the pool) remaining as of the
September 2023 remittance, and in general, those loans continue to
perform as expected with business plans progressing. In conjunction
with this press release, DBRS Morningstar has published a
Surveillance Performance Update report with in-depth analysis and
credit metrics for the transaction and with business plan updates
on select loans.
The initial collateral consisted of 45 floating-rate mortgage loans
secured by 61 transitional multifamily and manufactured housing
properties, totaling $1.74 billion (61.3% of the total fully funded
balance), excluding $265.8 million (9.4% of the total fully funded
balance) of future funding commitments and $830.3 million (29.3% of
the total fully funded balance) of pari passu debt. Most loans were
in a period of transition with plans to stabilize performance and
improve the asset value. The transaction has a maximum funded
balance of $1.8 billion and is a managed vehicle with the
reinvestment period scheduled to expire with the May 2024
remittance. As of the September 2023 remittance, the pool comprises
47 loans secured by 63 properties with a cumulative trust balance
of $1.80 billion. Three new loans, totaling $57.8 million, have
been added to the trust and one $30.6 million loan (Aspire at 610)
has repaid since the last credit rating action in November 2022.
The transaction is concentrated by property type as 44 loans,
representing 92.6% of the current trust balance, are secured by
multifamily properties with the remaining three loans (7.4% of the
current trust balance) secured by manufactured housing properties.
The pool is primarily secured by properties in suburban markets,
with 33 loans, representing 64.3% of the pool, assigned a DBRS
Morningstar Market Rank of 3, 4, or 5. An additional 11 loans,
representing 31.4% of the pool, are secured by properties in urban
markets, with a DBRS Morningstar Market Rank of 6, 7, or 8. The
remaining loans are backed by properties with a DBRS Morningstar
Market Rank of 1 or 2, denoting tertiary markets. These property
type and market type concentrations remain generally in line with
the pool composition at the November 2022 credit rating action.
Leverage across the pool has remained consistent as of September
2023 reporting when compared with issuance metrics as the current
weighted-average (WA) as-is appraised value loan-to-value ratio
(LTV) is 71.9%, with a current WA stabilized LTV of 64.4%. In
comparison, these figures were 71.8% and 63.3%, respectively, at
issuance. DBRS Morningstar recognizes that select property values
may be inflated as the majority of the individual property
appraisals were completed in 2022 and may not fully reflect the
effects of increased interest rates and/or widening capitalization
rates in the current environment.
Through August 2023, the lender had advanced cumulative loan future
funding of $147.8 million to 34 of the 41 outstanding individual
borrowers. The largest advance, $18.1 million, has been made to the
borrower of the Parkview at Collingwood loan, which is secured by a
1,030-unit, high-rise style apartment property in Collingswood, New
Jersey. The advanced funds have been used to fund the borrower's
$17.1 million planned capital expenditure (capex) plan across the
property. The Q2 2023 collateral manager report noted the borrower
had completed 477 unit upgrades with another 10 units in progress.
The loan is being monitored on the servicer's watchlist for cash
flow and occupancy concerns. As of June 2023, the property was
72.6% occupied, down from 94.7% at issuance. The drop in occupancy
is a combination of factors including tenant evictions and down
units as a result of ongoing renovations. Despite the occupancy
decline, the collateral manager noted that the average rental rate
across the renovated units was $1,549 per unit, which represents a
$297 per unit premium over rents at issuance. In comparison, DBRS
Morningstar assumed a rent premium of $1,489 per unit when deriving
the DBRS Morningstar Stabilized net cash flow figure.
An additional $158.0 million of loan future funding allocated to 38
individual borrowers remains available. The vast majority of
available funding ($47.1 million) is allocated to the Virtuoso
Living loan, which is secured by a 400-unit, horizontal multifamily
development located in Huntsville, Alabama. That loan's future
funding commitment was allocated to assist with the acquisition of
the Phase II portion of the property; however, the collateral
manager reported that transaction fell through in December 2022.
Overall, the property was 96% occupied as of April 2023.
As of the September 2023 remittance, 10 loans, representing 19.0%
of the current pool balance, are in special servicing. The largest
of those loans, and the only one that is delinquent, is the $41.3
million Sterling Apartments loan (2.3% of the pool). That loan is
secured by a Class B high-rise apartment complex totaling 128 units
in Fort Lee, New Jersey. The loan transferred to special servicing
in April 2023 after being reported 60 days delinquent. The business
plan at issuance was to complete a $4.7 million renovation project;
however, according to the collateral manager, no unit renovations
have been completed to date. As of May 2023, the property was 81.3%
occupied, with an average rental rate of $2,277 per unit,
representing a 3.3% increase over rents at issuance. According to
the collateral manager, the issuer has begun the foreclosure
process and the enforcement of remedies against the borrower. At
issuance, the property was appraised for $52.0 million on an as-is
basis, resulting in an LTV of 79.5%. Given the outstanding default,
DBRS Morningstar analyzed the loan with a stressed scenario, which
resulted in an expected loss in excess of the pool average.
In September 2023, nine of the 10 loans in the pool sponsored by
Tides Equities (Tides) transferred to special servicing. The loan
that did not transfer, The Meadows ($26.9 million, 1.5% of the
pool), also has a pari passu piece of the A-note securitized in the
MF1 2022-FL8, which is also rated by DBRS Morningstar. The loan in
that transaction was transferred to special servicing with
September 2023 reporting. According to The Real Deal, the
principals of the firm noted in June 2023 a capital call would
likely be needed from investors in order to fund debt service
shortfalls across the portfolio given the rise in floating interest
rate debt. All nine loans transferred to special servicing were
reported current as of the September 2023 remittance and the
collateral manager's commentary indicates two loans, AYA Las Vegas
and Plaza del Lago, have been modified. Both loans received
preferred equity capital injections to cover the projected debt
service shortfall over the next three years. In the analysis for
this review, DBRS Morningstar made a negative adjustment to the
sponsor strength across all 10 Tides-sponsored loans, resulting in
increased expected losses for those loans that exceeded the pool
average.
There are 28 loans on the servicer's watchlist, representing 70.0%
of the current trust balance. The loans have primarily been flagged
for below breakeven debt service coverage ratios and upcoming loan
maturities. All loans remain current with performance declines
expected to be temporary as multifamily units are being taken
offline by respective borrowers to complete interior renovations.
In the next six months, 10 loans, representing 15.4% of the current
trust balance are scheduled to mature. According to the collateral
manager, eight of the individual borrowers are expected to exercise
loan extension options, while the two remaining borrowers are
expected to successfully execute exit strategies.
According to the collateral manager, six loans, representing 21.5%
of the current trust balance, have been modified. The modifications
have generally allowed borrowers to exercise loan extension options
by amending loan terms in exchange for fresh equity deposits and
the purchase of a new interest rate cap agreements. The most common
amended loan terms include the removal of performance-based tests
and changes to the required strike price of a new interest rate cap
agreement.
Notes: All figures are in U.S. dollars unless otherwise noted.
MILL CITY: Moody's Hikes Ratings on 21 Bonds Issued in 2019
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 21 bonds from
two transactions issued by Mill City Mortgage Loan Trust 2019-GS2
and Mill City Mortgage Loan Trust 2019-GS1. The transactions are
backed by seasoned performing and modified re-performing
residential mortgage loans (RPL). The collateral has multiple
servicers.
The complete rating actions are as follows:
Issuer: Mill City Mortgage Loan Trust 2019-GS1
Cl. A3, Upgraded to Aa1 (sf); previously on Jan 12, 2023 Upgraded
to Aa2 (sf)
Cl. A4, Upgraded to Aa3 (sf); previously on Jan 12, 2023 Upgraded
to A1 (sf)
Cl. B1, Upgraded to Ba3 (sf); previously on Sep 28, 2020 Downgraded
to B2 (sf)
Cl. B1A, Upgraded to Ba1 (sf); previously on Sep 28, 2020
Downgraded to Ba3 (sf)
Cl. B1B, Upgraded to Ba3 (sf); previously on Sep 28, 2020
Downgraded to B2 (sf)
Cl. B2, Upgraded to B2 (sf); previously on Oct 17, 2019 Definitive
Rating Assigned Caa1 (sf)
Cl. B2A, Upgraded to B1 (sf); previously on Sep 28, 2020 Downgraded
to B3 (sf)
Cl. B2B, Upgraded to B2 (sf); previously on Oct 17, 2019 Definitive
Rating Assigned Caa1 (sf)
Cl. M2, Upgraded to Aa2 (sf); previously on Jan 12, 2023 Upgraded
to A1 (sf)
Cl. M3, Upgraded to Baa2 (sf); previously on Sep 28, 2020
Downgraded to Ba1 (sf)
Cl. M3A, Upgraded to Baa1 (sf); previously on Oct 17, 2019
Definitive Rating Assigned Baa3 (sf)
Cl. M3B, Upgraded to Baa2 (sf); previously on Sep 28, 2020
Downgraded to Ba1 (sf)
Issuer: MILL CITY MORTGAGE LOAN TRUST 2019-GS2
Cl. A3, Upgraded to Aa1 (sf); previously on Jan 12, 2023 Upgraded
to Aa2 (sf)
Cl. A4, Upgraded to Aa2 (sf); previously on Jan 12, 2023 Upgraded
to A1 (sf)
Cl. B1, Upgraded to Ba2 (sf); previously on Sep 28, 2020 Downgraded
to B1 (sf)
Cl. B1A, Upgraded to Ba1 (sf); previously on Sep 28, 2020
Downgraded to Ba3 (sf)
Cl. B1B, Upgraded to Ba3 (sf); previously on Sep 28, 2020
Downgraded to B2 (sf)
Cl. M2, Upgraded to Aa2 (sf); previously on Jan 12, 2023 Upgraded
to A1 (sf)
Cl. M3, Upgraded to Baa1 (sf); previously on Sep 28, 2020 Confirmed
at Baa3 (sf)
Cl. M3A, Upgraded to A3 (sf); previously on Sep 28, 2020 Downgraded
to Baa2 (sf)
Cl. M3B, Upgraded to Baa1 (sf); previously on Sep 28, 2020
Confirmed at Baa3 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and an increase in credit enhancement available to
the bonds. In Moody's analysis, Moody's considered the likelihood
of higher future pool expected losses due to rising borrower
defaults driven by an increase in unemployment and inflation while
prepayments remain broadly subdued amid elevated interest rates.
The actions also reflect Moody's updated loss expectations on the
pools which incorporate Moody's assessment of the representations
and warranties framework of the transactions, the due diligence
findings of the third-party reviews at the time of issuance, and
the transactions' servicing arrangement.
Principal Methodologies
The methodologies used in these ratings were "Non-Performing and
Re-Performing Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
MORGAN STANLEY I: Fitch Affirms 'B-sf' Rating on Class F-RR Certs
-----------------------------------------------------------------
Fitch Ratings has affirmed 14 classes of Morgan Stanley Capital I
Trust (MSC) commercial mortgage pass-through certificates series
2018-H4, along with the 2018-H4 III Trust horizontal risk retention
pass-through certificate (MOA 2020-H4 E). In addition, the Outlooks
on three affirmed classes remain Negative. The under criteria
observation (UCO) has been resolved.
Entity/Debt Rating Prior
----------- ------ -----
MSC 2018-H4
A-2 61691RAB2 LT AAAsf Affirmed AAAsf
A-S 61691RAH9 LT AAAsf Affirmed AAAsf
A-SB 61691RAC0 LT AAAsf Affirmed AAAsf
A3 61691RAD8 LT AAAsf Affirmed AAAsf
A4 61691RAE6 LT AAAsf Affirmed AAAsf
B 61691RAJ5 LT AA-sf Affirmed AA-sf
C 61691RAK2 LT A-sf Affirmed A-sf
D 61691RAL0 LT BBB-sf Affirmed BBB-sf
E-RR 61691RAN6 LT BBsf Affirmed BBsf
F-RR 61691RAQ9 LT B-sf Affirmed B-sf
G-RR 61691RAS5 LT CCCsf Affirmed CCCsf
X-D 61691RBA3 LT BBB-sf Affirmed BBB-sf
XA 61691RAF3 LT AAAsf Affirmed AAAsf
XB 61691RAG1 LT AA-sf Affirmed AA-sf
MOA 2020-H4 E
E-RR 90216VAA0 LT BBsf Affirmed BBsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
5.4%. Eight loans (12.8% of the pool) have been designated as Fitch
Loans of Concern (FLOCs), including one loan (3.9%) in special
servicing.
The Negative Outlooks reflect increasing loss expectations on the
FLOCs, specifically the specially serviced 300 North Greene (3.9%)
loan. Downgrades to these classes are possible should performance
continue to deteriorate and/or with a prolonged workout.
FLOCs/Contributors to Loss: The largest contributor to overall loss
expectations is the 300 North Greene loan, which is secured by a
325,771-sf office property in downtown Greensboro, NC. The loan
transferred to special servicing in July 2020 when the borrower
failed to satisfy a tenant improvement obligation. The trust took
title to the property in December 2021, and the asset subsequently
became REO. The special servicer has indicated they are working to
renew existing tenants and stabilize occupancy before selling the
asset.
The initial decline in performance was caused by the largest tenant
vacating the building. After being at the property since 1990, Fox
Rothschild LLP (20.1% of the NRA) chose not to renew its lease in
June 2020, contributing to a 36% decline in NOI between 2019 and
2020. Since then, the space has been backfilled by The Fresh
Market, Inc. (21.6%) in February 2021 on a lease through November
2033. Other major tenants include Wells Fargo Bank (10.5%; December
2024) and Bell Partners, Inc. (8.5%; May 2025).
As of the July 2023 rent roll, occupancy was 70.3%, compared to
69.4% at June 2022, 70% at YE 2021, 56.5% at YE 2020 and 75.3% at
issuance. The NOI debt service coverage ratio (DSCR) was 1.01x as
of June 2023, compared with 0.84x at June 2022, 0.40x at YE 2021,
0.95x at YE 2020 and 1.41x at issuance.
Fitch's 'Bsf' rating case loss of 33% (prior to concentration
add-ons) was based on a haircut to a recent appraisal, reflecting a
stressed value of $86 psf.
The second largest contributor to overall loss expectations is the
Fordham Medical Office Portfolio (5.2%) loan, which is secured by a
63,209-sf three building portfolio. Two buildings are located in
the Fordham area of the Bronx and one property is located in
Manhattan. Four tenants, approximately 70% of portfolio NRA, are
affiliates of the sponsor, including two of the largest tenants:
MedAlliance (39.7% of NRA expiring November 2034 and January 2036)
and Avicenna Ambulatory Services (20.9%; November 2033).
Occupancy at the property has been strong since issuance, with the
March 2023 rent roll reporting occupancy of 100%, compared to 100%
in YE 2022, 88% at September 2020, and 100% at YE 2019. The
portfolio has minimal near-term rollover, with 5.7% of the NRA
rolling in 2023 and 9.4% in 2024. YE 2022 NOI DSCR was 1.46x,
compared with 1.18x at YE 2020 and 1.45x at issuance.
Fitch's 'Bsf' rating case of 8% (prior to concentration add-ons)
reflects a 9.75% cap rate and a 10% stress to the YE2022 NOI.
The third largest contributor to overall loss expectations is the
AVR Homewood Suites Lubbock (1.0%) loan, secured by a 74 key
extended stay property in Lubbock, TX. The NOI DSCR was 0.60x as of
YE 2022, compared with 1.23x at YE 2021, 0.67x at YE 2020, 1.87x at
YE 2019 and 1.96x at issuance. The increase in expenses, mainly
labor costs and utilities, drove the decline in DSCR from 2021 to
2022.
As of the May 2023 TTM STR report, the property reported an
occupancy, ADR, and RevPAR of 68%, $118, and $81, respectively,
compared to its competitive set of 68%, $102, and $69,
respectively. Although the property is performing above its
competitive set, the borrower has noted it's been a challenging
time for the Lubbock market in terms of group and transient travel.
Performance is expected to slightly improve by YE 2023.
Fitch's 'Bsf' rating case of 39% (prior to concentration add-ons)
reflects a 11.50% cap rate and no additional stress to the YE 2022
NOI.
Credit Opinion Loan: One loan, representing 7.9% of the pool, had a
credit opinion at issuance. With this review, Aventura Mall remains
a credit opinion loan.
Improved CE: As of the September 2023 distribution date, the pool's
aggregate balance has been paid down by 4.2% to $763.0 million from
$796.8 million at issuance. Two loans (6.2% of the pool) were
defeased.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the 'AAAsf' rated classes are not likely due to the
continued expected amortization, position in the capital structure
and sufficient CE relative to loss expectations, but may occur
should interest shortfalls affect these classes.
Downgrades to the 'AA-sf' and 'A-sf' rated classes may occur if
expected losses increase significantly for the FLOCs, specifically
300 North Greene.
Downgrades to the 'BBB-sf' rated classes may occur with a greater
certainty of loss from performance decline of the FLOCs,
specifically 300 North Greene, and/or loans transfer to special
servicing.
Downgrades to the 'BBsf', 'B-sf', and 'CCCsf' rated classes would
occur with a greater certainty of losses, should additional loans
default or transfer to special servicing and/or
higher-than-expected losses are incurred on the specially serviced
loan.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to the 'AA-sf' and 'A-sf' rated classes would likely occur
with significant improvement in CE and/or defeasance, as well as
improved asset performance on the FLOCs.
Upgrades to the 'BBB-sf' rated classes are considered unlikely and
would be limited based on the sensitivity to concentrations or the
potential for future concentrations. Classes would not be upgraded
above 'Asf' if there were likelihood of interest shortfalls.
Upgrades to the 'BBsf' and 'B-sf' rated classes are not likely
until the later years in the transaction and only if the
performance of the remaining pool is stable and/or there is
sufficient CE to the bonds.
An upgrade to the 'CCCsf' rated class is considered unlikely are
not likely unless resolution of the specially serviced loans is
better than expected and/or recoveries on the FLOCs are
significantly better than expected, and there is sufficient CE to
the classes.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
NEUBERGER BERMAN I: Fitch Gives 'BB-(EXP)sf' Rating on Cl. E Notes
------------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Ratings Outlooks to
Neuberger Berman Loan Advisers LaSalle Street Lending CLO I, Ltd.
Entity/Debt Rating
----------- ------
Neuberger Berman Loan
Advisers LaSalle Street
Lending CLO I, LTD.
A LT NR(EXP)sf Expected Rating
B LT NR(EXP)sf Expected Rating
C-1 LT A(EXP)sf Expected Rating
C-2 LT A(EXP)sf Expected Rating
D-1 LT BBB-(EXP)sf Expected Rating
D-2 LT BBB-(EXP)sf Expected Rating
E LT BB-(EXP)sf Expected Rating
F LT NR(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Neuberger Berman Loan Advisers LaSalle Street Lending CLO I, LTD.
(the issuer) is an arbitrage cash flow collateralized loan
obligation (CLO) that will be managed by Neuberger Berman Loan
Advisers II LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400.00 million of primarily first lien senior
secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Neutral): The indicative portfolio consists of
94.2% first lien senior secured loans and has a weighted average
recovery assumption of 70.5%. In addition, second lien loan
exposure is slightly higher than other typical Fitch Rated BSL
CLOs. Fitch stressed the indicative portfolio by assuming a higher
portfolio concentration of assets with lower recovery prospects and
further reduced recovery assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
constitute up to 39.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.0-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default rates and recovery assumptions consistent with
their assigned ratings.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'Bsf' and 'BBB+sf' for class C, between less than
'B-sf' and 'BB+sf' for class D; and between less than 'B-sf' and
'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'A+sf' for class C, 'Asf' for class D; and 'BBB+sf'
for class E.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
NEUBERGER BERMAN I: Fitch Gives Final 'BB-sf' Rating on Cl. E Notes
-------------------------------------------------------------------
Fitch Ratings has assigned final ratings and Rating Outlooks to
Neuberger Berman Loan Advisers LaSalle Street Lending CLO I, Ltd.
Entity/Debt Rating Prior
----------- ------ -----
Neuberger Berman
Loan Advisers
LaSalle Street
Lending CLO I, LTD.
A LT NRsf New Rating NR(EXP)sf
B LT NRsf New Rating NR(EXP)sf
C-1 LT Asf New Rating A(EXP)sf
C-2 LT Asf New Rating A(EXP)sf
D-1 LT BBB-sf New Rating BBB-(EXP)sf
D-2 LT BBB-sf New Rating BBB-(EXP)sf
E LT BB-sf New Rating BB-(EXP)sf
F LT NRsf New Rating NR(EXP)sf
Subordinated Notes LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Neuberger Berman Loan Advisers LaSalle Street Lending CLO I, Ltd.
(the issuer) is an arbitrage cash flow collateralized loan
obligation (CLO) that will be managed by Neuberger Berman Loan
Advisers II LLC. Net proceeds from the issuance of the secured and
subordinated notes will provide financing on a portfolio of
approximately $400.00 million of primarily first lien senior
secured leveraged loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard U.S. CLO structural
features.
Asset Security (Neutral): The indicative portfolio consists of
94.2% first lien senior secured loans and has a weighted average
recovery assumption of 70.5%. In addition, second lien loan
exposure is slightly higher than other typical Fitch-rated BSL
CLOs. Fitch stressed the indicative portfolio by assuming a higher
portfolio concentration of assets with lower recovery prospects and
further reduced recovery assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
constitute up to 39.0% of the portfolio balance in aggregate, while
the top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
U.S. CLOs.
Portfolio Management (Neutral): The transaction has a 5.0-year
reinvestment period and reinvestment criteria similar to other U.S.
CLOs. Fitch's analysis was based on a stressed portfolio created by
making adjustments to the indicative portfolio to reflect
permissible concentration limits and collateral quality test
levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default rates and recovery assumptions consistent with
their assigned ratings.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'Bsf' and 'BBB+sf' for class C, between less than
'B-sf' and 'BB+sf' for class D; and between less than 'B-sf' and
'B+sf' for class E.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'A+sf' for class C, 'Asf' for class D; and 'BBB+sf'
for class E.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
NEUBERGER BERMAN I: Moody's Assigns B3 Rating to $500,000 F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned ratings to three classes of
notes issued by Neuberger Berman Loan Advisers LaSalle Street
Lending CLO I, Ltd. (the "Issuer" or "NB LSL CLO I").
US$236,000,000 Class A Senior Secured Floating Rate Notes due 2036,
Definitive Rating Assigned Aaa (sf)
US$51,000,000 Class B Senior Secured Floating Rate Notes due 2036,
Definitive Rating Assigned Aa2 (sf)
US$500,000 Class F Junior Secured Deferrable Floating Rate Notes
due 2036, Definitive Rating Assigned B3 (sf)
The notes listed are referred to herein, collectively, as the
"Rated Notes."
RATINGS RATIONALE
The rationale for the ratings is based on Moody's methodology and
considers all relevant risks, particularly those associated with
the CLO's portfolio and structure.
NB LSL CLO I is a managed cash flow CLO. The issued notes will be
collateralized primarily by lightly- and broadly-syndicated senior
secured corporate loans. At least 87.5% of the portfolio must
consist of first lien senior secured loans, senior secured bonds,
cash and eligible investments, up to 10% of the portfolio may
consist of second lien loans and unsecured loans, and up to 10% of
the portfolio may consists of bonds. The portfolio is approximately
85% ramped as of the closing date.
Neuberger Berman Loan Advisers II LLC (the "Manager") will direct
the selection, acquisition and disposition of the assets on behalf
of the Issuer and may engage in trading activity, including
discretionary trading, during the transaction's five year
reinvestment period. Thereafter, subject to certain restrictions,
the Manager may reinvest unscheduled principal payments and
proceeds from sales of credit risk assets.
In addition to the Rated Notes, the Issuer issued five other
classes of secured notes and one class of subordinated notes.
The transaction incorporates interest and par coverage tests which,
if triggered, divert interest and principal proceeds to pay down
the notes in order of seniority.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in December 2021.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $400,000,000
Diversity Score: 65
Weighted Average Rating Factor (WARF): 3125
Weighted Average Spread (WAS): 4.35%
Weighted Average Coupon (WAC): 7.0%
Weighted Average Recovery Rate (WARR): 44.0%
Weighted Average Life (WAL): 8.1 years
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
December 2021.
Factors That Would Lead to an Upgrade or Downgrade of the Ratings:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of
the underlying portfolio, which in turn depends on economic and
credit conditions that may change. The Manager's investment
decisions and management of the transaction will also affect the
performance of the Rated Notes.
NEW RESIDENTIAL 2019-RPL2: Moody's Ups Cl. B-2 Notes Rating to B1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 10 bonds from
two transactions issued by New Residential Mortgage Loan Trust in
2019. The transactions are backed by seasoned performing and
modified re-performing residential mortgage loans (RPL). The
collateral has multiple servicers and Nationstar Mortgage LLC is
the master servicer for both deals.
A List of Affected Credit Ratings is available at
https://urlcurt.com/u?l=r19Kph
Complete rating actions are as follows:
Issuer: New Residential Mortgage Loan Trust 2019-RPL2
Cl. A-4, Upgraded to Aaa (sf); previously on Mar 9, 2022 Upgraded
to Aa1 (sf)
Cl. B-1, Upgraded to Ba1 (sf); previously on Sep 28, 2020
Downgraded to Ba3 (sf)
Cl. B-2, Upgraded to B1 (sf); previously on Sep 28, 2020 Confirmed
at B3 (sf)
Cl. M-1, Upgraded to Aa1 (sf); previously on Mar 9, 2022 Upgraded
to Aa3 (sf)
Cl. M-2, Upgraded to A1 (sf); previously on Mar 9, 2022 Upgraded to
A3 (sf)
Issuer: New Residential Mortgage Loan Trust 2019-RPL3
Cl. A-4, Upgraded to Aaa (sf); previously on Mar 9, 2022 Upgraded
to Aa1 (sf)
Cl. B-1, Upgraded to Ba1 (sf); previously on Sep 28, 2020
Downgraded to Ba3 (sf)
Cl. B-2, Upgraded to B1 (sf); previously on Sep 28, 2020 Downgraded
to B3 (sf)
Cl. M-1, Upgraded to Aa1 (sf); previously on Mar 9, 2022 Upgraded
to Aa3 (sf)
Cl. M-2, Upgraded to A2 (sf); previously on Mar 9, 2022 Upgraded to
Baa1 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and/or an increase in credit enhancement available
to the bonds. In Moody's analysis, Moody's considered the
likelihood of higher future pool expected losses due to rising
borrower defaults driven by an increase in unemployment and
inflation while prepayments remain broadly subdued amid elevated
interest rates. The actions also reflect Moody's updated loss
expectations on the pools which incorporate Moody's assessment of
the representations and warranties framework of the transactions,
the due diligence findings of the third-party reviews at the time
of issuance, and the transactions' servicing arrangement.
Principal Methodologies
The methodologies used in these ratings were "Non-Performing and
Re-Performing Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
NEW RESIDENTIAL 2023-NQM1: Fitch Assigns 'B-sf' Rating on B-2 Notes
-------------------------------------------------------------------
Fitch Ratings has assigned ratings to the residential
mortgage-backed notes issued by New Residential Mortgage Loan Trust
2023-NQM1 (NRMLT 2023-NQM1).
The expected rating of 'AAA(EXP)sf' for class A-1 has been
withdrawn as the notes are not expected to be issued. In its place,
classes A-1A and A-1B will be issued.
Entity/Debt Rating Prior
----------- ------ -----
NRMLT 2023-NQM1
A-1 LT WDsf Withdrawn AAA(EXP)sf
A-1A LT AAAsf New Rating
A-1B LT AAAsf New Rating
A-2 LT AA-sf New Rating AA-(EXP)sf
A-3 LT A-sf New Rating A-(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
B-1 LT BB-sf New Rating BB-(EXP)sf
B-2 LT B-sf New Rating B-(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
M-1 LT BBB-sf New Rating BBB-(EXP)sf
R LT NRsf New Rating NR(EXP)sf
XS-1 LT NRsf New Rating NR(EXP)sf
XS-2 LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
The notes are supported by 1,521 loans with a total
interest-bearing balance of approximately $670 million as of the
cutoff date. The loans in the pool were originated by NewRez LLC
and Caliber Home Loans, both Rithm Capital (RITM) subsidiaries as
well as third-party originations from Excelerate Capital.
The expected rating of 'AAA(EXP)sf' for class A-1 has been
withdrawn as the notes are not expected to be issued. In its place,
classes A-1A and A-1B will be issued.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 8.3% above a long-term sustainable level (relative
to 7.6% on a national level as of 1Q23). The rapid gain in home
prices through the pandemic moderated in the second half of 2022
but has resumed increasing in 2023. Driven by the declines in 2H22,
home prices decreased 0.2% yoy nationally as of April 2023.
Non-Prime Credit Quality (Negative): The collateral consists of
1,521 loans, totaling $670 million and seasoned approximately nine
months in aggregate, according to Fitch, as calculated from
origination date. The borrowers have a stronger credit profile when
compared with other non-QM transactions, with a 746 Fitch model
FICO score and 40% debt/income ratios (DTI), as determined by Fitch
after converting the debt service coverage ratio (DSCR) values.
However, leverage (76% sustainable loan/value [sLTV]) within this
pool is consistent compared to previous NRMLT transactions from
2022. The pool consists of 62.7% of loans where the borrower
maintains a primary residence, while 37.3% are considered an
investor property or second home. Additionally, only 14.8% of the
loans were originated through a retail channel. Moreover, 67.4% are
considered non-QM and the remainder are not subject to QM.
Modified Sequential-Payment Structure (Mixed): The structure pays
principal pro rata among the senior notes while shutting out the
subordinate bonds from principal until all senior classes are
reduced to zero. If a cumulative loss trigger event or delinquency
trigger event occurs in a given period, principal will be paid
sequentially to class A-1, A-2 and A-3 notes until they are reduced
to zero.
After the 48th payment date, the A-1 through A-3 classes will be
contractually due the lower of the fixed rate for the class plus
1.0% or the Net WAC rate. This increases the principal and interest
(P&I) allocation for the A-1 through A-3 and decreases the amount
of excess spread available in the transaction. Furthermore,
interest amounts otherwise distributable to the class B-3 will be
redirected to pay Cap Carryover amounts to classes A-1 through A-3
sequentially starting from the first payment date.
Loan Documentation (Negative): 86.5% of the pool was underwritten
to less than full documentation, according to Fitch. Approximately
62.01% was underwritten to a 12-month or 24-month bank statement
program for verifying income, which is not consistent with Fitch's
view of a full documentation program.
A key distinction between this pool and legacy Alt-A loans is that
these loans adhere to underwriting and documentation standards
required under the Consumer Financial Protection Bureau's (CFPB)
ATR Rule. The standards are meant to reduce the risk of borrower
default arising from lack of affordability, misrepresentation or
other operational quality risks due to rigor of the ATR Rule's
mandates with respect to the underwriting and documentation of the
borrower's ATR. Additionally, 21.62% are DSCR product and 1.2% are
Asset Depletion product.
High Investor Property Concentrations (Negative): Approximately 33%
of the pool comprises investment property loans, including 66.22%
underwritten to a cash flow ratio rather than the borrower's DTI
ratio. Investor property loans exhibit higher probability of
defaults (PDs) and higher loss severities (LS) than owner-occupied
homes. Fitch increased the PD by approximately 2.0x for the cash
flow ratio loans relative to a traditional income documentation
investor loan, to account for the increased risk.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model projected 40.4% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
The defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up- and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Clayton, Infinity, and Selene. The third-party due
diligence described in Form 15E focused on a credit, compliance and
property valuation review. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment(s)
to its analysis:
- A 5% PD credit was applied at the loan level for all loans graded
either 'A' or 'B';
- Fitch lowered its loss expectations by approximately 52bps as a
result of the diligence review.
ESG CONSIDERATIONS
NRMLT 2023-NQM1 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to increased operational risk
considering R&W, transaction due diligence and originator and
servicer results in an increase in expected losses, which has a
negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.The highest level of ESG
credit relevance is a score of '3', unless otherwise disclosed in
this section. A score of '3' means ESG issues are credit-neutral or
have only a minimal credit impact on the entity, either due to
their nature or the way in which they are being managed by the
entity. Fitch's ESG Relevance Scores are not inputs in the rating
process; they are an observation on the relevance and materiality
of ESG factors in the rating decision.
OMI TRUST 2001-E: S&P Affirms 'CC (sf)' Rating on Class A-4 Notes
-----------------------------------------------------------------
S&P Global Ratings completed its review of 16 ratings from 13 U.S.
manufactured housing ABS transactions issued by Oakwood Mortgage
Investors Inc.'s series 1997-A, 1998-B, and series 1998-D and OMI
Trust 1999-C, 1999-D, 1999-E, 2000-A, 2000-C, 2000-D, 2001-D,
2001-E, 2002-A, and 2002-B. The review yielded five upgrades and 11
affirmations.
The collateral pools backing the transactions that S&P reviewed
consist of manufactured housing loans that were originated by
Oakwood Acceptance Corp. LLC. The transactions are serviced by
Vanderbilt ABS Corp., which began servicing these transactions in
April 2004.
S&P said, "The 'CCC (sf)' and 'CC (sf)' ratings reflect our view
that credit support will remain insufficient to cover our expected
losses for these classes. As defined in our criteria, the 'CCC
(sf)'-level ratings reflect our view that the related classes are
vulnerable to nonpayment and are dependent upon favorable business,
financial, and economic conditions in order to be paid interest
and/or principal according to the terms of each transaction. The
'CC (sf)' ratings reflect our view that the related classes remain
virtually certain to default."
For the Oakwood Mortgage Investors Inc. series 1998-D transaction,
while hard credit enhancement (HCE) in the form of subordination
provided by the M-1 class has remained stable as a percentage of
the current pool balance, the class M-1 notes are receiving
principal payments in addition to being written down. As the M-1
notes continue to be written down, the class A-1-ARM's HCE level as
a percent of the current pool balance may decline in the future. As
a result, S&P has affirmed the 'BBB' rating on this class.
For the OMI Trust 2002-A and 2002-B transactions, credit
enhancement has continued to remain stable as a percentage of the
remaining collateral balance and supports upgrades to 'BBB- (sf)'
and 'BB+ (sf)', respectively.
S&P will continue to monitor the performance of the transactions
relative to their cumulative net loss expectations and the
available credit enhancement. S&P will take rating actions as it
considers appropriate.
Ratings Raised
OMI Trust 2000-C
Class A1: to 'CCC (sf)' from 'CCC- (sf)'
OMI Trust 2002-A
Class A3: to 'BBB- (sf)' from 'CCC+ (sf)'
Class A4: to 'BBB- (sf)' from 'CCC+ (sf)'
OMI Trust 2002-B
Class A3: to 'BB+ (sf)' from 'CCC (sf)'
Class A4: to 'BB+ (sf)' from 'CCC (sf)'
Ratings Affirmed
Oakwood Mortgage Investors Inc.
Series 1997-A, class B-1: 'CC (sf)'
Series 1998-B, class M-1: 'CCC- (sf)'
Series 1998-D, class A-1 ARM: 'BBB (sf)'
OMI Trust 1999-C
Class A-2: 'CC (sf)'
OMI Trust 1999-D
Class A-1: 'CCC- (sf)'
OMI Trust 1999-E
Class A-1: 'CC (sf)'
OMI Trust 2000-A
Class A-4: 'CC (sf)'
Class A-5: 'CC (sf)'
OMI Trust 2000-D
Class A-4: 'CC (sf)'
OMI Trust 2001-D
Class A-4: 'CC (sf)'
OMI Trust 2001-E
Class A-4: 'CC (sf)'
ORION CLO 2023-1: S&P Assigns Prelim BB-(sf) Rating on Cl. E Notes
------------------------------------------------------------------
S&P Global Ratings assigned its preliminary ratings to Orion CLO
2023-1 Ltd./Orion CLO 2023-1 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Antares Liquid Credit Strategies LLC,
an affiliate of Antares Capital Advisers LLC, and subsidiary of
Antares Holdings L.P.
The preliminary ratings are based on information as of Oct. 10,
2023. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The collateral pool's diversification;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated debt through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Preliminary Ratings Assigned
Orion CLO 2023-1 Ltd./Orion CLO 2023-1 LLC
Class A, $288.00 million: AAA (sf)
Class B, $54.00 million: AA (sf)
Class C (deferrable), $27.00 million: A (sf)
Class D (deferrable), $27.00 million: BBB- (sf)
Class E (deferrable), $13.50 million: BB- (sf)
Subordinated notes, $51.08 million: Not rated
OSD CLO 2021-23: Fitch Affirms BB+ Rating on Class E Notes
----------------------------------------------------------
Fitch Ratings has affirmed the ratings on the class A, B, C, D, and
E notes of OSD CLO 2021-23, Ltd. (OSD 2021-23) and the class B-R2,
C-R2 and D-R2 notes of OCP CLO 2015-10, Ltd. (OCP 2015-10). The
Rating Outlooks for class D and E in OSD 2015-10 were revised from
Positive to Stable. The Rating Outlooks on all other classes remain
Stable.
Entity/Debt Rating Prior
----------- ------ -----
OCP CLO 2015-10, Ltd.
B-R2 67092DAV1 LT AAsf Affirmed AAsf
C-R2 67092DAX7 LT A+sf Affirmed A+sf
D-R2 67092DAZ2 LT BBB+sf Affirmed BBB+sf
OSD CLO 2021-23, Ltd.
A 671026AA0 LT AAAsf Affirmed AAAsf
B 671026AC6 LT AA+sf Affirmed AA+sf
C 671026AE2 LT A+sf Affirmed A+sf
D 671026AG7 LT BBB+sf Affirmed BBB+sf
E 671025AA2 LT BB+sf Affirmed BB+sf
TRANSACTION SUMMARY
OSD 2021-23 and OCP 2015-10 are arbitrage collateralized loan
obligations (CLOs) managed by Onex Credit Partners, LLC. OSD
2021-23 closed in December 2021 and exited its reinvestment period
in October 2022, and reinvestment is no longer permitted. OCP
2015-10 closed in December 2021 and will exit its reinvestment
period in January 2025. Both CLOs are secured primarily by
first-lien, senior secured leveraged loans.
KEY RATING DRIVERS
STABLE COLLATERAL POOL QUALITY
The affirmations are supported by sufficient credit enhancement
levels against relevant rating stress loss levels. The credit
quality of the portfolios remained at the 'B'/'B-' level for both
transactions. However, the revision of the Rating Outlooks for
classes D and E notes in OSD 2021-23 to Stable from Positive
reflects a relatively slow pace of deleveraging and slight
deterioration in the portfolio. Exposure to issuers with a Negative
Outlook and Fitch's watchlist increased to 17.1% and 7.2% from
14.0% and 1.8%, and the Fitch weighted average rating factor (WARF)
for OSD 2021-23 portfolio increased to 24.3 from 23.5 at last
review. This is reflected in lower break-even default rate (BEDR)
cushions as compared to last review in October 2022.
The portfolio for OSD 2021-23 consists of 240 obligors, and the
largest 10 obligors represent 7.8% of the portfolio. OCP 2015-10
has 312 obligors, with the largest 10 obligors comprising 7.0% of
the portfolio. There were no defaulted assets in OSD 2021-23, and
defaulted assets comprised 0.3% of the portfolio for OCP 2015-10.
Exposure to issuers with a Negative Outlook and Fitch's watchlist
for OCP 2015-10 stood at 14.4% and 4.8%, respectively.
First lien loans, cash and eligible investments comprise 98.9% of
OSD 2021-23 portfolio and 95.3% of OCP 2015-10 portfolio. Fitch's
weighted average recovery rate of the portfolio decreased slightly
to 76.4% from 76.6% for OSD 2021-23 at last review and increased to
75.6% from 75.2% for OCP 2015-10.
All coverage tests, collateral quality tests (CQTs), and
concentration limitations are in compliance for both transactions,
except for the Fitch WARF test in OSD 2021-23.
CASH FLOW ANALYSIS
Fitch conducted cash flow analysis based on both the current
portfolio and a stressed portfolio for OSD 2021-23 that
incorporated a one-notch downgrade on the Fitch Issuer Default
Rating Equivalency Rating for assets with a Negative Outlook on the
driving rating of the obligor. In addition, the stressed analysis
extended the weighted average life (WAL) of the portfolio to the
current maximum covenant of 4.9 years to reflect the issuers'
ability to consent to maturity amendments.
For OCP 2015-10, Fitch analyzed a newly run Fitch Stressed
Portfolio (FSP) since the transaction is still in its reinvestment
period. Fitch affirmed the class B-2R notes in OCP 2015-10 one
notch below the MIR produced by the analysis, due to limited BEDR
cushions at the higher rating level. The FSP analysis stressed the
current portfolio from the latest trustee report to account for
permissible concentration and CQT limits. The FSP analysis assumed
a weighted average life of 6.0 years, 3.30% WAS, 7.5% 'CCC'
exposure and 10.0% non-senior secured assets. For the current
portfolio, fixed rate asset exposure in the current portfolio
increased to 4.3% from 2.9% at last review and was assumed at 5%
for the FSP analysis.
Other than the class B-2R in OCP 2015-10, the ratings are in line
with their respective MIRs, as defined in Fitch's CLOs and
Corporate CDOs Rating Criteria. The Stable Outlooks reflect Fitch's
expectation that the notes have sufficient level of credit
protection to withstand potential deterioration in the credit
quality of the portfolios in stress scenarios commensurate with
each class' rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades may occur if realized and projected losses of the
portfolio are higher than what was assumed at closing and the
notes' credit enhancement do not compensate for the higher loss
expectation than initially assumed.
- A 25% increase of the mean default rate across all ratings, along
with a 25% decrease of the recovery rate at all rating levels for
the current portfolio, would lead to downgrades of up to three
rating notches for both transactions, based on MIRs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Except for 'AAAsf' rated notes, which are at the highest level on
Fitch's scale, upgrades may occur in the event of
better-than-expected portfolio credit quality and transaction
performance.
- A 25% reduction of the mean default rate across all ratings,
along with a 25% increase of the recovery rate at all rating levels
for the current portfolio, would lead to upgrades of up to four
rating notches for OSD 2021-23 and up to three rating notches for
OCP 2015-10, based on the MIRs.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio information or
conducted a review of origination files as part of its ongoing
monitoring.
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other nationally
recognized statistical rating organizations and/or European
securities and markets authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information or information on the risk-presenting entities.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
PALMER SQUARE 2023-4: S&P Assigns BB- (sf) Rating on Cl. E Notes
----------------------------------------------------------------
S&P Global Ratings assigned its ratings to Palmer Square CLO 2023-4
Ltd./Palmer Square CLO 2023-4 LLC's floating-rate debt.
The debt issuance is a CLO securitization governed by investment
criteria and backed primarily by broadly syndicated
speculative-grade (rated 'BB+' or lower) senior secured term loans.
The transaction is managed by Palmer Square Capital Management
LLC.
The ratings reflect S&P's view of:
-- The diversification of the collateral pool;
-- The credit enhancement provided through subordination, excess
spread, and overcollateralization;
-- The experience of the collateral manager's team, which can
affect the performance of the rated notes through portfolio
identification and ongoing management; and
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
Ratings Assigned
Palmer Square CLO 2023-4 Ltd./Palmer Square CLO 2023-4 LLC
Class A, $330.00 million: AAA (sf)
Class B, $50.00 million: AA (sf)
Class C, $35.00 million: A (sf)
Class D, $30.00 million: BBB- (sf)
Class E, $12.50 million: BB- (sf)
Subordinated notes, $42.50 million: Not rated
PRPM 2023-NQM2: Fitch Assigns Final 'B-sf' Rating on Cl. B-2 Certs
------------------------------------------------------------------
Fitch Ratings has assigned final ratings to the residential
mortgage-backed certificates issued by PRPM 2023-NQM2 Trust (PRPM
2023-NQM2).
Entity/Debt Rating Prior
----------- ------ -----
PRPM 2023-NQM2
A-1 LT AAAsf New Rating AAA(EXP)sf
A-2 LT AAsf New Rating AA(EXP)sf
A-3 LT Asf New Rating A(EXP)sf
M-1 LT BBBsf New Rating BBB(EXP)sf
B-1 LT BBsf New Rating BB(EXP)sf
B-2 LT B-sf New Rating B-(EXP)sf
B-3 LT NRsf New Rating NR(EXP)sf
A-IO-S LT NRsf New Rating NR(EXP)sf
X-S LT NRsf New Rating NR(EXP)sf
P LT NRsf New Rating NR(EXP)sf
R LT NRsf New Rating NR(EXP)sf
TRANSACTION SUMMARY
Fitch has rated the residential mortgage-backed certificates to be
issued by PRPM 2023-NQM2 Trust, Mortgage Pass-Through Certificates,
Series 2023-NQM2 (PRPM 2023-NQM2 Trust), as indicated above. The
certificates are supported by 615 loans with a balance of $276.77
million as of the cutoff date. This will be the second PRPM NQM
transaction rated by Fitch and the fourth PRPM transaction in
2023.
The certificates are secured by a pool of fixed and adjustable rate
mortgage loans (some of which have an initial interest-only period)
that are primarily fully amortizing with original terms to maturity
of primarily five year to 40 years. The loans are secured by first
liens primarily on one- to four-family residential properties,
units in planned unit developments, condominiums, townhouses and
manufactured housing. 51.9% of the loans are nonqualified mortgages
(non-QM), as defined by the Ability to Repay (ATR) rule (the Rule)
and 47.1% are exempt from QM rule as they are investment
properties. The remaining 1% of the loans are QM Safe Harbor and
Rebuttable Presumption.
Nexera Holding LLC d/b/a Newfi Lending (Newfi) originated 30.0% of
the loans, National Mortgage Service, Inc. (NMSI) originated 27.2%
of the loans, Peer Street originated 10.4% of the loans and the
remaining 32.4% of the loans were originated by various other
third-party originators. Fitch assesses NewFi Lending as an
'Average' originator. Additionally, Fitch had an operational risk
discussion with NMSI to better understand their underwriting and
origination practices.
Fay Servicing, LLC (Fay Servicing) will service 100% of the loans
in the pool. Fitch rates Fay Servicing 'RSS2'/Stable.
KEY RATING DRIVERS
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 6.8% above a long-term sustainable level (versus
7.6% on a national level as of 1Q23, down 0.2% since last quarter).
Housing affordability is the worst it has been in decades driven by
both high interest rates and elevated home prices driving national
overvaluation. Home prices have increased 1.0% yoy nationally as of
August 2023, despite regional declines, but are still being
supported by limited inventory.
Nonprime Credit Quality (Mixed): Collateral consists of fixed and
adjustable rate loans with maturities of up to 40 years.
Specifically, the pool is comprised of 87.1% 30-year fully
amortizing loans, 11.3% 30-year and 40-year loans with a five-year,
seven-year, 10-year and 20-year interest-only (IO) period and 0.4%
five-year balloon loan. The pool is seasoned at about 12 months in
aggregate, as determined by Fitch. The borrowers in this pool have
relatively strong credit profiles with a 740 weighted average (WA)
FICO score (745 WA FICO per the transaction documents) and a 47.2%
debt-to-income ratio (DTI), both as determined by Fitch, as well as
moderate leverage, with an original combined loan-to-value ratio
(CLTV) of 73.2%, translating to a Fitch-calculated sustainable LTV
ratio (sLTV) of 77.1%.
Fitch considered 51.7% of the pool to consist of loans where the
borrower maintains a primary residence, while 47.1% comprises
investor property and 1.2% represents second homes.
There are also cross-collateralized loans (one loan to multiple
properties) that were underwritten to debt service coverage ratio
(DSCR)/investor guidelines in the pool and these loans account for
approximately 10.1% of the pool. In its analysis, Fitch used the
most conservative collateral attributes of the properties
associated with the loan. All properties are in the same MSA.
The majority of the loans (71.8% in Fitch's analysis) are to
single-family homes, townhomes, and PUDs; 7.6% are to condos; and
20.7% are to multifamily and manufactured housing. Fitch treated
the cross-collateralized loans as multifamily and the PD was
increased for these loans as a result.
There were 11 loans made to foreign nationals in the pool. If the
co-borrower is a U.S. citizen or permanent resident, Fitch does not
count the loans as loans to foreign nationals. Fitch does not make
adjustments for loans to nonpermanent residents since historical
performance has shown they perform the same or better than those to
U.S. citizens.
For foreign nationals, Fitch treated them as investor occupied, and
having no documentation for income, employment and assets. Since
not all assets were confirmed as located in U.S. banks or GSIBS, no
credit was given to liquid reserves for the loans to foreign
nationals in the analysis. If a FICO was not provided for the
foreign national, a FICO of 650 was assumed.
In total, 74.7% of the loans were originated through a nonretail
channel. Additionally, 51.9% of the loans are designated as non-QM,
1.0% of the loans were designated as QM Rebuttable Presumption or
Safe Harbor, while the remaining 47.1% are exempt from QM status.
The pool contains 48 loans over $1.0 million, with the largest loan
at $2.48 million. The largest loan in the pool is a
cross-collateralized cash-out loan with 14 underlying properties in
Fort Worth, TX and has the following collateral attributes: 793
borrower FICO and 77% LTV.
About 47.1% of the pool comprises loans for investor properties
(5.3% underwritten to borrowers' credit profiles and 41.8%
comprising investor cash flow loans). There are no second liens in
the pool and 0.3% of the loans have subordinate financing.
98.7% of the pool is current as of Aug. 31, 2023. Overall, the pool
characteristics resemble nonprime collateral; therefore, the pool
was analyzed using Fitch's nonprime model.
Loan Documentation: Bank Statement, Asset Depletion, DSCR Loans
(Negative): Approximately 94.6% of the pool was underwritten to
less than full documentation, according to Fitch (per the
transaction documents, 94.7% was underwritten to less than full
documentation).
Specifically, 25.1% was underwritten to a 12-month or 24-month bank
statement program for verifying income, which is not consistent
with appendix Q standards and Fitch's view of a full documentation
program. Additionally, 1.5% comprises a 1099 product, 10.0% is a
CPA or P&L product, 16.3% is a WVOE product and 41.8% is a DSCR
product. Overall, Fitch increased the PD on the non-full
documentation loans to reflect the additional risk.
A key distinction between this pool and legacy Alt-A loans is these
loans adhere to underwriting and documentation standards required
under the Consumer Financial Protection Bureau's (CFPB) ATR Rule.
This reduces the risk of borrower default arising from lack of
affordability, misrepresentation or other operational quality risks
due to the rigor of the Rule's mandates with respect to
underwriting and documentation of the borrower's ATR.
No Advancing (Mixed): The servicers will not advance delinquent
monthly payments of P&I. Because P&I advances made on behalf of
loans that become delinquent and eventually liquidate reduce
liquidation proceeds to the trust, the loan-level loss severities
are less for this transaction than for those where the servicer is
obligated to advance P&I.
To provide liquidity and ensure timely interest will be paid to the
'AAA' and 'AA' rated classes and ultimate interest on the remaining
rated classes, principal will need to be used to pay for interest
accrued on delinquent loans. This will result in stress on the
structure and the need for additional credit enhancement compared
to a pool with limited advancing.
Modified Sequential Payment Structure (Mixed): The structure
distributes collected principal pro rata among the class A notes
while excluding subordinate bonds from principal until classes A-1,
A-2 and A-3 are reduced to zero. To the extent that either a
cumulative loss trigger event or delinquency trigger event occurs
in a given period, principal will be distributed sequentially to
classes A-1, A-2 and A-3 until they are reduced to zero.
The transaction has excess spread that will be available to
reimburse the certificates for losses or interest shortfalls. The
excess spread may be reduced on and after October 2027, since
classes A-1, A-2 and A-3 have a step-up coupon feature that goes
into effect on and after that date. To mitigate the impact of the
step-up feature, interest payments are redirected from class B-3 to
pay any cap carryover interest for the A-1, A-2 and A-3 classes on
and after October 2027.
Additional analysis for Fitch's rating stresses considered a WAC
deterioration that varied by rating stress. The WAC cut was derived
by assuming a 2.5% cut (based on the most common historical
modification rate) on 40% (historical Alt-A modification
percentage) of the performing loans. Although the WAC reduction
stress is based on historical modification rates, Fitch did not
include the WAC reduction stress in its testing of the delinquency
trigger.
Fitch viewed the WAC deterioration as more of a pre-emptive cut
given the ongoing macroeconomic and regulatory environment. A
portion of borrowers will likely be impaired but will not
ultimately default due to modifications and reduced P&I.
Furthermore, this approach had the largest impact on the
back-loaded benchmark scenario.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Situs AMC, Maxwell, Digital Risk, Evolve, Canopy,
Stonehill, Consolidated Analytics, Phoenix, Infinity, Selene, and
Mission. The third-party due diligence described in Form 15E
focused on three areas: compliance review, credit review and
valuation review. Fitch considered this information in its
analysis. Based on the results of the 100% due diligence performed
on the pool, Fitch reduced the overall 'AAAsf' expected loss by 50
bps.
ESG CONSIDERATIONS
PRPM 2023-NQM2 has an ESG Relevance Score of '4' for Transaction
Parties & Operational Risk due to elevated operational risk, which
has a negative impact on the credit profile, and is relevant to the
ratings in conjunction with other factors.
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
REALT 2016-1: DBRS Confirms B Rating on Class G Certs
-----------------------------------------------------
DBRS Limited confirmed its ratings on the Commercial Mortgage
Pass-Through Certificates, Series 2016-1 issued by Real Estate
Asset Liquidity Trust (REALT), Series 2016-1 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X at A (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of
this transaction, which remains in line with DBRS Morningstar's
expectations. Since the last review, Tamarack Centre Retail
(Prospectus ID#1), previously the largest loan in the pool with an
issuance balance of $30.0 million, paid off in full in June 2023,
prior to its May 2026 loan maturity date. In addition, the
transaction continues to benefit from the amortization of all loans
in the pool. There are currently no delinquent or specially
serviced loans.
As of the August 2023 remittance, 38 of the original 55 loans
remain in the trust, with an aggregate balance of $234.6 million,
representing a collateral reduction of 41.5% since issuance. The
transaction is concentrated by property type with loans backed by
retail, multifamily, and office properties representing 31.4%,
23.0%, and 19.8% of the pool balance, respectively. One loan is
fully defeased, representing 0.6% of the current pool balance. Nine
loans, representing 30.0% of the pool balance, are on the
servicer's watchlist and are primarily being monitored for low debt
service coverage ratios (DSCRs), tenant rollover risk, forbearances
related to the Coronavirus Disease (COVID-19) pandemic, or upcoming
loan maturity. Loans that have exhibited increased credit risk were
analyzed with stressed scenarios in the analysis. This resulted in
a weighted-average expected loss that was more than triple the pool
average.
The largest loan on the servicer's watchlist is the Toronto
Congress Centre loan (Prospectus ID#2, 7.7% of the current pool
balance), which is secured by a 471,268-square-foot (sf) convention
and trade show center near Toronto Pearson International Airport
and is fully leased to Congress Centers Inc. The partial
interest-only (IO) loan is currently amortizing over a 25-year
schedule. At issuance, the loan was shadow-rated investment grade.
The loan was initially added to the servicer's watchlist in July
2020 following the sponsor's pandemic-related relief request and is
currently being monitored for not providing updated financial
statements. The forbearance agreement was revised a few times, but
ultimately the borrower was granted a three-month deferral of
payments and an 18-month IO period, extending to March 2022. The
deferred principal is to be repaid at maturity. As per the May 2023
servicer site inspection, there is $2.3 million in capital
expenditure planned for the property, primarily focused on roof
replacement. The most recently provided financials from YE2021
reported a DSCR of 0.91 times (x), an improvement from YE2020 DSCR
of 0.15x, but continues to lag behind the DBRS Morningstar DSCR of
1.52x at issuance. While the subject struggled amid the challenges
posed by the pandemic surrounding capacity restrictions, the
increased volume of events booked at the subject and the net cash
flow (NCF) improvement suggests the subject is rebounding. Other
mitigating factors include the subject's desirable location and
experienced sponsorship, and the loan's full recourse to the
sponsor, who has owned an interest in the property since 1994. The
loan also benefits from a low issuance loan-to-value (LTV) of
31.9%, which provides cushion for potential value declines. With
this review, DBRS Morningstar confirms that the loan
characteristics remain in line with an investment-grade shadow
rating.
The second-largest loan on the servicer's watchlist is the Ste
Catherine Street Retail Montreal loan (Prospectus ID#4, 6.9% of the
current pool balance), which is secured by an 35,219-sf unanchored
retail property in Montréal. The loan has been watchlisted since
2019 after the largest tenant, Forever 21 (85.8% of the net
rentable area), had announced plans to close its Canadian stores.
The space was backfilled by Ardene on a month-to-month lease but
was vacated in 2022. Fossil was the second tenant at the subject
and occupied 14.2% of the space; however, the tenant vacated the
space in October 2022. This space was backfilled by a new tenant,
Quartz Co., through a lease until February 2023.
The borrower is actively marketing the fully vacant property. The
borrower has kept the loan current despite reporting negative NCFs
in the last few years, and there are no recourse provisions. The
property is well-located within a prominent retail corridor, but
given the increased risk, the loan was analyzed with an elevated
probability of default, resulting in an expected loss almost seven
times higher than the pool average.
Notes: All figures are in U.S. dollars unless otherwise noted.
RR 27 LTD: Fitch Assigns 'BB(EXP)sf' Rating on Class D Notes
------------------------------------------------------------
Fitch Ratings has assigned expected ratings and Rating Outlooks to
RR 27 LTD
Entity/Debt Rating
----------- ------
RR 27 LTD
A-1a LT AAA(EXP)sf Expected Rating
A-1b LT AAA(EXP)sf Expected Rating
A-2 LT AA(EXP)sf Expected Rating
B-1 LT A+(EXP)sf Expected Rating
B-2 LT A(EXP)sf Expected Rating
C-1 LT BBB(EXP)sf Expected Rating
C-2 LT BBB-(EXP)sf Expected Rating
D LT BB(EXP)sf Expected Rating
E LT NR(EXP)sf Expected Rating
Subordinated Notes LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
RR 27 LTD, is an arbitrage cash flow collateralized loan obligation
(CLO) that will be managed by Redding Ridge Asset Management LLC.
Net proceeds from the issuance of the secured and subordinated
notes will provide financing on a portfolio of approximately $400
million of primarily first lien senior secured loans.
KEY RATING DRIVERS
Asset Credit Quality (Negative): The average credit quality of the
indicative portfolio is 'B'/'B-', which is in line with that of
recent CLOs. Issuers rated in the 'B' rating category denote a
highly speculative credit quality; however, the notes benefit from
appropriate credit enhancement and standard CLO structural
features.
Asset Security (Positive): The indicative portfolio consists of
100% first-lien senior secured loans and has a weighted average
recovery assumption of 73.8%. Fitch stressed the indicative
portfolio by assuming a higher portfolio concentration of assets
with lower recovery prospects and further reduced recovery
assumptions for higher rating stresses.
Portfolio Composition (Positive): The largest three industries may
comprise up to 37% of the portfolio balance in aggregate while the
top five obligors can represent up to 12.5% of the portfolio
balance in aggregate. The level of diversity required by industry,
obligor and geographic concentrations is in line with other recent
CLOs.
Portfolio Management (Neutral): The transaction has a 4.9-year
reinvestment period and reinvestment criteria similar to other
CLOs. Fitch's analysis was based on a stressed portfolio created by
adjusting to the indicative portfolio to reflect permissible
concentration limits and collateral quality test levels.
Cash Flow Analysis (Positive): Fitch used a customized proprietary
cash flow model to replicate the principal and interest waterfalls
and assess the effectiveness of various structural features of the
transaction. In Fitch's stress scenarios, the rated notes can
withstand default and recovery assumptions consistent with their
assigned ratings.
The weighted average life (WAL) used for the transaction stress
portfolio is 12 months less than the WAL covenant to account for
structural and reinvestment conditions after the reinvestment
period. In Fitch's opinion, these conditions would reduce the
effective risk horizon of the portfolio during stress periods.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Variability in key model assumptions, such as decreases in recovery
rates and increases in default rates, could result in a downgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
a metric. The results under these sensitivity scenarios are as
severe as between 'BBB+sf' and 'AA+sf' for class A-1a, between
'BBB+sf' and 'AA+sf' for class A-1b, between 'BB+sf' and 'A+sf' for
class A-2, between 'B+sf' and 'BBB+sf' for class B-1, between
'B+sf' and 'BBB+sf' for class B-2, between less than 'B-sf' and
'BB+sf' for class C-1, between less than 'B-sf' and 'BB+sf' for
class C-2; and between less than 'B-sf' and 'B+sf' for class D.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrade scenarios are not applicable to the class A-1a and class
A-1b notes; and as these notes are in the highest rating category
of 'AAAsf'.
Variability in key model assumptions, such as increases in recovery
rates and decreases in default rates, could result in an upgrade.
Fitch evaluated the notes' sensitivity to potential changes in such
metrics; the minimum rating results under these sensitivity
scenarios are 'AAAsf' for class A-2, 'A+sf' for class B-1, 'A+sf'
for class B-2, 'A+sf' for class C-1, 'A-sf' for class C-2; and
'BBB+sf' for class D.
DATA ADEQUACY
The majority of the underlying assets or risk-presenting entities
have ratings or credit opinions from Fitch and/or other Nationally
Recognized Statistical Rating Organizations and/or European
securities and Markets Authority-registered rating agencies. Fitch
has relied on the practices of the relevant groups within Fitch
and/or other rating agencies to assess the asset portfolio
information.
Overall, and together with any assumptions referred to above,
Fitch's assessment of the information relied upon for the agency's
rating analysis according to its applicable rating methodologies
indicates that it is adequately reliable.
SEQUOIA MORTGAGE 2023-4: Fitch Gives BB(EXP) Rating on B-4 Certs
----------------------------------------------------------------
Fitch Ratings expects to rate the residential mortgage-backed
certificates issued by Sequoia Mortgage Trust 2023-4 (SEMT
2023-4).
Entity/Debt Rating
----------- ------
SEMT 2023-4
A-1 LT AAA(EXP)sf Expected Rating
A-2 LT AAA(EXP)sf Expected Rating
A-3 LT AAA(EXP)sf Expected Rating
A-4 LT AAA(EXP)sf Expected Rating
A-5 LT AAA(EXP)sf Expected Rating
A-6 LT AAA(EXP)sf Expected Rating
A-7 LT AAA(EXP)sf Expected Rating
A-8 LT AAA(EXP)sf Expected Rating
A-9 LT AAA(EXP)sf Expected Rating
A-10 LT AAA(EXP)sf Expected Rating
A-11 LT AAA(EXP)sf Expected Rating
A-12 LT AAA(EXP)sf Expected Rating
A-13 LT AAA(EXP)sf Expected Rating
A-14 LT AAA(EXP)sf Expected Rating
A-15 LT AAA(EXP)sf Expected Rating
A-16 LT AAA(EXP)sf Expected Rating
A-17 LT AAA(EXP)sf Expected Rating
A-18 LT AAA(EXP)sf Expected Rating
A-19 LT AAA(EXP)sf Expected Rating
A-20 LT AAA(EXP)sf Expected Rating
A-21 LT AAA(EXP)sf Expected Rating
A-22 LT AAA(EXP)sf Expected Rating
A-23 LT AAA(EXP)sf Expected Rating
A-24 LT AAA(EXP)sf Expected Rating
A-25 LT AAA(EXP)sf Expected Rating
A-IO1 LT AAA(EXP)sf Expected Rating
A-IO2 LT AAA(EXP)sf Expected Rating
A-IO3 LT AAA(EXP)sf Expected Rating
A-IO4 LT AAA(EXP)sf Expected Rating
A-IO5 LT AAA(EXP)sf Expected Rating
A-IO6 LT AAA(EXP)sf Expected Rating
A-IO7 LT AAA(EXP)sf Expected Rating
A-IO8 LT AAA(EXP)sf Expected Rating
A-IO9 LT AAA(EXP)sf Expected Rating
A-IO10 LT AAA(EXP)sf Expected Rating
A-IO11 LT AAA(EXP)sf Expected Rating
A-IO12 LT AAA(EXP)sf Expected Rating
A-IO13 LT AAA(EXP)sf Expected Rating
A-IO14 LT AAA(EXP)sf Expected Rating
A-IO15 LT AAA(EXP)sf Expected Rating
A-IO16 LT AAA(EXP)sf Expected Rating
A-IO17 LT AAA(EXP)sf Expected Rating
A-IO18 LT AAA(EXP)sf Expected Rating
A-IO19 LT AAA(EXP)sf Expected Rating
A-IO20 LT AAA(EXP)sf Expected Rating
A-IO21 LT AAA(EXP)sf Expected Rating
A-IO22 LT AAA(EXP)sf Expected Rating
A-IO23 LT AAA(EXP)sf Expected Rating
A-IO24 LT AAA(EXP)sf Expected Rating
A-IO25 LT AAA(EXP)sf Expected Rating
A-IO26 LT AAA(EXP)sf Expected Rating
B-1 LT AA-(EXP)sf Expected Rating
B-2 LT A-(EXP)sf Expected Rating
B-3 LT BBB-(EXP)sf Expected Rating
B-4 LT BB(EXP)sf Expected Rating
B-5 LT NR(EXP)sf Expected Rating
A-IO-S LT NR(EXP)sf Expected Rating
TRANSACTION SUMMARY
Fitch expects to rate the residential mortgage-backed certificates
issued by Sequoia Mortgage Trust 2023-4 (SEMT 2023-4) as indicated
above. The certificates are supported by 353 loans with a total
balance of approximately $369 million as of the cutoff date. The
pool consists of prime jumbo fixed-rate mortgages acquired by
Redwood Residential Acquisition Corp. (Redwood) from various
mortgage originators. Distributions of principal and interest (P&I)
and loss allocations are based on a senior-subordinate,
shifting-interest structure.
KEY RATING DRIVERS
High-Quality Mortgage Pool (Positive): The collateral consists of
353 loans totaling approximately $369 million and seasoned
approximately five months in aggregate. The borrowers have a strong
credit profile (776 model FICO and 34.6% debt to income ratio
[DTI]) and moderate leverage (78.4% sustainable loan to value ratio
[sLTV] and 71.8% mark-to-market combined LTV ratio [cLTV]).
Overall, the pool consists of 94.4% of loans where the borrower
maintains a primary residence, while 5.6% are of a second home;
88.5% of the loans were originated through a retail channel.
Additionally, 99.7% are designated as qualified mortgage (QM) loans
and 0.3% are designated as QM rebuttable assumption.
Updated Sustainable Home Prices (Negative): Due to Fitch's updated
view on sustainable home prices, Fitch views the home price values
of this pool as 8.1% above a long-term sustainable level (versus
7.6% on a national level as of 1Q23, down 0.2% since last quarter).
Home prices increased 1.0% yoy nationally as of August 2023 despite
regional declines, but are still being supported by limited
inventory.
Shifting-Interest Structure (Negative): The mortgage cash flow and
loss allocation are based on a senior-subordinate,
shifting-interest structure, whereby the subordinate classes
receive only scheduled principal and are locked out from receiving
unscheduled principal or prepayments for five years. The lockout
feature helps to maintain subordination for a longer period should
losses occur later in the life of the deal. The applicable credit
support percentage feature redirects subordinate principal to
classes of higher seniority if specified credit enhancement (CE)
levels are not maintained.
Interest Reduction Risk (Negative): The transaction incorporates a
structural feature most commonly used by Redwood's program for
loans more than 120 days delinquent (a stop-advance loan). Unpaid
interest on stop-advance loans reduces the amount of interest that
is contractually due to bondholders in reverse-sequential order.
While this feature helps to limit cash flow leakage to subordinate
bonds, it can result in interest reductions to rated bonds in high
delinquency scenarios.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper market value declines (MVDs) than
assumed at the MSA level. Sensitivity analyses was conducted at the
state and national levels to assess the effect of higher MVDs for
the subject pool as well as lower MVDs, illustrated by a gain in
home prices.
This defined negative rating sensitivity analysis demonstrates how
the ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10.0%, 20.0% and 30.0% in addition to the
model-projected 40.3% at 'AAA'. The analysis indicates that there
is some potential rating migration with higher MVDs for all rated
classes, compared with the model projection. Specifically, a 10%
additional decline in home prices would lower all rated classes by
one full category.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Fitch incorporates a sensitivity analysis to demonstrate how the
ratings would react to steeper MVDs than assumed at the MSA level.
Sensitivity analyses was conducted at the state and national levels
to assess the effect of higher MVDs for the subject pool as well as
lower MVDs, illustrated by a gain in home prices.
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth of 10% with
no assumed overvaluation. Excluding the senior class, which is
already rated 'AAAsf', the analysis indicates there is potential
positive rating migration for all of the rated classes.
Specifically, a 10% gain in home prices would result in a full
category upgrade for the rated class excluding those being assigned
ratings of 'AAAsf'.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as
prepared by Clayton, AMC, and Digital Risk. The third-party due
diligence described in Form 15E focused on credit, compliance, and
property valuation. Fitch considered this information in its
analysis and, as a result, Fitch made the following adjustment to
its analysis: a 5% reduction in its analysis. This adjustment
resulted in a 14bps reduction to the 'AAAsf' expected loss.
DATA ADEQUACY
Fitch relied in its analysis on an independent third-party due
diligence review performed on about 88.2% of the pool. The
third-party due diligence was consistent with Fitch's "U.S. RMBS
Rating Criteria." Clayton, AMC and Digital Risk were engaged to
perform the review. Loans reviewed under this engagement were given
credit, compliance and valuation grades and assigned initial grades
for each subcategory. Minimal exceptions and waivers were noted in
the due diligence reports. Refer to the Third-Party Due Diligence
section of the presale report for further details.
Fitch also utilized data files that were made available by the
issuer on its SEC Rule 17g-5-designated website. Fitch received
loan-level information based on the American Securitization Forum's
(ASF) data layout format, and the data are considered
comprehensive. The ASF data tape layout was established with input
from various industry participants, including rating agencies,
issuers, originators, investors and others, to produce an industry
standard for the pool-level data in support of the U.S. RMBS
securitization market. The data contained in the ASF layout data
tape were reviewed by the due diligence companies, and no material
discrepancies were noted.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
STARWOOD RETAIL 2014-STAR: DBRS Cuts Class F Certs Rating to D
--------------------------------------------------------------
DBRS Limited downgraded the credit rating on one class of
Commercial Mortgage Pass-Through Certificates, Series 2014-STAR
issued by Starwood Retail Property Trust 2014-STAR as follows:
-- Class F to D (sf) from C (sf)
In addition, the credit rating on Class F was simultaneously
discontinued and withdrawn.
The credit rating downgrade and discontinuation on Class F were
because of a loss to the trust that was reflected with the August
2023 remittance. The MacArthur Center property, previously 25.6% of
the pool, was liquidated from the trust at a loss of approximately
$5.7 million, all of which affected Class F. For more information
on this transaction, please see the press release dated May 11,
2023.
Notes: All figures are in U.S. dollars unless otherwise noted.
TOWD POINT 2021-HE1: Fitch Assigns 'B-sf' Rating on 7 Tranches
--------------------------------------------------------------
Fitch Ratings has assigned ratings and Rating Outlooks to
previously unrated subordinated classes B-3, B-4, and their related
exchangeable classes from Towd Point HE Trust 2021-HE1 (Towd
2021-HE1) issued in 2021.
Entity/Debt Rating
----------- ------
TPHT 2021-HE1
B3 89180DAG1 LT Bsf New Rating
B3A 89180DBX3 LT Bsf New Rating
B3AX 89180DBY1 LT Bsf New Rating
B3B 89180DBZ8 LT Bsf New Rating
B3BX 89180DCA2 LT Bsf New Rating
B3C 89180DCB0 LT Bsf New Rating
B3CX 89180DCC8 LT Bsf New Rating
B4 89180DAH9 LT B-sf New Rating
B4A 89180DCD6 LT B-sf New Rating
B4AX 89180DCE4 LT B-sf New Rating
B4B 89180DCF1 LT B-sf New Rating
B4BX 89180DCG9 LT B-sf New Rating
B4C 89180DCH7 LT B-sf New Rating
B4CX 89180DCJ3 LT B-sf New Rating
TRANSACTION SUMMARY
The additional classes with ratings assigned today are more junior
than the classes with existing ratings and were unrated at deal
close. Towd 2021-HE1 has performed well since closing with many of
the previously rated bonds upgraded or assigned a Positive Outlook.
This pool consists of seasoned collateral including both open and
closed-end HELOCs in the first and second lien positions.
KEY RATING DRIVERS
Lower Expected Losses (Positive): The expected losses for Towd
2021-HE1 have decreased since issuance. Reduced loss expectation is
primarily driven by stable and continued borrower performance,
improved pool attributes increases in borrower equity. Since
issuance, first lien loans make up a larger portion of the
underlying pool, increasing 6.9% to 36.7% of the pool. To date the
pool factor has paydown to 45%. Further, home price appreciation
over the past few years continues to support the pool, compared to
issuance Fitch's sLTV value has decreased on average 16 points,
current pool average sLTV is 50%.
Stable Performance (Positive): While delinquencies (DQs) have
increased since issuance they remain extremely low, 1.62% 30+ DQ
reported for Sept 2023. The highest DQ rate observed was for March
2022 at only 2.0% 30+ DQ. Serious DQ, 90 days or more, is
consistently under 1%, as of September 2023 only 0.53% of borrowers
are seriously DQ. Borrowers continue to perform consistently as
95.12% have always been performing over the last 2 years.
Consistent with stable borrower performance the deal has also
benefitted from significant paydowns. Current deal factor is 46%,
at a deal age of 30 months. Paydowns for the senior classes,
current factor of 24% for A1-M1 class, has led to significant build
up in credit enhancement (CE). Since issuance the B3 class has seen
2,057bps increase in CE and 1,738bps for the B4 class.
Modified Sequential Structure (Positive): The proposed structure is
a modified sequential in which principal is distributed pro-rata to
the senior classes to the extent that the performance triggers are
passing. To the extent they are failing it is paid sequentially.
The transaction also benefits from a material amount of excess
spread that can be used to pay down the notes. If any additional
HELOC draws are funded through the class D certificates, the class
will be created at the bottom of the capital structure. If the
triggers are passing it will receive its pro-rata share of
principal and losses but to the extent they are failing it will
serve entirely as the first loss piece and will be paid principal
after all other classes have been paid in full.
Representations and Warranty (Negative): The transaction has two
different loan-level representations and warranties (R&Ws)
frameworks to cover first liens and second liens, respectively.
Both frameworks are consistent with a Fitch Tier 3 framework for
the originally issue classes. The R&W framework allows for
protection for the investor as the Seller would be required to
make-whole any loan losses incurred by a loan found to have a
breach, prior the R&W sunset date. However, the R&W framework does
not support the unrated bonds at issuance (B3-B5). The framework
does not trigger any loan breach review until after losses have
been incurred up to and including the B-3 class. Given this
framework there is limited protection from or remedy for principal
write-downs and loss of interest for the B-3 and B-4 classes.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
This defined negative stress sensitivity analysis demonstrates how
the ratings would react to steeper market value declines (MVDs) at
the national level. The analysis assumes MVDs of 10.0%, 20.0% and
30.0% in addition to the model projected decline at the base case.
This analysis indicates that there is some potential rating
migration with higher MVDs compared with the model projection.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
This defined positive rating sensitivity analysis demonstrates how
the ratings would react to positive home price growth with no
assumed overvaluation. The analysis assumes positive home price
growth of 10.0%. Excluding the senior classes already rated 'AAAsf'
as well as classes that are constrained due to qualitative rating
caps, the analysis indicates there is potential positive rating
migration for all of the other rated classes.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption is modified, while
holding others equal. The modeling process uses the modification of
these variables to reflect asset performance in up and down
environments. The results should only be considered as one
potential outcome, as the transaction is exposed to multiple
dynamic risk factors. It should not be used as an indicator of
possible future performance. For enhanced disclosure of Fitch's
stresses and sensitivities, please refer to U.S. RMBS Loss
Metrics.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
Any diligence adjustments that were incorporated during the
original rating analysis was applied for this review to the extent
the loans with adjustments are still outstanding.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
UBS COMMERCIAL 2018-C14: Fitch Lowers Rating on 2 Tranches to BBsf
------------------------------------------------------------------
Fitch Ratings has affirmed 15 classes of UBS Commercial Mortgage
Trust 2018-C13, downgraded two classes and affirmed 13 classes of
UBS Commercial Mortgage Trust 2018-C14. Rating Outlooks were
revised to Negative from Stable on four classes in UBS 2018-C13,
and Negative Rating Outlooks were assigned to two classes following
their downgrades in UBS 2018-C14.
Fitch has removed all classes from these transactions from Under
Criteria Observation (UCO).
Entity/Debt Rating Prior
----------- ------ -----
UBS 2018-C14
A-3 90278KAZ4 LT AAAsf Affirmed AAAsf
A-4 90278KBA8 LT AAAsf Affirmed AAAsf
A-S 90278KBD2 LT AAAsf Affirmed AAAsf
A-SB 90278KAY7 LT AAAsf Affirmed AAAsf
B 90278KBE0 LT AA-sf Affirmed AA-sf
C 90278KBF7 LT A-sf Affirmed A-sf
D 90278KAJ0 LT BBBsf Affirmed BBBsf
E 90278KAL5 LT BBsf Downgrade BBB-sf
F 90278KAN1 LT CCCsf Affirmed CCCsf
G 90278KAQ4 LT CCCsf Affirmed CCCsf
X-A 90278KBB6 LT AAAsf Affirmed AAAsf
X-B 90278KBC4 LT AA-sf Affirmed AA-sf
X-D 90278KAA9 LT BBsf Downgrade BBB-sf
X-F 90278KAC5 LT CCCsf Affirmed CCCsf
X-G 90278KAE1 LT CCCsf Affirmed CCCsf
UBS 2018-C13
A-2 90353KAV1 LT AAAsf Affirmed AAAsf
A-3 90353KAX7 LT AAAsf Affirmed AAAsf
A-4 90353KAY5 LT AAAsf Affirmed AAAsf
A-S 90353KBB4 LT AAAsf Affirmed AAAsf
A-SB 90353KAW9 LT AAAsf Affirmed AAAsf
B 90353KBC2 LT AA-sf Affirmed AA-sf
C 90353KBD0 LT A-sf Affirmed A-sf
D 90353KAC3 LT BBBsf Affirmed BBBsf
D-RR 90353KAE9 LT BBB-sf Affirmed BBB-sf
E-RR 90353KAG4 LT BB+sf Affirmed BB+sf
F-RR 90353KAJ8 LT BB-sf Affirmed BB-sf
G-RR 90353KAL3 LT B-sf Affirmed B-sf
X-A 90353KAZ2 LT AAAsf Affirmed AAAsf
X-B 90353KBA6 LT A-sf Affirmed A-sf
X-D 90353KAA7 LT BBBsf Affirmed BBBsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria,"
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's last
rating action.
The affirmations in UBS 2018-C13 reflect the impact of the criteria
and generally stable pool performance since the last rating action.
Fitch's current ratings incorporate a 'Bsf' rating case loss of
4.7%.
The Outlook revisions to Negative from Stable on classes D-RR,
E-RR, F-RR and G-RR reflect performance concerns on the Fitch Loans
of Concern (FLOCs), particularly the specially serviced 1670
Broadway loan (7.9% of the pool) which did not refinance at
maturity, along with office FLOCs, Medtronic Santa Rosa and
Riverwalk, which have significant near-term rollover. Ten loans
have been designated as FLOCs (27.8%), including two loans (11.3%)
in special servicing.
The downgrades in UBS 2018-C14 reflect the impact of the updated
criteria and higher loss expectations since the last rating action
on the largest loan, GNL Portfolio (8%), and the specially serviced
1670 Broadway loan (5.4%). Fitch's current ratings incorporate a
'Bsf' rating case loss of 4.9%.
The Negative Outlooks assigned to classes E and interest-only (IO)
X-D reflects the potential for further downgrades with higher than
expected losses from continued performance deterioration and/or
lack of stabilization on the FLOCS, particularly 1670 Broadway, GNL
Portfolio, Nebraska Crossing and Barrywoods Crossing. Eleven loans
have been designated as FLOCs (33.5%), including four loans (16%)
in special servicing.
Fitch Loans of Concern/Specially Serviced Loans: The largest
contributor to overall loss expectations in UBS 2018- C13 and
second largest contributor in UBS 2018-C14 is the 1670 Broadway
loan, which is secured by a 703,654-sf LEED Gold- certified office
building with a 520-space parking garage located in downtown
Denver, CO. In August 2023, the loan transferred to special
servicing ahead of the loan's upcoming maturity in September 2023.
The lender and borrower are currently discussing workout options.
As of March 2023, occupancy declined to 82.4% from 86% at YE 2021
and 87.2% at issuance. The largest tenant, TIAA, had a contraction
option in the lease which allowed them to terminate a full floor of
space every 18 months until December 2022. TIAA occupies 38.2% of
the NRA on a lease through December 2029, down from 48.5% of the
NRA at issuance. In addition, the second largest tenant, HUD (12.3%
NRA; lease expiration December 2028), has a termination option
beginning in December 2023 with 120 days' notice and no penalty.
The servicer-reported YE 2022 NOI DSCR was 2.38x, compared with
2.11x at YE 2021, 2.27x at YE 2020 and 2.34x at YE 2019.
Fitch's Bsf' rating case loss (prior to concentration add-on) of
9.3% reflects a 9.25% cap rate and the YE 2022 NOI with a 10%
stress. The loan is no longer considered credit opinion due to
performance deterioration since issuance.
The largest contributor to overall loss expectations in UBS
2018-C14 is the GNL Portfolio loan (8%), which is secured by a
portfolio of seven properties located across six states, with the
three largest concentrations in San Jose, CA (25.4% of NRA), Allen,
TX (22.4%) and St. Louis, MO (13.9%). The portfolio consists of
three office buildings, two industrial buildings, one office/lab
building and one warehouse building.
Portfolio occupancy has declined to 74.7% as of March 2023 after
Nimble Storage vacated the San Jose property in October 2021. There
is additional tenant rollover consisting of 25% of the portfolio
NRA in 2024. The servicer-reported TTM March 2023 NOI DSCR declined
to 1.11x from 2.14x at YE 2021 and 2.10x at YE 2020.
Fitch's Bsf' rating case loss (prior to concentration add-on) of
13.6% reflects a 10% cap rate to the TTM March 2023 NOI.
The second largest contributor to overall loss expectations in UBS
2018-C13 is The Buckingham loan (7.2%), which is secured by a
454-bed student housing property located in Downtown Chicago,
within walking distance of several educational institutions
including Columbia College, Roosevelt University, Robert Morris
University, School of the Art Institute of Chicago (SAIC), and
DePaul University.
This loan was previously transferred to special servicing in July
2020 for payment default. The property suffered from a decline in
occupancy as result of the transition to online classes during the
pandemic. The loan was brought current and returned to master
servicing during the February 2022 reporting period following the
execution of a modification.
The June 2023 occupancy has improved to 98% from a low of 63% at YE
2020 and 97% at YE 2019. Due to the improvement in occupancy, YE
2022 NOI has increased by 60% over YE 2021. YE 2022 NOI DSCR was
1.24 x compared to 0.88x at YE 2021, and 0.80x at YE 2020.
Fitch's Bsf' rating case loss (prior to concentration add-on) of
7.5% reflects a 9.25% cap rate and the TTM March 2023 NOI with a
7.5% stress.
Increasing CE: As of the September 2023 distribution date, UBS
2018-C13 and UBS 2018- C14 have paid down by 16.1% and 14.3%,
respectively. UBS 2018-C13 has one defeased loan representing 5.6%
of the pool and UBS 2018-C14 has four defeased loans representing
6.1%. Cumulative interest shortfalls are currently affecting class
NR in both transactions. UBS 2018-C13 has not incurred realized
losses to date and UBS 2018-C14 has realized losses of 0.74% of the
original pool balance.
All loans in both transactions are scheduled to mature in 2028,
except for two loans, 1670 Broadway which matured in September 2023
and Residence Inn Boston Danvers (1.5%) in UBS 2018-C13 which
matures in October 2023.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from concerns with potential further declines in performance that
could result in higher expected losses on FLOCs. If expected losses
do increase, downgrades to these classes are anticipated.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur. For 'AAAsf' rated bonds, additional
stresses applied to defeased collateral if the U.S. sovereign
rating is lower than 'AAA' could also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs,
particularly 1670 Broadway, Medtronic Santa Rosa and Riverwalk in
UBS 2018-C13, and 1670 Broadway, GNL Portfolio, Nebraska Crossing
and Barrywoods Crossing in UBS 2018-C14.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from continued performance of the FLOCs
and with greater certainty of near-term losses on specially
serviced assets and other FLOCs.
Downgrades to distressed ratings of 'CCCsf' would occur as losses
become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
stable-to-improved pool-level loss expectations and performance
stabilization of FLOCs, particularly 1670 Broadway, Medtronic Santa
Rosa and Riverwalk in UBS 2018-C13, and 1670 Broadway, GNL
Portfolio, Nebraska Crossing and Barrywoods Crossing in UBS
2018-C14. Upgrades of these classes to 'AAAsf' will also consider
the concentration of defeased loans in the transaction.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings of 'CCCsf' is not expected, but
possible with better than expected recoveries on specially serviced
loans or significantly higher values on FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
UNLOCK HEA 2023-1: DBRS Gives Prov. BB(low) Rating on B Notes
-------------------------------------------------------------
DBRS, Inc. assigned provisional ratings to the following
Asset-Backed Notes, Series 2023-1 (the Notes) to be issued by
Unlock HEA Trust 2023-1:
-- $152.5 million Class A at BBB (low) (sf)
-- $31.0 million Class B at BB (low) (sf)
The BBB (low) (sf) rating reflects credit enhancement of 25.69% for
Class A, and the BB (low) (sf) rating reflects credit enhancement
of 10.59% for Class B.
Other than the specified classes above, DBRS Morningstar did not
rate any other classes in this transaction.
Home equity investments (HEIs) allow homeowners access to the
equity in their homes without having to sell their homes or make
monthly mortgage payments. HEIs provide homeowners with an
alternative to borrowing and are available to homeowners of any age
(unlike reverse mortgage loans, for example, for which there is
often a minimum age requirement). A homeowner receives an upfront
cash payment (an Advance or an Investment Amount) in exchange for
giving an Investor (i.e., an Originator) a stake in their property.
The homeowner retains sole right of occupancy of the property and
pays all upkeep and expenses during the term of the HEI, but the
Originator participates in any increase, or decrease, in the value
of the property.
Like reverse mortgage loans, the HEI underwriting approach is
asset-based, meaning there is greater emphasis placed on the value
of the underlying property than on the credit quality of the
homeowner. The property value is the main focus for predicting
repayment because it is the primary source of funds to satisfy the
obligation. HEIs are nonrecourse; a homeowner is not required to
provide additional funds when the HEI repayment amount exceeds the
remaining equity value in the property (after accounting for any
other obligations such as senior liens, if applicable). Therefore,
repayment of the Advance and any Originator return is primarily
subject to the amount of appreciation/depreciation on the
property.
As of the cut-off date, 221 contracts in the transaction are first
lien contracts, representing roughly $28.31 million in current
exercise value; 1,525 are second lien contracts, representing
roughly $153.83 million in current exercise value; and 238 are
third lien contracts, representing roughly $23.09 million in
current exercise value.
Of the pool, 13.84% of the contracts are first lien and have a
weighted-average exchange rate of 1.95x, 74.84% are second lien
contracts and have a weighted-average exchange rate of 1.90x and
the remaining 11.32% of the pool are third lien contracts with a
weighted-average exchange rate of 1.98x. This brings the entire
transaction's weighted-average exchange rate to 1.91x. To better
understand the impact and mechanics of exchange rate please see the
example below, in the Contract Mechanics—Worked Example section.
The current unadjusted loan-to-value ratio (LTV) of the pool is
38.14% (i.e., of senior liens ahead of the contracts). At cutoff
the pool had a weighted-average Contract-to-Value (CTV, also known
as Option-to-Value, or OTV) of 19.04%, and a weighted-average
Loan-plus-Contract-to-Value (LCTV also known as
Loan-plus-Option-to-Value, or LOTV) of 57.34%.
The transaction uses a sequential structure in which cash
distributions are first made to reduce the interest payment amount
and any interest carryforward amount on the Class A-IO, Class A,
and Class B (as long as trigger B event is not in effect). Payments
are then made to reduce the note principal balance on Class A Notes
until such notes are paid off. With respect to Class B Notes,
payments are first made to any remaining interest payment amount
and interest carryforward amount and then to reduce the note
principal balance until such notes are paid off. Class C Notes are
then paid the Interest Payment Amount and any previously accrued
and unpaid Interest Payment Amount and then to reduce the note
principal balance until such notes are paid off.
The Issuer may, at its option, exercise a call and purchase all of
the outstanding Notes on the Optional Redemption Date. A failure to
purchase all outstanding Notes on the Optional Redemption Date will
cause a Class B Trigger Event and such trigger cannot be cured.
During a Class B Trigger Event, the Class B Notes shall not receive
any interest or principal payments until the Class A Notes are
fully paid down.
DBRS Morningstar's credit ratings on the Notes address the credit
risk associated with the identified financial obligations in
accordance with the relevant transaction documents. The associated
financial obligations for each of the rated Notes are the related
Class Principal Balance, Interest Payment Amount, and Interest
Carryforward Amount.
DBRS Morningstar's long-term credit ratings provide opinions on
risk of default. DBRS Morningstar 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.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2015-C26: Fitch Affirms 'B-sf' Rating on Two Tranches
-----------------------------------------------------------------
Fitch Ratings has upgraded three and affirmed 10 classes of Wells
Fargo Commercial Mortgage Trust 2015-C26 (WFCM 2015-C26),
commercial mortgage pass-through certificates. The Rating Outlooks
are Stable. The under criteria observation (UCO) has been
resolved.
Entity/Debt Rating Prior
----------- ------ -----
WFCM 2015-C26
A-3 94989CAW1 LT AAAsf Affirmed AAAsf
A-4 94989CAX9 LT AAAsf Affirmed AAAsf
A-S 94989CAZ4 LT AAAsf Affirmed AAAsf
A-SB 94989CAY7 LT AAAsf Affirmed AAAsf
B 94989CBC4 LT AAAsf Upgrade AA-sf
C 94989CBD2 LT Asf Upgrade A-sf
D 94989CAG6 LT BBB-sf Affirmed BBB-sf
E 94989CAJ0 LT BB-sf Affirmed BB-sf
F 94989CAL5 LT B-sf Affirmed B-sf
PEX 94989CBE0 LT Asf Upgrade A-sf
X-A 94989CBA8 LT AAAsf Affirmed AAAsf
X-C 94989CAA9 LT BB-sf Affirmed BB-sf
X-D 94989CAC5 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated "U.S. and Canadian Multiborrower CMBS Rating Criteria,"
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating action.
The upgrades reflect lower pool loss expectations and increased CE
since the prior rating action, as well as the impact of the updated
criteria. The pool has exhibited generally stable to improved loan
performance and an increase in defeased collateral. Fitch has
identified nine Fitch Loans of Concern (FLOCs; 20.2% of the pool
balance), including one loan in special servicing (3.9%). Fitch's
current ratings incorporate a 'Bsf' rating case loss of 4.4%.
Alternative Loss Scenario; Maturity Concentration: Given the
significant near-term maturity concentration with approximately 98%
of the pool scheduled to matures by February 2025, Fitch's ratings
are based on a look-through analysis to determine the loans'
expected recoveries and losses to assess the outstanding classes'
ratings relative to CE.
Specially Serviced Loan: The largest contributor to overall loss
expectations, Aloft Houston by the Galleria (3.9% of the pool), is
secured by a 152-room limited service hotel located adjacent to the
Houston Galleria. Parking is provided by a five-story garage
structure, which is also part of the collateral. The loan
transferred to special servicing in 2020 due to a COVID-19 relief
request and imminent default. The property receiver has
transitioned the property and stabilized operations while
maintaining brand standards. The special servicer has provided
notice of a repurchase claim to the loan originator.
The servicer reported that the deterioration in pre-pandemic cash
flow was the result of increased competition in the area; the
coronavirus pandemic then further negatively impacted property
performance. Per the servicer-provided TTM June 2023 STR report,
the subject had occupancy, ADR and RevPAR of 52.9%, $131, and $69,
respectively.
The total loan exposure has increased to $41.7 million, or $12.8
million above the loan balance. Fitch's 'Bsf' rating case loss of
87% reflects a stressed value of $110k/key and is primarily driven
by the increased exposure since the prior rating action and
uncertainty regarding the ultimate repurchase of the loan.
Improved Loan Performance: The largest loan in the pool, Chateau on
the Lake (5.2%), is secured by a 301-key independent resort
property located in Branson, Missouri. The loan was previously in
special servicing beginning in 2016 due to borrower bankruptcy
filing; however, the loan was transferred back to the master
servicer in late 2020. Performance has stabilized after initial
declines related to the pandemic. Per the servicer-provided TTM
June 2023 STR report, the subject had occupancy, ADR, and RevPAR of
55.1%, $186 and $102, respectively, with RevPAR penetration above
the property's competitive set.
Broadcom Building (4.5%): The loan is secured by a 201,500-sf
office property located in San Jose, CA, which is fully vacant and
has negative cash flow. The property had been 100% leased to the
Broadcom Corporation since 2000; however, the tenant exercised its
option to terminate the lease early and vacated by May 2018. NIO,
an electric vehicle manufacturer, took occupancy at the property
during 2023. The tenant begins to pay rent on its 10-year lease in
November 2023 at a rate in line with submarket on a NNN basis. The
loan has remained current through the term.
JW Marriott New Orleans (4.5%): The loan is secured by the fee and
leasehold interest in a 496-room full-service luxury hotel located
in the French Quarter of New Orleans, LA. The hotel is located
along Canal Street in New Orleans' Central Business District. The
location is on the direct route for the annual Mardi Gras parade,
which generates significant demand to the market. Loan performance
has rebounded from pandemic lows in 2020 when the reported YE 2020
NCF was negative. Per the servicer-provided July 2023 STR report,
the TTM occupancy was 69.3%; ADR was $245, and RevPAR was $170; all
metrics are outperforming the property's competitive set.
Pre-pandemic, the 2018 and 2019 RevPAR was $148 and $173,
respectively. This amortizing loan has remained current through the
term.
Increased CE: As of the September 2023 distribution date, the
pool's aggregate principal balance has been reduced by 23.7% to
$734.3 million from $962.1 million at issuance. Realized losses to
date and interest shortfalls are currently affecting the non-rated
class G. The increased CE is attributed to amortization, loan
payoffs and defeasance. There are 26 loans (28.8%) that are
defeased. There are two co-op loans (0.7%) that are full-term
interest-only, and no loans remain in their partial interest-only
periods.
Property Type Concentration: Excluding defeased collateral, the
remaining pool consists of 10 hotel loans (22%), 17 retail loans
(18.5%) and two office loans (5.5%).
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
Downgrades to the 'AAAsf' classes are not likely due to expected
continued paydowns and amortization, increasing CE and non-reliance
on FLOCs, but may occur should interest shortfalls affect these
classes.
Downgrades to the 'Asf' and 'BBB-sf' classes could occur should
overall pool losses increase significantly and/or one or more large
loans, in particular FLOCs, Chateau on the Lake and the specially
serviced Aloft Houston by the Galleria, have an outsized loss,
which would erode CE.
Downgrades to the 'BB-sf' or 'B-sf' classes could occur should loss
expectations increase as performance declines further or fail to
stabilize on the FLOCs, and/or loans expected to refinance do not
pay off at maturity.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades may occur with continued stable to improved asset
performance, coupled with additional paydown and/or defeasance.
Upgrades to the 'Asf' rated classes are not expected, but may occur
with significant improvement in CE and/or defeasance and better
recoveries than expected on FLOCs, especially Chateau on the Lake
and the specially serviced Aloft Houston by the Galleria.
An upgrade of the 'BBB-sf' class is considered unlikely and would
be limited based on the sensitivity to concentrations or the
potential for future concentrations. Classes would not be upgraded
above 'Asf' if there is a likelihood of interest shortfalls.
Upgrades to the 'BB-sf' or 'B-sf' rated classes are not likely
unless the performance of the remaining pool stabilizes and the
senior classes pay off.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
WELLS FARGO 2017-RC1: DBRS Confirms C Rating on Class F Certs
-------------------------------------------------------------
DBRS Limited confirmed its ratings on all classes of the Commercial
Mortgage Pass-Through Certificates, Series 2017-RC1 issued by Wells
Fargo Commercial Mortgage Trust 2017-RC1 as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class X-D at BB (high) (sf)
-- Class D at BB (sf)
-- Class E at CCC (sf)
-- Class F at C (sf)
All trends are Stable.
The rating confirmations reflect transaction performance that
remains in line with DBRS Morningstar's expectations at the last
rating action. Since the last rating action, Hyatt Place Portfolio
(Prospectus ID#1), the only loan in special servicing at the time,
was liquidated from the trust and incurred a realized loss of $10.9
million, contained to the unrated Class G certificate. The recovery
of $41.3 million at liquidation was slightly better than DBRS
Morningstar anticipated. There are no other loans in special
servicing, but DBRS Morningstar remains concerned with a number of
loans backed by office properties, the most concerning of which are
described in greater detail below.
As of the September 2023 remittance, 53 of the original 60 loans
remain in the trust, with an aggregate balance of $442.0 million
reflecting a collateral reduction of 29.3% since issuance. Seven
loans, representing 15.1% of the current pool balance have fully
defeased. There are currently no specially serviced loans, and only
four loans, representing 5.7% of the current pool balance, are on
the servicer's watchlist. The pool is concentrated by property type
with retail and office backed properties, representing 32.0% and
19.0% of the pool, respectively. Among these, one of the top 10
remaining loans Peachtree Mall (Prospectus ID#14, 2.1% of the
pool), which is secured by an 822,433 square-foot (sf) regional
mall in Columbus, Georgia, has seen decreases in operating
performance over the past few reporting periods that have remained
consistently below issuance expectations. Given the secondary
location of the subject, the fluidity of the retail landscape, and
the shifting consumer preferences, DBRS Morningstar maintains a
negative outlook on this loan.
Most of the pool's office loans continue to perform in line with
issuance expectations; however, the office sector has been
challenged of late, given the low investor appetite for that
property type and high vacancy rates in many submarkets as a result
of the shift in workplace dynamics. DBRS Morningstar identified two
office-backed loans, representing 4.1% of the pool, as exhibiting
increased risk from issuance and thus analyzed with a stressed
scenario in the analysis. The resulting weighted average expected
loss for these loans was approximately double or triple the pool
average. These loans are highlighted below.
The largest loan on the servicer's watchlist is secured by
Whitehall Corporate Center VI (Prospectus ID #12, 2.9% of the
pool), a 116,855-sf office center in Charlotte, North Carolina. The
collateral consists of approximately 860,000 sf of office
properties in six different buildings. The loan was added to the
watchlist in March 2023 for a low debt service coverage ratio
(DSCR). The decline in DSCR followed the lease termination of
Advantage Sales (previously 21.4% of the net rentable area (NRA))
in September 2020 and the departure of Home Point (previously 20.1%
of the NRA) at lease expiry in December 2021. While the borrower
was successful in backfilling 12.3% of the NRA, the current
occupancy of 76.0% as of the March 2023 rent roll represents a
significant net decline when compared with 90.7% at issuance. In
addition, leases representing approximately 28% of the NRA are
scheduled to expire in the next 12 months. The top three tenants at
the property are Direct Chassis Link (20.2% of the NRA, lease
expiry in May 2027), ABX Converting Acquisition, LLC (12.3% of the
NRA, lease expiry in December 2025), and C.H. Robinson Worldwide,
Inc. (10.2% of the NRA, lease expiry in March, 2024). According to
the most recent financial reporting, the YE2022 net cash flow (NCF)
was $862,953 with a DSCR of 0.91 times (x) compared to $1.2 million
and 1.26x in YE2021. Without significant leasing activity in the
near term, DBRS Morningstar expects cash flow and DSCR to decline
further given the concentrated upcoming rollover. According to
Reis, the Airport/Parkway submarket of Charlotte reported a YE2022
average rental rate of $24.5 and vacancy of 21.6%. In its analysis,
DBRS Morningstar stressed the loan-to-value ratio (LTV), resulting
in an expected loss more than double the deal average.
Another loan of concern is Haverstick Office Park (Prospectus ID
#35, 1.2% of the pool), which is secured by an 80,696-sf office
property in the North/Carmel submarket of Indianapolis. The loan
was added to the watchlist in October 2022 for low DSCR, caused by
the property's declining occupancy. Since 2020, property cash flow
has declined approximately 14.2% on average every year. As a
result, DSCR has dropped to 1.06x from 1.11x at YE2021 at 1.48x at
YE2020. The subject was 90.1% occupied at issuance. Occupancy fell
to 79% at YE2021, though it has ticked up to 88.0% as of June 2023.
According to the most recent servicer commentary, the borrower was
able to sign a new lease with USP Indianapolis for 4.3% of the NRA.
The lease, scheduled to expire in November 2029, was in rent
abatement until September 2023. In total, two new leases,
representing 15.3% of the NRA, were signed in 2023, one of which
had an average rental rate of $19.26 per sf. The borrower has
reportedly invested $400,000 in recent capital expenditures in an
effort to attract new tenants; however, leases representing 23.7%
of the NRA are scheduled to expire in the next 12 months. According
to the Q2 2023 Reis report on the North/Carmel submarket of
Indianapolis, the submarket vacancy was 18.5%, and Reis forecasts
submarket vacancy will remain around 20.0% over the next five
years. DBRS Morningstar expects that revenue may improve slightly
in the short term as free rent periods burn off, but barring
significant leasing or renewal activity, cash flow and DSCR are
likely to continue trending downward. As a result of these property
and submarket concerns, DBRS Morningstar stressed the loan's LTV in
its analysis, yielding an expected loss over triple the deal
average.
Notes: All figures are in U.S. dollars unless otherwise noted.
WELLS FARGO 2019-C53: DBRS Confirms B(low) Rating on K-RR Certs
---------------------------------------------------------------
DBRS Limited confirmed the ratings on all classes of Commercial
Mortgage Pass-Through Certificates, Series 2019-C53 issued by Wells
Fargo Commercial Mortgage Trust 2019-C53 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class X-D at A (sf)
-- Class D at A (low) (sf)
-- Class E-RR at BBB (sf)
-- Class F-RR at BBB (low) (sf)
-- Class G-RR at BB (high) (sf)
-- Class H-RR at BB (low) (sf)
-- Class J-RR at B (high) (sf)
-- Class K-RR at B (low) (sf)
All trends are Stable
The rating confirmations reflect the overall stable performance in
the four years since issuance, with a small concentration of loans
on the servicer's watchlist and no loans specially serviced or
delinquent as of the most recent remittance. In addition, cash
flows have been steady with the pool reporting a debt service
coverage ratio (DSCR) above 2.00 times (x) based on the most recent
year-end reporting.
As of the September 2023 remittance, all 58 loans remain in the
pool with a collateral reduction of 2.1% since issuance. The pool
is concentrated by property type as seven loans, representing 25.3%
of the pool, are secured by office properties. Although the office
concentration for this transaction is noteworthy given the
challenges for that property type in the current environment, DBRS
Morningstar notes that, overall, the office loans in this pool are
generally performing as expected, with the YE2022 DSCRs generally
in line with or exceeding issuance levels. Ten loans, representing
18.7% of the pool, are on the servicer's watchlist, with only three
loans, representing 5.8% of the pool, being monitored for low cash
flow while the other seven loans are being monitored for various
noncredit issues, including unsubmitted financial statements,
deferred maintenance, and below-average property quality, per the
most recent site inspections.
The DoubleTree ABQ loan (Prospectus ID#12; 2.7% of the pool) is
secured by a 295-key, full-service hotel in Albuquerque, New
Mexico. The loan is on the watchlist for low DSCR as revenues have
been depressed in the last several years because of the effects of
the Coronavirus Disease (COVID-19) pandemic. The loan has been
reporting DSCRs well below issuance figures, with a DSCR of 1.16x
for the trailing 12 months (T-12) ended June 30, 2023, an
improvement from YE2020 when the loan was reporting negative cash
flows but still below DBRS Morningstar's expectations. The most
recent financials for the T-12 ended June 30, 2023, reported an
occupancy rate, average daily rate, and revenue per available room
(RevPAR) of 51.9%, $138.68, and $72.03, respectively. The RevPAR
has improved year over year but is still below the issuance figure
of $78.90. For this review, DBRS Morningstar analyzed the loan with
an elevated probability of default, resulting in an expected loss
approximately three times the pool average.
The transaction continues to benefit from stable performances by
the largest loans in the pool. The two largest loans in the pool,
Equinix Data Center (Prospectus ID#1; 8.7% of the pool) and
Ceasar's Bay Shopping Center (Prospectus ID#2; 6.6% of the pool)
continue to perform in line with expectations with DSCRs above
2.00x. Equinix Data Center is secured by the leased fee interest in
the land underneath three data centers. The improvements are 100.0%
leased by Equinix, a leading provider of network-neutral data
centers, on a lease through December 2068. Ceasar's Bay Shopping
Center is secured by an anchored retail center in Brooklyn, New
York, approximately 13 miles south of Lower Manhattan. The property
was 100.0% occupied as of June 2023, with minimal near-term
rollover risk.
Notes: All figures are in U.S. dollars unless otherwise noted.
[*] DBRS Reviews 853 Classes From 49 US RMBS Transactions
---------------------------------------------------------
DBRS, Inc. reviewed 853 classes from 49 U.S. residential
mortgage-backed securities (RMBS) transactions. Of the 853 classes
reviewed, DBRS Morningstar upgraded 61 credit ratings and confirmed
792 credit ratings.
The Affected Ratings Are Available at https://bit.ly/3F369pa
Here is the list of the Issuers:
- Ameriquest Mortgage Securities Inc. Series 2004-R8
- Ameriquest Mortgage Securities Inc. Series 2004-R9
- C-BASS 2005-CB3 Trust
- Asset Backed Securities Corporation Home Equity Loan Trust,
Series NC 2006-HE2
- Asset Backed Securities Corporation Home Equity Loan Trust,
Series NC 2006-HE4
- Asset Backed Securities Corporation Home Equity Loan Trust,
Series AMQ 2006-HE7
- Credit Suisse First Boston Mortgage Securities Corp. Adjustable
Rate Mortgage Trust 2005-7
- Credit Suisse First Boston Mortgage Securities Corp. Adjustable
Rate Mortgage Trust 2005-9
- Credit Suisse First Boston Mortgage Securities Corp. Adjustable
Rate Mortgage Trust 2005-11
- Credit Suisse First Boston Mortgage Acceptance Corp. Adjustable
Rate Mortgage Trust 2005-12
- Chase Mortgage Finance Trust Series 2007-A3
- ACE Securities Corp. Home Equity Loan Trust, Series 2006-HE4
- ACE Securities Corp. Home Equity Loan Trust, Series 2007-WM1
- ACE Securities Corp. Home Equity Loan Trust, Series 2007-HE2
- ACE Securities Corp. Home Equity Loan Trust, Series 2006-NC3
- ACE Securities Corp. Home Equity Loan Trust, Series 2005-HE1
- ACE Securities Corp. Home Equity Loan Trust, Series 2006-ASAP1
- Carrington Mortgage Loan Trust, Series 2007-HE1
- BCAP LLC Trust 2007-AA2
- BCAP LLC Trust 2007-AA1
- BCAP LLC Trust 2007-AA3
- BCAP LLC Trust 2007-AA4
- Agate Bay Mortgage Trust 2015-2
- Bear Stearns Alt-A Trust 2007-2
- New Residential Mortgage Loan Trust 2016-3
- New Residential Mortgage Loan Trust 2016-4
- BNC Mortgage Loan Trust 2007-2
- Banc of America Mortgage 2007-3 Trust
- Banc of America Funding 2007-E Trust
- Banc of America Funding 2007-7 Trust
- Citigroup Mortgage Loan Trust 2007-FS1
- Argent Securities Inc. Series 2005-W4
- Citigroup Mortgage Loan Trust 2006-HE3
- Citigroup Mortgage Loan Trust 2006-NC2
- Citigroup Mortgage Loan Trust 2006-FX1
- Citigroup Mortgage Loan Trust 2006-NC1
- Citigroup Mortgage Loan Trust 2006-HE2
- Citigroup Mortgage Loan Trust 2007-AHL1
- Citigroup Mortgage Loan Trust 2007-AMC2
- Citigroup Mortgage Loan Trust 2006-AMC1
- Citigroup Mortgage Loan Trust 2007-AMC1
- CWALT, Inc. Alternative Loan Trust 2006-6CB
- Citigroup Mortgage Loan Trust 2006-WFHE4
- Citigroup Mortgage Loan Trust 2006-WFHE2
- Bear Stearns Mortgage Funding Trust 2007-AR2
- Citigroup Mortgage Loan Trust Inc., Series 2007-SHL1
- Accredited Mortgage Loan Trust 2005-4
- Accredited Mortgage Loan Trust 2005-3
- CWABS Asset-Backed Certificates Trust 2004-12
The credit rating upgrades reflect positive performance trends and
increases in credit support sufficient to withstand stresses at
their new credit rating levels. The credit rating confirmations
reflect asset performance and credit-support levels that are
consistent with the current credit ratings.
[*] DBRS Takes Rating Actions on 10 Flagship Credit Auto Deals
--------------------------------------------------------------
DBRS, Inc. upgraded five ratings, confirmed 20 ratings and
discontinued three ratings due to repayment from 10 Flagship Credit
Auto Trust transactions.
The Affected Ratings Are Available at https://bit.ly/48DEAAg
The Issuers involved in this rating are:
Flagship Credit Auto Trust 2020-4
Flagship Credit Auto Trust 2018-3
Flagship Credit Auto Trust 2020-2
Flagship Credit Auto Trust 2019-2
Flagship Credit Auto Trust 2020-1
Flagship Credit Auto Trust 2019-1
Flagship Credit Auto Trust 2019-4
Flagship Credit Auto Trust 2020-3
Flagship Credit Auto Trust 2018-4
Flagship Credit Auto Trust 2019-3
The rating actions are based on the following analytical
considerations:
-- The transaction assumptions consider DBRS Morningstar's
baseline macroeconomic scenarios for rated sovereign economies,
available in its commentary Baseline Macroeconomic Scenarios For
Rated Sovereigns - June 2023 Update, published on June 30, 2023.
These baseline macroeconomic scenarios replace DBRS Morningstar's
moderate and adverse COVID-19 pandemic scenarios, which were first
published in April 2020.
-- The transaction parties' capabilities with regard to
originating, underwriting, and servicing.
-- The rating actions are the result of collateral performance to
date and DBRS Morningstar's assessment of future performance
assumptions.
-- The transaction's capital structure and form and sufficiency of
available credit enhancement. The current level of hard credit
enhancement and estimated excess spread are sufficient to support
the DBRS Morningstar-projected remaining cumulative net loss
assumption at a multiple of coverage commensurate with the ratings.
[*] Fitch Affirms 101 Classes From Four 2023 Vintage Conduit Deals
------------------------------------------------------------------
Fitch Ratings has affirmed 101 classes from four 2023 vintage U.S.
conduit transactions. The Rating Outlooks for all classes remain
Stable. Fitch has removed all classes from these transactions from
Under Criteria Observation (UCO).
Entity/Debt Rating Prior
----------- ------ -----
BMO 2023-C4
A-1 05610CAA2 LT AAAsf Affirmed AAAsf
A-2 05610CAB0 LT AAAsf Affirmed AAAsf
A-3 05610CAC8 LT AAAsf Affirmed AAAsf
A-4 05610CAD6 LT AAAsf Affirmed AAAsf
A-5 05610CAE4 LT AAAsf Affirmed AAAsf
A-S 05610CAJ3 LT AAAsf Affirmed AAAsf
A-SB 05610CAF1 LT AAAsf Affirmed AAAsf
B 05610CAK0 LT AA-sf Affirmed AA-sf
C 05610CAL8 LT A-sf Affirmed A-sf
D 05610CAP9 LT BBBsf Affirmed BBBsf
E-RR 05610CAR5 LT BBB-sf Affirmed BBB-sf
F-RR 05610CAT1 LT BBsf Affirmed BBsf
G-RR 05610CAV6 LT BB-sf Affirmed BB-sf
J-RR 05610CAX2 LT B-sf Affirmed B-sf
X-A 05610CAG9 LT AAAsf Affirmed AAAsf
X-B 05610CAH7 LT AA-sf Affirmed AA-sf
BANK5 2023-5YR1
A-S-1 06644EAN8 LT AAAsf Affirmed AAAsf
A-S-2 06644EAP3 LT AAAsf Affirmed AAAsf
A-S-X1 06644EAQ1 LT AAAsf Affirmed AAAsf
A-S-X2 06644EAR9 LT AAAsf Affirmed AAAsf
B 06644EBZ0 LT AA-sf Affirmed AA-sf
B-1 06644EAS7 LT AA-sf Affirmed AA-sf
B-2 06644EAT5 LT AA-sf Affirmed AA-sf
B-X1 06644EAU2 LT AA-sf Affirmed AA-sf
B-X2 06644EAV0 LT AA-sf Affirmed AA-sf
C 06644EAW8 LT A-sf Affirmed A-sf
C-1 06644EAX6 LT A-sf Affirmed A-sf
C-2 06644EAY4 LT A-sf Affirmed A-sf
C-X1 06644EAZ1 LT A-sf Affirmed A-sf
C-X2 06644EBA5 LT A-sf Affirmed A-sf
D 06644EBM9 LT BBBsf Affirmed BBBsf
E 06644EBP2 LT BBB-sf Affirmed BBB-sf
F 06644EBR8 LT BB-sf Affirmed BB-sf
G 06644EBT4 LT B-sf Affirmed B-sf
X-A 06644EBB3 LT AAAsf Affirmed AAAsf
X-D 06644EBD9 LT BBB-sf Affirmed BBB-sf
X-F 06644EBF4 LT BB-sf Affirmed BB-sf
X-G 06644EBH0 LT B-sf Affirmed B-sf
FIVE 2023-V1
A-1 337964AA8 LT AAAsf Affirmed AAAsf
A-2 337964AB6 LT AAAsf Affirmed AAAsf
A-3 337964AC4 LT AAAsf Affirmed AAAsf
A-M 337964AE0 LT AAAsf Affirmed AAAsf
B 337964AF7 LT AA-sf Affirmed AA-sf
C 337964AG5 LT A-sf Affirmed A-sf
D 337964AP5 LT BBBsf Affirmed BBBsf
E 337964AR1 LT BBB-sf Affirmed BBB-sf
F 337964AT7 LT BB-sf Affirmed BB-sf
G 337964AV2 LT B-sf Affirmed B-sf
X-A 337964AD2 LT AAAsf Affirmed AAAsf
X-F 337964AH3 LT BB-sf Affirmed BB-sf
X-G 337964AK6 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023 and incorporate any changes in loan
status and/or credit enhancement (CE) since Fitch's last review.
Performance and 'Bsf' Loss Expectations: Deal-level rating case
losses are as follows: BANK5 2023-5YR1, 3.7%; BANK 2023-BANK45,
3.9%; BMO 2023-C4, 4.5% and FIVE 2023-V1, 3.4%.
The affirmations reflect continued performance in-line with
issuance expectations and no updated financial reporting given the
recent closing of the transactions. In addition, Fitch's analysis
included the original rating assumptions with minor adjustments to
align with the current criteria.
There are no specially serviced or delinquent loans in the four
transactions.
Credit Enhancement and Defeasance: There has been limited paydown
and change to CE and no defeasance since issuance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
- Downgrades to 'AAAsf' and 'AAsf' category rated classes are not
expected due to their senior position in the transaction and
expectations of stable to increased CE but could occur if
deal-level expected losses increase significantly and/or interest
shortfalls occur;
- Downgrades to 'Asf' and 'BBBsf' category rated classes could
occur if deal-level losses increase significantly on non-defeased
loans in the transactions including outsized losses on any larger
FLOCs;
- Downgrades to 'BBsf' and 'Bsf' category rated classes are
possible with higher expected losses from FLOCs, if loans transfer
to special servicing and/or become delinquent.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
- Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with increased CE resulting from amortization and paydowns, coupled
with stable-to-improved pool-level loss expectations. Classes would
not be upgraded above 'Asf' if there is likelihood for interest
shortfalls; classes may not be upgraded to 'AAAsf' if there are
significant concentrations of defeasance;
- Upgrades to the 'BBBsf', 'BBsf' and 'Bsf' category rated classes
would be limited based on sensitivity to concentrations of the
pools, including maturity dates and are generally not expected
until the later years of the transactions.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
[*] Fitch Affirms 52 Classes From 3 CMBS 2019 Vintage Conduit Deals
-------------------------------------------------------------------
Fitch Ratings has affirmed 52 classes from three U.S. CMBS 2019
vintage conduit transactions. The Rating Outlooks for four classes
in the CSAIL 2019-C18 transaction were revised to Negative from
Stable. All classes from these transactions have been removed from
Under Criteria Observation (UCO).
Entity/Debt Rating Prior
----------- ------ -----
BANK 2019-BNK23
A-1 06541RAY9 LT AAAsf Affirmed AAAsf
A-2 06541RBA0 LT AAAsf Affirmed AAAsf
A-3 06541RBB8 LT AAAsf Affirmed AAAsf
A-S 06541RBE2 LT AAAsf Affirmed AAAsf
A-SB 06541RAZ6 LT AAAsf Affirmed AAAsf
B 06541RBF9 LT AA-sf Affirmed AA-sf
C 06541RBG7 LT A-sf Affirmed A-sf
D 06541RAJ2 LT BBBsf Affirmed BBBsf
E 06541RAL7 LT BBB-sf Affirmed BBB-sf
F 06541RAN3 LT BB-sf Affirmed BB-sf
G 06541RAQ6 LT B-sf Affirmed B-sf
X-A 06541RBC6 LT AAAsf Affirmed AAAsf
X-B 06541RBD4 LT AA-sf Affirmed AA-sf
X-D 06541RAA1 LT BBB-sf Affirmed BBB-sf
X-F 06541RAC7 LT BB-sf Affirmed BB-sf
X-G 06541RAE3 LT B-sf Affirmed B-sf
MSC 2019-L3
A-1 61691UBA6 LT AAAsf Affirmed AAAsf
A-2 61691UBB4 LT AAAsf Affirmed AAAsf
A-3 61691UBD0 LT AAAsf Affirmed AAAsf
A-4 61691UBE8 LT AAAsf Affirmed AAAsf
A-S 61691UBH1 LT AAAsf Affirmed AAAsf
A-SB 61691UBC2 LT AAAsf Affirmed AAAsf
B 61691UBJ7 LT AA-sf Affirmed AA-sf
C 61691UBK4 LT A-sf Affirmed A-sf
D 61691UAJ8 LT BBBsf Affirmed BBBsf
E 61691UAL3 LT BBB-sf Affirmed BBB-sf
F 61691UAN9 LT BB+sf Affirmed BB+sf
G 61691UAQ2 LT BB-sf Affirmed BB-sf
H 61691UAS8 LT B-sf Affirmed B-sf
X-A 61691UBF5 LT AAAsf Affirmed AAAsf
X-B 61691UBG3 LT AAAsf Affirmed AAAsf
X-D 61691UAA7 LT BBB-sf Affirmed BBB-sf
X-F 61691UAC3 LT BB+sf Affirmed BB+sf
X-G 61691UAE9 LT BB-sf Affirmed BB-sf
X-H 61691UAG4 LT B-sf Affirmed B-sf
CSAIL 2019-C18
A-1 12597DAA3 LT AAAsf Affirmed AAAsf
A-2 12597DAB1 LT AAAsf Affirmed AAAsf
A-3 12597DAC9 LT AAAsf Affirmed AAAsf
A-4 12597DAD7 LT AAAsf Affirmed AAAsf
A-S 12597DAH8 LT AAAsf Affirmed AAAsf
A-SB 12597DAE5 LT AAAsf Affirmed AAAsf
B 12597DAJ4 LT AA-sf Affirmed AA-sf
C 12597DAK1 LT A-sf Affirmed A-sf
D 12597DAS4 LT BBBsf Affirmed BBBsf
E 12597DAU9 LT BBB-sf Affirmed BBB-sf
F 12597DAW5 LT BB-sf Affirmed BB-sf
G 12597DAY1 LT B-sf Affirmed B-sf
X-A 12597DAF2 LT AAAsf Affirmed AAAsf
X-B 12597DAG0 LT AA-sf Affirmed AA-sf
X-D 12597DAL9 LT BBB-sf Affirmed BBB-sf
X-F 12597DAN5 LT BB-sf Affirmed BB-sf
X-G 12597DAQ8 LT B-sf Affirmed B-sf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of the
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since Fitch's prior
rating actions of these transactions.
Performance and 'Bsf' Loss Expectations: Deal-level 'Bsf' rating
case losses range from 3.15% to 4.02%. The affirmations reflect the
impact of the criteria and generally stable performance of the
transactions.
The Negative Outlooks for classes F, G, X-F and X-G within the
CSAIL 2019-C18 transaction reflect the potential for downgrades due
to lease rollover and maturity concerns with the United Healthcare
Office loan.
Fitch Loans of Concern: Fitch has identified four loans as Fitch
Loans of Concern (FLOCs) all within the CSAIL 2019-C18
transaction.
The largest FLOCs include Redwood Technology Center (3% of pool)
and United Healthcare Office (2.9% of pool). The Redwood Technology
Center was developed in 2007 as two, multi-tenant office buildings
and one retail/fitness center. One of the three suites leased to
the property's largest tenant, Ciena Corporation (37% of NRA;
January 2025), accounting for 12.1% of the NRA is currently dark.
The lease for all of the tenant's space expires in January 2025.
Fitch's 'Bsf' rating case loss of 13.9% (prior to concentration
adjustments) is based on an 9% cap rate and 20% stress to YE 2022
NOI given the near-term rollover and dark space. Fitch also
increased the probability of default due to refinancability
concerns.
The United Healthcare Office loan is secured by a 204,123-sf office
property located in Las Vegas, NV. The building is 100% leased to
the single-tenant United Healthcare through December 2025,
approximately 14 months after the loan's maturity in October 2024.
As an additional sensitivity scenario, Fitch factored in a 50%
outsized loss on the loan due to the near-term maturity and
concerns with refinancing given the lease expiration of the sole
tenant.
Change to Credit Enhancement: As of the September distribution
date, the aggregate pool balance has been reduced on average 1.75%.
For BANK 2019-BNK23 and MSC 2019-L3, paydown since issuance has
been less than 1% and for CSAIL 2019-C18, paydown has been 3.57%
since issuance. No losses have been realized in any of the
transactions.
Defeasance: On average, the transactions have a 5% concentration of
defeasance, with largest concentration in the CSAIL 2019-C18
(6.6%).
Fitch is currently evaluating the treatment of defeased loans in
CMBS transactions and may consider higher stress assumptions on
government obligations that have a rating lower than 'AAA'. No
classes rated 'AAAsf' in these transactions are anticipated to be
negatively impacted by defeasance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from refinance and lease rollover concerns with the United
Healthcare Office loan that could result in higher than expected
losses. If the tenant does not renew its lease and/or fails to
repay at maturity, downgrades to these classes are anticipated.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur. For 'AAAsf' rated bonds, additional
stresses applied to defeased collateral if the U.S. sovereign
rating is lower than 'AAA' could also contribute to downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from continued performance of the FLOCs
and with greater certainty of near-term losses on specially
serviced assets and other FLOCs.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
stable-to-improved pool-level loss expectations and performance
stabilization of FLOCs. Upgrades of these classes to 'AAAsf' will
also consider the concentration of defeased loans in the
transaction.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
[*] Fitch Cuts 25 & Affirms 77 Classes From 13 CBMS Conduit Deals
-----------------------------------------------------------------
Fitch Ratings has downgraded 25 and affirmed 77 classes from 13
U.S. CMBS conduit transactions from the 2013, 2014 and 2017
vintages.
In addition, Negative Rating Outlooks were assigned to eight
classes following their downgrades. The Outlooks were revised to
Negative from Stable on 26 classes, revised to Stable from Positive
on three classes, and revised to Negative from Positive on one
class. The Outlook remains Negative on one affirmed class.
Fitch has removed all classes from these transactions from Under
Criteria Observation (UCO).
Entity/Debt Rating Prior
----------- ------ -----
COMM 2014-CCRE14
Mortgage Trust
A-2 12630DAV6 LT PIFsf Paid In Full AAAsf
A-3 12630DAX2 LT PIFsf Paid In Full AAAsf
A-4 12630DAY0 LT AAAsf Affirmed AAAsf
A-M 12630DBA1 LT AAAsf Affirmed AAAsf
A-SB 12630DAW4 LT AAAsf Affirmed AAAsf
X-A 12630DAZ7 LT AAAsf Affirmed AAAsf
Citigroup
Commercial
Mortgage Trust
2013-GC15
A-S 17321JAF1 LT PIFsf Paid In Full AAAsf
B 17321JAG9 LT PIFsf Paid In Full AA-sf
C 17321JAH7 LT PIFsf Paid In Full A-sf
D 17321JAP9 LT BBB-sf Affirmed BBB-sf
E 17321JAR5 LT B-sf Affirmed B-sf
F 17321JAT1 LT CCsf Downgrade CCCsf
PEZ 17321JAZ7 LT PIFsf Paid In Full A-sf
X-A 17321JAJ3 LT PIFsf Paid In Full AAAsf
X-C 17321JAM6 LT B-sf Affirmed B-sf
WFRBS Commercial
Mortgage Trust
2013-C17
A-4 92938GAD0 LT PIFsf Paid In Full AAAsf
A-S 92938GAF5 LT AAAsf Affirmed AAAsf
A-SB 92938GAE8 LT PIFsf Paid In Full AAAsf
B 92938GAJ7 LT AAAsf Affirmed AAAsf
C 92938GAK4 LT AAsf Affirmed AAsf
D 92938GAN8 LT BBB-sf Affirmed BBB-sf
E 92938GAQ1 LT BBsf Affirmed BBsf
F 92938GAS7 LT Bsf Affirmed Bsf
X-A 92938GAG3 LT AAAsf Affirmed AAAsf
X-B 92938GAH1 LT AAAsf Affirmed AAAsf
COMM 2013-CCRE12
A-4 12591KAE5 LT AAAsf Affirmed AAAsf
A-M 12591KAG0 LT BBBsf Downgrade Asf
B 12591KAH8 LT CCCsf Downgrade Bsf
C 12591KAK1 LT CCsf Downgrade CCCsf
D 12624SAE9 LT Csf Affirmed Csf
E 12624SAG4 LT Csf Affirmed Csf
F 12624SAJ8 LT Csf Affirmed Csf
PEZ 12591KAJ4 LT CCsf Downgrade CCCsf
X-A 12591KAF2 LT BBBsf Downgrade Asf
X-B 12624SAA7 LT CCCsf Downgrade Bsf
MSBAM 2013-C12
A-4 61762XAU1 LT AAAsf Affirmed AAAsf
A-S 61762XAW7 LT AAAsf Affirmed AAAsf
B 61762XAX5 LT AA-sf Affirmed AA-sf
C 61762XAZ0 LT A-sf Affirmed A-sf
D 61762XAC1 LT BBsf Affirmed BBsf
E 61762XAE7 LT CCCsf Downgrade Bsf
F 61762XAG2 LT CCsf Downgrade CCCsf
G 61762XAJ6 LT Csf Downgrade CCCsf
PST 61762XAY3 LT A-sf Affirmed A-sf
X-A 61762XAV9 LT AAAsf Affirmed AAAsf
JPMBB 2013-C15
A-S 46640NAJ7 LT AAAsf Affirmed AAAsf
B 46640NAK4 LT AAsf Affirmed AAsf
C 46640NAL2 LT Asf Affirmed Asf
D 46640NAP3 LT BBB-sf Affirmed BBB-sf
E 46640NAR9 LT Bsf Downgrade BBsf
F 46640NAT5 LT CCCsf Downgrade Bsf
X-A 46640NAG3 LT AAAsf Affirmed AAAsf
X-B 46640NAH1 LT AAsf Affirmed AAsf
JPMBB 2013-C17
A-3 46640UAC6 LT PIFsf Paid In Full AAAsf
A-4 46640UAD4 LT AAAsf Affirmed AAAsf
A-S 46640UAH5 LT AAAsf Affirmed AAAsf
A-SB 46640UAE2 LT PIFsf Paid In Full AAAsf
B 46640UAJ1 LT AA-sf Affirmed AA-sf
C 46640UAK8 LT A-sf Affirmed A-sf
D 46640UAN2 LT BBB-sf Affirmed BBB-sf
E 46640UAP7 LT B-sf Downgrade BBsf
EC 46640UAL6 LT A-sf Affirmed A-sf
F 46640UAQ5 LT CCCsf Affirmed CCCsf
X-A 46640UAF9 LT AAAsf Affirmed AAAsf
MSBAM 2013-C13
A-3 61763BAT1 LT PIFsf Paid In Full AAAsf
A-4 61763BAU8 LT AAAsf Affirmed AAAsf
A-S 61763BAW4 LT AAAsf Affirmed AAAsf
B 61763BAX2 LT AAsf Affirmed AAsf
C 61763BAZ7 LT Asf Affirmed Asf
D 61763BAC8 LT BBB-sf Affirmed BBB-sf
E 61763BAE4 LT BB+sf Affirmed BB+sf
F 61763BAG9 LT BB-sf Affirmed BB-sf
G 61763BAJ3 LT CCCsf Affirmed CCCsf
PST 61763BAY0 LT Asf Affirmed Asf
X-A 61763BAV6 LT AAAsf Affirmed AAAsf
X-B 61763BAA2 LT AAsf Affirmed AAsf
COMM 2013-CCRE13
A-3 12630BAZ1 LT PIFsf Paid In Full AAAsf
A-4 12630BBA5 LT AAAsf Affirmed AAAsf
A-M 12630BBC1 LT AAAsf Affirmed AAAsf
A-SB 12630BAY4 LT AAAsf Affirmed AAAsf
B 12630BBD9 LT AAsf Affirmed AAsf
C 12630BBF4 LT BBBsf Downgrade Asf
D 12630BAE8 LT B-sf Downgrade BBsf
E 12630BAG3 LT CCsf Downgrade CCCsf
F 12630BAJ7 LT Csf Downgrade CCsf
PEZ 12630BBE7 LT BBBsf Downgrade Asf
X-A 12630BBB3 LT AAAsf Affirmed AAAsf
CGCMT 2013-GC17
A-4 17321RAD8 LT AAAsf Affirmed AAAsf
A-S 17321RAH9 LT AAAsf Affirmed AAAsf
B 17321RAJ5 LT AAsf Affirmed AAsf
C 17321RAL0 LT Asf Affirmed Asf
D 17321RAM8 LT BBsf Downgrade BBBsf
E 17321RAP1 LT CCCsf Downgrade Bsf
F 17321RAR7 LT CCsf Downgrade CCCsf
PEZ 17321RAK2 LT Asf Affirmed Asf
X-A 17321RAF3 LT AAAsf Affirmed AAAsf
X-B 17321RAG1 LT AAsf Affirmed AAsf
X-C 17321RAV8 LT CCCsf Downgrade Bsf
WFRBS 2013-C16
A-5 92938EAQ6 LT PIFsf Paid In Full AAAsf
A-S 92938EAW3 LT PIFsf Paid In Full AAAsf
B 92938EBF9 LT PIFsf Paid In Full AA-sf
C 92938EBJ1 LT PIFsf Paid In Full A-sf
D 92938EBR3 LT BBsf Downgrade BBB-sf
E 92938EBU6 LT CCCsf Downgrade Bsf
F 92938EBX0 LT Csf Downgrade CCCsf
PEX 92938EBM4 LT PIFsf Paid In Full A-sf
X-A 92938EAZ6 LT PIFsf Paid In Full AAAsf
WFRBS 2013-C18
A-4 96221QAD5 LT AAAsf Affirmed AAAsf
A-5 96221QAE3 LT AAAsf Affirmed AAAsf
A-S 96221QAG8 LT AAAsf Affirmed AAAsf
A-SB 96221QAF0 LT AAAsf Affirmed AAAsf
B 96221QAJ2 LT AA-sf Affirmed AA-sf
C 96221QAK9 LT A-sf Affirmed A-sf
D 96221QAM5 LT CCCsf Affirmed CCCsf
E 96221QAP8 LT CCsf Affirmed CCsf
F 96221QAR4 LT Csf Affirmed Csf
PEX 96221QAL7 LT A-sf Affirmed A-sf
X-A 96221QAH6 LT AAAsf Affirmed AAAsf
LSTAR 2017-5
A-3 54910TAE2 LT AAAsf Affirmed AAAsf
A-4 54910TAG7 LT AAAsf Affirmed AAAsf
A-5 54910TAJ1 LT AAAsf Affirmed AAAsf
KEY RATING DRIVERS
Criteria Update: The rating actions reflect the impact of Fitch's
updated U.S. and Canadian Multiborrower CMBS Rating Criteria,
published on May 22, 2023, and incorporate any changes in loan
performance and/or credit enhancement (CE) since its last rating
action.
Pool Concentration: Due to significant near-term maturity
concentration, few remaining loans and/or the majority of the loans
being Fitch Loans of Concerns (FLOCs), Fitch conducted a
look-through analysis to determine the loans' expected recoveries
and losses to assess the outstanding classes' ratings relative to
CE. In some cases, this analysis resulted in rating caps given the
collateral quality of the remaining loans/assets and issues with
refinanceability or ultimate resolutions.
The downgrades reflect higher pool loss expectations, driven mainly
by the specially serviced loans/assets and other FLOCs flagged for
refinance risk.
Deal-level 'Bsf' rating case losses range from 4.1% to 42.5%. These
transactions have a high FLOC concentration averaging 60% (ranging
from 22% to 100%), with specially serviced loans/assets averaging
28% (ranging from 1.3% to 100%).
Of the 25 downgraded classes from eight transactions:
- four were from an investment-grade to a lower investment-grade
rating;
- two were from an investment-grade to a below investment-grade
rating;
- 10 were from a below investment-grade to a lower below
investment-grade or distressed rating (CCCsf or below);
- nine were from an already distressed rating to a lower distressed
rating due to greater certainty of losses to the class.
Investment-Grade Downgrades: In COMM 2013-CCRE12 and COMM
2013-CCRE13, the downgrades primarily reflected higher loss
expectations since the last rating action on the 175 West Jackson
loan, which is secured by a 22-story 1.45 million-sf office
building located in downtown Chicago, IL. Occupancy remains
challenged with reported occupancy of 55% as of June 2023, down
from 61% at YE 2022 and 65% at YE 2021. The servicer-reported NOI
DSCR was 0.68x as of YE 2022, compared with 0.52x as of YE 2021.
The lender is in discussions with the borrower about a potential
cooperative marketing/sale of the property and/or a deed-in-lieu of
foreclosure. The master servicer has deemed outstanding advances on
the loan as non-recoverable.
In WFRBS 2013-C16, the downgrade of class D reflects rating cap of
'BBsf' due to the collateral quality of the remaining five loans in
the pool, which are all in special servicing, as well as higher
loss expectations since the last rating action on the Augusta Mall
loan, secured by a 500,222-sf portion of a 1,106,493-sf, two-story
super-regional mall located in Augusta, GA. The loan defaulted at
its scheduled August 2023 maturity.
In CGCMT 2013-GC17, the downgrade of class D reflects higher losses
on the larger retail and office FLOCs in the pool, where
performance has either not stabilized or has deteriorated further.
The Negative Outlooks on 36 classes in 10 transactions reflect
their significant reliance on FLOCs, including specially serviced
loans/assets and those flagged for refinance risk, to repay,
whereby further performance deterioration and/or lower recovery
expectations would result in downgrades. The FLOCs, which are the
largest contributors to overall loss expectations in these
transactions, include:
- CGCMT 2013-GC15: 735 Sixth Avenue, Parkway Centre East, Spectrum
Office Building;
- CGCMT 2013-GC17: Park Place Shopping Center, One Union Square,
Rivergate Station, Kings Crossing;
- COMM 2013-CCRE12: 175 West Jackson, Harbourside North, Oglethorpe
Mall, 216 West Jackson, 9 Northeastern Boulevard, Nashua Mall, The
MAve Hotel;
- COMM 2013-CCRE13: 175 West Jackson;
- JPMBB 2013-C15: 1615 L Street, 369 Lexington Avenue, Southfield
Retail Portfolio, 2 West 46th Street;
- JPMBB 2013-C17: Chinatown Row, Wildwood Center, 801 Travis,
Deville Plaza;
- MSBAM 2013-C12: Westfield Countryside, 15 MetroTech Center, Deer
Springs Town Center, City Creek Center;
- MSBAM 2013-C13: 1200 Howard Blvd., 940 Ridgebrook Road,
Stonestown Galleria;
- WFRBS 2013-C17: Home Depot Brush Avenue, Landerwood Crossing,
Sierra Commons Shopping Center, Baymont Hospitality Portfolio, City
Centre;
- WFRBS 2013-C18: Cedar Rapids Office Portfolio, HIE at Magnificent
Mile, JFK Hilton, Hudson Mall.
Change to CE: As of the September 2023 distribution date, the
aggregate pool balance has been reduced on average 62% (ranging
from 30% to 91%).
The transactions have a defeasance concentration averaging 15%
(ranging from 0% to 41%). Fitch is currently evaluating the
treatment of defeased loans in CMBS transactions and may consider
higher stress assumptions on government obligations that have a
rating lower than 'AAA'. No classes rated 'AAAsf' in these
transactions are anticipated to be negatively impacted by
defeasance.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
The Negative Outlooks reflect possible future downgrades stemming
from issues with potential further declines in performance that
could result in higher expected losses on FLOCs. If expected losses
do increase, downgrades to these classes are anticipated.
Downgrades to 'AAAsf' and 'AAsf' category rated classes could occur
if deal-level expected losses increase significantly and/or
interest shortfalls occur. For 'AAAsf' rated bonds, additional
stresses applied to significant concentrations of defeased
collateral could cause downgrades.
Downgrades to 'Asf' and 'BBBsf' category rated classes could occur
if deal-level losses increase significantly on non-defeased loans
in the transactions and with outsized losses on larger FLOCs.
Downgrades to 'BBsf' and 'Bsf' category rated classes are possible
with higher expected losses from continued performance of the FLOCs
and with greater certainty of near-term losses on specially
serviced assets and other FLOCs.
Downgrades to distressed ratings of 'CCCsf' through 'Csf' would
occur as losses become more certain and/or as losses are incurred.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade
Upgrades to 'AAsf' and 'Asf' category rated classes are possible
with significantly increased CE from paydowns, coupled with
stable-to-improved pool-level loss expectations and performance
stabilization of FLOCs. Upgrades of these classes to 'AAAsf' will
also consider the concentration of defeased loans in the
transaction.
Upgrades to the 'BBBsf' category rated classes would be limited
based on sensitivity to concentrations or the potential for future
concentration. Classes would not be upgraded above 'Asf' if there
is likelihood for interest shortfalls.
Upgrades to 'BBsf' and 'Bsf' category rated classes are not likely
until the later years in a transaction and only if the performance
of the remaining pool is stable and there is sufficient CE to the
classes.
Upgrades to distressed ratings of 'CCCsf' through 'Csf' are not
expected, but are possible with better than expected recoveries on
specially serviced loans or significantly higher values on FLOCs.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless
otherwise disclosed in this section. A score of '3' means ESG
issues are credit-neutral or have only a minimal credit impact on
the entity, either due to their nature or the way in which they are
being managed by the entity. Fitch's ESG Relevance Scores are not
inputs in the rating process; they are an observation on the
relevance and materiality of ESG factors in the rating decision.
[*] Moody's Upgrades Ratings on $199MM of US RMBS Issued 2019
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 13 bonds from
three transactions issued by CIM Trust 2019-R2, CIM Trust 2019-R5
and GCAT 2019-RPL1 Trust. The transactions are backed by seasoned
performing and modified re-performing residential mortgage loans
(RPL). The collateral has multiple servicers.
Complete rating actions are as follows:
Issuer: CIM Trust 2019-R2
Cl. B1, Upgraded to Ba1 (sf); previously on Sep 28, 2020 Confirmed
at Ba3 (sf)
Cl. B2, Upgraded to B1 (sf); previously on Sep 28, 2020 Confirmed
at B3 (sf)
Cl. M2, Upgraded to Aa3 (sf); previously on Mar 9, 2022 Upgraded to
A2 (sf)
Cl. M3, Upgraded to Baa1 (sf); previously on Sep 28, 2020 Confirmed
at Baa3 (sf)
Issuer: CIM Trust 2019-R5
Cl. B1, Upgraded to A2 (sf); previously on Dec 22, 2022 Upgraded to
Baa1 (sf)
Cl. B2, Upgraded to Baa3 (sf); previously on Mar 9, 2022 Upgraded
to Ba2 (sf)
Cl. M2, Upgraded to Aaa (sf); previously on Dec 22, 2022 Upgraded
to Aa1 (sf)
Cl. M3, Upgraded to Aa2 (sf); previously on Dec 22, 2022 Upgraded
to A1 (sf)
Issuer: GCAT 2019-RPL1 Trust
Cl. B-1, Upgraded to Baa1 (sf); previously on Mar 9, 2022 Upgraded
to Baa3 (sf)
Cl. B-2, Upgraded to Ba2 (sf); previously on Mar 9, 2022 Upgraded
to B1 (sf)
Cl. B-3, Upgraded to Caa3 (sf); previously on Mar 9, 2022 Upgraded
to Ca (sf)
Cl. M-2, Upgraded to Aa1 (sf); previously on Mar 9, 2022 Upgraded
to Aa3 (sf)
Cl. M-3, Upgraded to A1 (sf); previously on Mar 9, 2022 Upgraded to
A3 (sf)
RATINGS RATIONALE
The rating actions reflect the recent performance as well as
Moody's updated loss expectations on the underlying pools. The
rating upgrades are a result of the improving performance of the
related pools, and an increase in credit enhancement available to
the bonds. In Moody's analysis, Moody's considered the likelihood
of higher future pool expected losses due to rising borrower
defaults driven by an increase in unemployment and inflation while
prepayments remain broadly subdued amid elevated interest rates.
The actions also reflect Moody's updated loss expectations on the
pools which incorporate Moody's assessment of the representations
and warranties framework of the transactions, the due diligence
findings of the third-party reviews at the time of issuance, and
the transactions' servicing arrangement.
Principal Methodologies
The methodologies used in these ratings were "Non-Performing and
Re-Performing Loan Securitizations Methodology" published in July
2022.
Factors that would lead to an upgrade or downgrade of the ratings:
Up
Levels of credit protection that are higher than necessary to
protect investors against current expectations of loss could drive
the ratings of the subordinate bonds up. Losses could decline from
Moody's original expectations as a result of a lower number of
obligor defaults or appreciation in the value of the mortgaged
property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and
housing market.
Down
Levels of credit protection that are insufficient to protect
investors against current expectations of loss could drive the
ratings down. Losses could rise above Moody's expectations as a
result of a higher number of obligor defaults or deterioration in
the value of the mortgaged property securing an obligor's promise
of payment. Transaction performance also depends greatly on the US
macro economy and housing market. Other reasons for
worse-than-expected performance include poor servicing, error on
the part of transaction parties, inadequate transaction governance
and fraud.
Finally, performance of RMBS continues to remain highly dependent
on servicer procedures. Any change resulting from servicing
transfers or other policy or regulatory change can impact the
performance of these transactions. In addition, improvements in
reporting formats and data availability across deals and trustees
may provide better insight into certain performance metrics such as
the level of collateral modifications.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
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The Sunday TCR delivers securitization rating news from the week
then-ending.
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Troubled Company Reporter is a daily newsletter co-published
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Peter A. Chapman, Editors.
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*** End of Transmission ***