DBRS Morningstar Confirms All Classes of JPMDB Commercial Mortgage Securities Trust 2017-C7

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2017-C7 issued by JPMDB Commercial Mortgage Securities Trust 2017-C7 as follows:

-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 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 (sf)
-- Class C at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E-RR at BB (low) (sf)
-- Class F-RR at B (low) (sf)

DBRS Morningstar changed the trends on Classes E-RR and F-RR to Stable from Negative. All other trends remain Stable. The trend changes to Stable reflect the recent forbearances of two of the three specially serviced loans as well as repayment of the Mural Lofts loan (Prospectus ID#27), which had previously transferred to special servicing for imminent default but was successfully repaid in March 2021 with no loss to the trust.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations. At issuance, the transaction consisted of 41 loans with an original trust balance of $1.11 billion. As of the November 2021 remittance report, 38 loans remain in the transaction with a current trust balance of $1.06 billion, representing a collateral reduction of approximately 4.5% since issuance. Three loans, representing 8.35% of the pool, are in special servicing.

The largest loan in special servicing is 245 Park Avenue (Prospectus ID#2, 3% of the pool), which transferred to special servicing in November 2021 because the majority sponsor, HNA Group (51%), had filed for bankruptcy. According to an October 2021 Bloomberg article, the borrower filed for Chapter 11 bankruptcy because the property manager has been unable to backfill Major League Baseball’s space (12.6% of net rentable area (NRA)), which vacated the property in January 2020 ahead of its October 2022 lease expiration (a departure that was known to be forthcoming at issuance). A December 2020 rent roll showed that the property was 93.2% occupied with an average base rent of $79.72 per square foot (psf), compared with the 91.2% occupancy rate and $80.72 psf average base rent at issuance. The loan is sponsored by HNA Group, a China-based Fortune 500 company that was relatively new to owning and managing commercial real estate at issuance.

The second-largest loan in special servicing is Sheraton DFW (Prospectus ID#14, 3% of the pool). The loan transferred to special servicing in July 2020 for payment default after the loan became 60 days delinquent as the property faced cash flow disruptions resulting from the Coronavirus Disease (COVID-19) pandemic. The loan is secured by the borrower’s fee interest in a 302-key full-service hotel adjacent to the Dallas/Fort Worth International Airport. The loan received pandemic relief in September 2021, which included converting the loan to interest only (IO) between June 2021 and May 2022 and waiving furniture, fixtures, and equipment deposits between April 2020 and December 2021. The loan is expected to return to the master servicer upon receipt of the November and December 2021 payments.

While not on the servicer’s watchlist, DBRS Morningstar remains concerned about the pool’s second-largest loan, Station Place III (Prospectus ID#3, 6.1% of the pool). This loan is secured by the borrower’s fee interest in a 517,653-sf Class A office building in the central business district of Washington, D.C. It will face rollover risk when the lease of the property’s largest tenant, the Securities and Exchange Commission (SEC), which accounts for 40.5% of the NRA, expires in September 2023. According to an article in the Washington Business Journal dated September 2021, the SEC is set to shift its headquarters to a yet-to-be-constructed 1.23 million-sf office complex by Douglas Development Corp. on New York Avenue NE by next year. As per the June 2021 rent roll, the tenant contributes approximately $1 million in base rent annually. Although the exit will severely affect the cash flows, such concerns are partially mitigated by the property’s location, which is adjacent to Union Station and a few blocks north of the United States Capitol. As on June 2021, the property was 100% occupied with a debt service coverage ratio of 3.15 times.

At issuance, there were four loans, representing 17.8% of the original pool, exhibiting credit characteristics consistent with investment-grade shadow ratings. With this review, DBRS Morningstar confirms that the loans continue to perform in line with those shadow ratings.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, and X-D are IO certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#14 – Sheraton DFW (3.0% of the pool)
-- Prospectus ID#15 – 245 Park Avenue (3.0% of the pool)
-- Prospectus ID#19 – Lightstone Portfolio (2.3% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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