DBRS Morningstar Confirms Ratings on All Classes of Natixis Commercial Mortgage Securities Trust 2017-75B

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2017-75B issued by Natixis Commercial Mortgage Securities Trust 2017-75B as follows:

-- Class A at AAA (sf)
-- Class V1A at AAA (sf)
-- Class XA at AAA (sf)
-- Class B at AA (sf)
-- Class V1B at AA (sf)
-- Class V1XB at A (high) (sf)
-- Class XB at A (high) (sf)
-- Class C at A (sf)
-- Class V1C at A (sf)
-- Class D at BBB (low) (sf)
-- Class V1D at BBB (low) (sf)
-- Class E at B (high) (sf)
-- Class V1E at B (high) (sf)
-- Class V2 at B (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance since DBRS Morningstar’s last review. Cash flow remains below the DBRS Morningstar net cash flow (NCF) derived at issuance as a result of occupancy declines. However, recent performance figures show some improvement as cash flow increased 5.4% year-over-year in 2021 with occupancy holding steady at 75.5% as of year-end (YE) 2021. In addition, recent leasing activity has been recorded and the borrower reports increased interest in available spaces in the past few months.

The total $250.0 million financing consisted of $59.0 million of pooled trust debt, $84.0 million of a subordinated B note held in the trust, $33.0 million of nonpooled pari passu debt outside the trust, and $54.0 of a subordinated B note held outside the trust. The 10-year loan pays interest only (IO) for the entire term. The total mortgage debt of $230.0 million was supplemented by $20.0 million of mezzanine debt.

Collateral for the loan is the fee-simple interest in a 671,369-square-foot (sf), Class B office tower in the Financial District of lower Manhattan, New York. The property has undergone recent improvements for the lobby, elevator, and mechanical systems.

The largest tenants at the collateral property are Board of Education of the City School District of the City of New York (16.3% of net rentable area (NRA), lease through January 2035), AT&T Corporation (4.3% of NRA, lease through February 2034), and Northsouth Production (4.1% of NRA, lease through April 2025). Occupancy declined from 85.9% in March 2020 because 10 tenants, representing 9.7% of NRA, vacated or downsized in 2020. There are seven tenants, representing 7.8% of the NRA, including the fourth-largest tenant, Paetec Communications, Inc., that are scheduled to roll within the next 12 months.

The YE2021 cash flow was reported at $12.8 million, an increase of 5.4% over the YE2020 figure, but remains 8.1% below the YE2019 figure because of the aforementioned occupancy declines. The YE2021 debt service coverage ratio (DSCR) was reported at 1.14 times (x), up from the YE2020 DSCR of 1.07x. According to Reis, the subject’s submarket reported a Q4 2021 vacancy rate of 10.8%, which suggests overall demand is healthy and conducive to the borrower’s efforts to back-fill the recent vacancies. The borrower has noted signings for two new tenants representing approximately 3% of the NRA, with overall activity noted to have increased in recent months. As of April 2022, the property’s website lists approximately 121,000 sf available for rent, implying an occupancy rate of 81.9%.

ESG CONSIDERATIONS
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 XA, XB, and V1XB are interest-only (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 this transaction.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loan including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

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

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), 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.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

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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