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UBS Commercial Mortgage Trust 2017-C1 -- Moody's affirms seven and downgrades one class of UBSCM 2017-C1

Rating Action: Moody's affirms seven and downgrades one class of UBSCM 2017-C1

Global Credit Research - 04 Aug 2020

Approximately $793 million of structured securities affected

New York, August 04, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on seven classes, and downgraded the rating on one class in UBS Commercial Mortgage Trust 2017-C1, Commercial Pass-Through Certificates, Series 2017-C1 as follows:

Cl. A-1, Affirmed Aaa (sf); previously on Jun 18, 2018 Affirmed Aaa (sf)

Cl. A-2, Affirmed Aaa (sf); previously on Jun 18, 2018 Affirmed Aaa (sf)

Cl. A-3, Affirmed Aaa (sf); previously on Jun 18, 2018 Affirmed Aaa (sf)

Cl. A-4, Affirmed Aaa (sf); previously on Jun 18, 2018 Affirmed Aaa (sf)

Cl. A-S, Affirmed Aa2 (sf); previously on Jun 18, 2018 Affirmed Aa2 (sf)

Cl. A-SB, Affirmed Aaa (sf); previously on Jun 18, 2018 Affirmed Aaa (sf)

Cl. B, Downgraded to A3 (sf); previously on Jun 18, 2018 Affirmed A2 (sf)

Cl. X-A*, Affirmed Aaa (sf); previously on Jun 18, 2018 Affirmed Aaa (sf)

* Reflects Interest Only Classes

RATINGS RATIONALE

The ratings on the six P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The rating on one P&I class was downgraded due to the decline in pool performance, driven primarily by exposure to retail and hotel properties (52% of the pool) and anticipated losses from the specially serviced (6.2% of the pool) and troubled loans.

The rating on the rated IO class, Cl. X-A, was affirmed based on the credit quality of the referenced classes.

The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of commercial real estate from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties. Moody's rating action reflects a base expected loss of 10.5% of the current pooled balance, compared to 4.6% at Moody's last review. Moody's base expected loss plus realized losses is now 10.1% of the original pooled balance, compared to 4.6% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The principal methodology used in rating all classes except interest-only classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/research/Approach-to-Rating-US-and-Canadian-ConduitFusion-CMBS--PBS_1226187. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/research/Approach-to-Rating-US-and-Canadian-ConduitFusion-CMBS--PBS_1226187 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Structured-Finance-Interest-Only-IO-Securities--PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

DEAL PERFORMANCE

As of the July 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 2.9% to $931million from $959million at securitization. The certificates are collateralized by 66 mortgage loans ranging in size from less than 1% to 5.4% of the pool, with the top ten loans (excluding defeasance) constituting 38.4% of the pool. Two loans, constituting 7.2% of the pool, have investment-grade structured credit assessments. Five loans, constituting 3.8% of the pool, have defeased and are secured by US government securities. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 38, compared to 41 at Moody's last review. As of the July 2020 remittance report, loans representing 88% were current or within their grace period on their debt service payments, 1.6% were beyond their grace period but less than 30 days delinquent, 2.5% were between 30 -- 59 days delinquent, and 4.5% was over 90+ days delinquent. Fifteen loans, constituting 22.6% of the pool, are on the master servicer's watchlist, of which 12 loans, representing 15.5% of the pool, indicate the borrower has requested relief in relation to coronavirus impact on the property. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Four loans, constituting 6.2% of the pool, are currently in special servicing. One of the specially serviced loans, representing 3.1% of the pool, transferred to special servicing since March 2020. The largest specially serviced loan is the Art Van Portfolio loan ($28.9 million -- 3.1% of the pool), which is secured by a portfolio consisting of 5 single tenant properties located in Michigan. The portfolio is 100% leased to Art Van Furniture Inc. under a 20-year master lease with expiration in February 2037, with two, 10-yr extension options. Art Van Furniture Inc. filed for bankruptcy protection in March 2020 and is now subject to a chapter 7 liquidation. The loan transferred to special servicing in April 2020 for imminent monetary default, and is currently cash managed. The special servicer is currently in discussions with the borrower and is in the process of developing a workout strategy. The second largest specially serviced loan is the Boston Creek Apartments loan ($16.1 million -- 1.7% of the pool), which is secured by a 349 unit garden style apartment complex, located in Lubbock, Texas. The loan transferred to special servicing in May 2019 due to imminent default. The property entered foreclosure in October 2019 and is now REO. The third largest specially serviced loan is the Greenhill Apartments loan ($7.48 million -- 0.8% of the pool), which is secured by a 258-unit student housing complex in Columbus, Georgia. Property performance has deteriorated since securitization. The loan transferred to special servicing in August 2018 due to imminent monetary default. The property was foreclosed in January 2019 and is currently REO. The remaining specially serviced loan is secured by a hotel property located in Ohio. Moody's has also assumed a high default probability for five poorly performing loans, constituting 6.8% of the pool, and has estimated an aggregate loss of $45.8 million (a 38% expected loss on average) from the specially serviced and troubled loans. The largest troubled loan is the Hampton Inn Savannah Historic District loan ($19.7 million -- 2.1% of the pool), which is secured by limited service hotel located in Savannah, Georgia. Moody's received full year 2019 operating results for 78% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 116%, compared to 112% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 21% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.2%.

Moody's actual and stressed conduit DSCRs are 1.52X and 0.98X, respectively, compared to 1.55X and 1.00X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance

The first loan with a structured credit assessment is the Apple Sunnyvale loan ($34 million -- 3.7% of the pool), which represents a pari-passu portion of a $104.35 million mortgage loan. The property is also encumbered with an $81.89 million B-note and a $46.32 million mezzanine loan. The loan is secured by the borrower's fee simple interest in a three-building office complex, located in Sunnyvale California. The buildings were built in 1989, and were recently renovated at a reported cost of $175 per square foot (PSF). The properties sole tenant, Apple, has leases that expire between 2023 and 2025. Due to the single-tenant exposure, Moody's analysis incorporated a Lit/Dark approach. Moody's structured credit assessment and stressed DSCR are baa3 (sca.pd) and 1.40X, respectively. The second largest loan with structured credit assessment is 75 Broad Street Loan ($33 million -- 3.5% of the pool), which represents a pari-passu portion of a $92.0 million mortgage loan. The property is also encumbered with an A-B and B-note of $138.0 million and a $20.0 million mezzanine loan. The loan is secured the borrower's leased fee interest in a 35-story office building located in New York, New York. The largest tenant is NYCDOE (11.9% of net rentable area (NRA)), which has a lease expiration in September 2033. Moody's structured credit assessment and stressed DSCR are a3 (sca.pd) and 1.71X, respectively. The top three conduit loans represent 14.3% of the pool balance. The largest loan is the Save Mart Portfolio Loan ($50 million -- 5.4% of the pool), which represents a pari-passu portion of a $138.0 million mortgage loan. The property is also encumbered with a $32.0 million B-note. The loan is secured by the borrower's simple fee interest in 33 anchored retail properties located in northern California, all within the Bay Area, Sacramento, and Central Valley markets. The portfolio contains 1,733,239 SF of aggregate NRA, with individual properties ranging in size from 40,593 SF to 62,501 SF. All properties were built between 1980 - 2003 (an average age of 24 years). The portfolio is 100% leased to Save Mart under a triple-net master lease that expires on April 30, 2032. The loan is interest-only for the entire term. Due to the single-tenant exposure, Moody's analysis incorporated a Lit/Dark approach. Moody's A-Note LTV and stressed/hurdle DSCR are 83% and 1.35X, respectively, compared to 79% and 1.42X at the last review. The second largest loan is the GM Logistics Center 1 Loan ($43.3 million -- 4.6% of the pool), which is secured by the borrower's leasehold interest in a 1.131 million SF industrial facility in Wentzville, Missouri (approximately 42 miles northwest of downtown St. Louis), situated on a 85.2 acre site. The property is built-to-suit for General Motors, and includes 32-foot ceiling heights and 168 dock high loading doors. The ground lease is with the City of Wentzville for a 10-year term expiring in December 2026. The sponsor deeded the property to the City in exchange for benefits under a payment-in-lieu-of-taxes (PILOT) program. If the sponsor chooses to forgo the PILOT program, the ground lease would collapse and fee simple interest would revert to the sponsor. The loan benefits from amortization. Due to the single-tenant exposure, Moody's analysis incorporated a Lit/Dark approach. Moody's LTV and stressed DSCR are 104% and 1.11X, respectively, compared to 108% and 1.07X at the last review. The third largest loan is the Moffett Place Google Loan ($40 million -- 4.3% of the pool), which represents a pari-passu portion of a $185 million mortgage loan. The property is also encumbered with a $40.0 million mezzanine loan. The loan is secured by the borrower's fee simple interest in a class A single tenant office building, located in Sunnyvale, California. The property is part of the larger Moffett Place Campus development, which includes three additional non-collateral, identical office buildings and three non-collateral parking garages. The property is currently 100% leased to Google through November 2028, with two seven-year extension options and no termination rights. Due to the single-tenant exposure, Moody's analysis incorporated a Lit/Dark approach. Moody's LTV and stressed DSCR are 129% and 0.78X, respectively, the same as at the last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004. The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Ashton Khan Associate Lead Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Romina Padhi VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653

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