UBS Commercial Mortgage Trust 2017-C5 -- Moody's affirms eight classes of UBSCM 2017-C5

Rating Action: Moody's affirms eight classes of UBSCM 2017-C5Global Credit Research - 09 Apr 2021Approximately $588.7 million of structured securities affectedNew York, April 09, 2021 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on eight classes in UBS Commercial Mortgage Trust 2017-C5, Commercial Mortgage Pass-Through Certificates, Series 2017-C5 as follows:Cl. A-1, Affirmed Aaa (sf); previously on Nov 16, 2018 Affirmed Aaa (sf)Cl. A-2, Affirmed Aaa (sf); previously on Nov 16, 2018 Affirmed Aaa (sf)Cl. A-3, Affirmed Aaa (sf); previously on Nov 16, 2018 Affirmed Aaa (sf)Cl. A-4, Affirmed Aaa (sf); previously on Nov 16, 2018 Affirmed Aaa (sf)Cl. A-5, Affirmed Aaa (sf); previously on Nov 16, 2018 Affirmed Aaa (sf)Cl. A-S, Affirmed Aa3 (sf); previously on Nov 16, 2018 Affirmed Aa3 (sf)Cl. A-SB, Affirmed Aaa (sf); previously on Nov 16, 2018 Affirmed Aaa (sf)Cl. X-A*, Affirmed Aaa (sf); previously on Nov 16, 2018 Affirmed Aaa (sf)* Reflects interest-only classesRATINGS RATIONALEThe ratings on the seven 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 the IO class, Cl. X-A, was affirmed based on the credit quality of the referenced classes.The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of commercial real estate from a gradual and unbalanced recovery in US economic activity. 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.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Moody's rating action reflects a base expected loss of 5.6% of the current pooled balance compared to 4.7% at Moody's last review. Moody's base expected loss plus realized losses is now 5.5% of the original pooled balance compared to 4.7% 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 RATINGSThe 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 ACTIONThe principal methodology used in rating all classes except interest-only classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=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 PERFORMANCEAs of the March 12, 2021 distribution date, the transaction's aggregate certificate balance has decreased by 1.8% to $729.9 million from $740.3 million at securitization. The certificates are collateralized by 49 mortgage loans ranging in size from less than 1% to 5.5% of the pool, with the top ten loans (excluding defeasance) constituting 45.4% of the pool.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 31, compared to 32 at Moody's last review.As of the March 2021 remittance report, loans representing 94.2% were current or within their grace period on their debt service payments, 5.8% was 30 + days delinquent.Eleven loans, constituting 19.7% of the pool, that currently are on the master servicer's watchlist. 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.No loans have been liquidated from the pool and there have been no realized losses to the trust. Two loans, constituting 4.3% of the pool, are currently in special servicing, all of which transferred to special servicing since March 2020.The largest specially serviced loan is the DoubleTree Wilmington Loan ($27.5 million -- 3.1% of the pool), which is secured by the borrower's fee simple interest in a 244-room full service hotel located in Wilmington, Delaware. The property was built in 1973 and extensively renovated in 2015. The property features 11,212 square feet (SF) of meeting space, an indoor pool, a fitness center, a business center, a sundry shop and typical complement of back-of-the-house facilities. In July 2020, this loan transferred to special servicing due to imminent default as a result of the business disruptions due to the coronavirus pandemic. The property has cash management in place with revenues being swept. Outside counsel was engaged as foreclosure proceedings were being filed and a potential receiver was vetted. However, the borrower has been able to reach an agreement on modification terms with the special servicer. As of January 2021, the loan was over 90+ days delinquent but was brought current in February. As of the March 2021 payment date, the loan is last paid through February 2021.The second largest specially serviced loan is the Holiday Inn Express Tallahassee Loan ($9.3 million -- 1.2% of the pool) which is secured by the borrower's fee interest in a 135-guestroom, limited-service hotel located in Tallahassee, Florida. The loan transferred to special servicing in January 2021 due to delinquency on loan payments. The borrower received a notice of default and has executed a pre negotiation letter, while bringing the loan current on delinquent payments.The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV. As described in the CMBS methodology used to rate this transaction, we make various adjustments to the MLTV. We adjust the MLTV for each loan using a value that reflects capitalization (cap) rates that are between our sustainable cap rates and market cap rates. We also use an adjusted loan balance that reflects each loan's amortization profile. The MLTV reported in this publication reflects the MLTV before the adjustments described in the methodology.Moody's received full year 2019 operating results for 97% of the pool, and partial year 2020 operating results for 98% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 112%, compared to 113% at the 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 21.6% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.3%.Moody's actual and stressed conduit DSCRs are 1.94X and 1.02X, respectively, compared to 1.87X and 1.03X at 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 loan with a structured credit assessment is the 237 Park Avenue Loan ($25.4 million -- 3.5% of the pool), which represents a pari passu portion of a $348.0 million senior mortgage. The property is also encumbered with $345.2 million in subordinate debt and $87.8 million in subordinated and non-pooled mezzanine debt. The loan is secured by the borrower's fee and leasehold condominium interests in a component of a 21-story, 1.3 million SF Class A office tower located in Manhattan, New York. The collateral also includes rent generated by space leases as well as the assignment of the purchase money note and mortgage with installment payments similar to lease payments generated by NYPH (a tenant of the building). As of December 2020, the property was 97% leased, compared 99% in 2019 and 96% in 2018. The three largest tenants represent 74% of the net rentable area (NRA) and all have lease expiration dates in 2025 or later. The loan is interest only throughout the entire 10-year loan term and Moody's structured credit assessment and stressed DSCR are baa1 (sca.pd) and 1.41X, respectively.The top three conduit loans represent 16.4% of the pool balance. The largest conduit loan is the Burbank Office Portfolio Loan ($40.0 million -- 5.5% of the pool), which represents a pari-passu portion of a $379 million senior mortgage loan. The loan is secured by four Class A office properties located in Burbank, California. The properties are also encumbered with a $281 million in subordinate debt. The properties are located within the Burbank Media District which is a hub for the media and entertainment industry and the portfolio's tenancy is dominated by companies within these fields. As of September 2020, the portfolio was 93%, essentially unchanged from previous two years. Moody's LTV and stressed DSCR are 76% and 1.34X, respectively, the same as at the last review.The second largest loan is the Griffin Portfolio Loan ($40.0 million -- 5.5% of the pool), which represents a pari passu portion of a $375.0 million senior mortgage. The portfolio is secured by nine Class A single tenant office buildings and one 1.5 million SF distribution center. The properties are predominantly either regional or corporate headquarters locations or business essential distribution centers. Moody's LTV and stressed DSCR are 109% and .95X, respectively, the same as at the last review.The third largest loan is the Centre 425 Bellevue Loan ($40.0 million -- 5.5% of the pool), which represents a pari passu portion of a $94.0 million senior mortgage. The loan is secured by a commercial condominium unit within a newly developed Class A office building located in the central business district of Bellevue, Washington. The property is 16 stories tall, holds a LEED silver designation, and contains approximately 356,909 SF of rentable area. As of September 2020, the property was 100% leased to Amazon Corporate and Starbucks. Moody's LTV and stressed DSCR are 76% and 1.45X, respectively, the same as at the last review.REGULATORY DISCLOSURESFor 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_1243406.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.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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. 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