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Rating Action:

Moody's assigns definitive ratings to nine CMBS classes of NCMS 2019-FAME

05 Sep 2019

$193.3 million of structured securities affected

New York, September 05, 2019 -- Moody's Investors Service, ("Moody's") has assigned definitive ratings to nine classes of CMBS securities, issued by Natixis Commercial Mortgage Securities Trust 2019-FAME, Commercial Mortgage Pass-Through Certificates, Series 2019-FAME:

Cl. A, Definitive Rating Assigned Aaa (sf)

Cl. X-A*, Definitive Rating Assigned Aaa (sf)

Cl. X-B*, Definitive Rating Assigned Baa1 (sf)

Cl. B, Definitive Rating Assigned A1 (sf)

Cl. C, Definitive Rating Assigned Baa3 (sf)

Cl. D, Definitive Rating Assigned B1 (sf)

Cl. V-A**, Definitive Rating Assigned Aaa (sf)

Cl. V-BC**, Definitive Rating Assigned Baa1 (sf)

Cl. V-D**, Definitive Rating Assigned B1 (sf)

* Reflects interest-only classes

** Reflects exchangeable classes

RATINGS RATIONALE

The certificates are collateralized by a single loan secured by the borrower's fee simple and leasehold interest in a 462,827 square foot retail plaza (Hollywood & Highland, or "the property") in Los Angeles, California. The property is an open-air, mixed-use retail and entertainment center located at 6801 Hollywood Boulevard Hollywood, CA. The center has several components including (i) 327,767 SF of retail space, (ii) 77,205 SF of event space occupied by Wolfgang Puck Catering for its catering division, (iii) 36,185 SF of movie theater space occupied by the Chinese 6 Theatres LLC (a 6-screen movie theater), (iv) 21,670 SF of current office space and (v) 18 billboard and media displays. Sections of the collateral are owned in leasehold ownership positions by the borrower, including all spaces above and below the Chinese 6 Theatre and the MTA subway station. The whole loan is a five-year, interest-only, first lien mortgage loan with a fixed-rate and a floating rate component, an outstanding principal balance of $211,300,000, and a maximum principal balance of $263,800,000. The floating rate component of the whole loan consists of a $52,500,000 future funding note with an initial interest rate of 1-month Libor plus a spread of 1.75%. In connection with the origination of the loan, the borrower entered into an interest rate cap agreement with a strike rate of 5.00% with an interest rate protection counterparty.

More specifically, the trust assets primarily consist of two promissory notes, including one senior Note A-1 and one subordinate Note A-B, which combined have an aggregate principal balance of $211,300,000 as of the cut-off date. As mentioned, in addition to the trust assets there is one additional pari passu senior note outside of the trust, Note A-2, which will be retained by the loan seller, Natixis, with a combined balance of $0 as of origination to be future funded over the life of the loan. It is expected that after the note is fully funded the balance will be $52,500,000.

The property is an open-air, mixed-use retail and entertainment center located on the highly trafficked Hollywood Walk of Fame, adjacent to the Ray Dolby Theatre and the historic TCL Chinese Theatre (formerly known as Mann's Chinese Theatre and Grauman's Chinese Theatre before that). Constructed in 2001, the property, was originally developed by TrizecHahn in collaboration with the Community Redevelopment Agency. TrizecHahn reportedly sold the project to CIM Group in 2004 for approximately $200 million. CIM Group reportedly sold the adjacent hotel to Loews Hotels & Resorts in 2012 for $165 million and recapitalized the remaining property with ADIA, which reportedly invested approximately $142 million, in 2013. The property was previously securitized in WFRBS 2011-C2 and at that time included the Ray Dolby Theatre which is not currently part of our collateral. At the time the sponsor had signed a long-term agreement with Cirque du Soleil to stage a new show at the Ray Dolby Theater for ten years, however this agreement ended in 2013 when it failed to generate sufficient box office interest. At the time the sponsor had spent approximately $27.0 million on the theatre to complete the renovations on the Cirque lease with the expectation that the Ray Dolby Theatre would drive additional traffic to the property. We are not aware of any major renovations that took place at the Hollywood & Highland retail component since the property's construction.

As of August 1, 2019, the property was approximately 90.0% leased by 62 tenants (excluding delinquent tenants). The property's physical occupancy rate has averaged approximately 95.9% from 2004 to 2018 including month to month and temporary tenants.

Moody's approach to rating this transaction involved an application of Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS, Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities, and Moody's Approach to Rating Repackaged Securities. The rating approach for securities backed by a single loan compares the credit risk inherent in the underlying collateral with the credit protection offered by the structure. The structure's credit enhancement is quantified by the maximum deterioration in property value that the securities are able to withstand under various stress scenarios without causing an increase in the expected loss for various rating levels. In assigning single borrower ratings, we also consider a range of qualitative issues as well as the transaction's structural and legal aspects.

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 LTV ratio.

The trust loan balance of $211,300,000 combined with the fully funded pari passu future funding note represent a Moody's LTV of 140.3%. The Moody's loan trust actual DSCR is 1.39x and Moody's loan trust stressed DSCR at a 9.25% stressed constant is 0.65x.

Notable strengths of the transaction include the property's excellent location on the Hollywood Walk of Fame, strong sponsorship, proximity to major drivers of tourism demand and the sponsor's business plan. Offsetting these strengths are a lack of asset diversification, the interest-only mortgage loan profile, multiple ground leases and credit negative legal features.

The principal methodology used in rating all classes except exchangeable classes and interest-only classes was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in July 2017. The principal methodology used in rating exchangeable classes was "Moody's Approach to Rating Repackaged Securities" published in March 2019. The methodologies used in rating interest-only classes were "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in July 2017 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *) and exchangeable classes (indicated by the **). Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Moody's approach for single borrower and large loan multi-borrower transactions evaluates credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from our Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, and property type. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations.

These ratings: (a) are based solely on information in the public domain and/or information communicated to Moody's by the issuer at the date it was prepared and such information has not been independently verified by Moody's; (b) must be construed solely as a statement of opinion and not a statement of fact or an offer, invitation, inducement or recommendation to purchase, sell or hold any securities or otherwise act in relation to the issuer or any other entity or in connection with any other matter. Moody's does not guarantee or make any representation or warranty as to the correctness of any information, rating or communication relating to the issuer. Moody's shall not be liable in contract, tort, statutory duty or otherwise to the issuer or any other third party for any loss, injury or cost caused to the issuer or any other third party, in whole or in part, including by any negligence (but excluding fraud, dishonesty and/or willful misconduct or any other type of liability that by law cannot be excluded) on the part of, or any contingency beyond the control of Moody's, or any of its employees or agents, including any losses arising from or in connection with the procurement, compilation, analysis, interpretation, communication, dissemination, or delivery of any information or rating relating to the issuer.

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 may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan paydowns or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls.

Moody's ratings address only the credit risks associated with the transaction. Other non-credit risks have not been addressed and may have a significant effect on yield to investors.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1192606.

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 quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

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.

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

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.

Samuel Ukrainsky
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

Joseph Podvarney, CFA
Vice President - Senior Analyst
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

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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