DBRS Morningstar Confirms Ratings on 39 Manulife/John Hancock Mortgage Loan Transactions, Discontinues Ratings on Three Transactions

DBRS Limited (DBRS Morningstar) confirmed the ratings on 39 mortgage loan transactions comprising 43 loans, as discussed in greater detail below. The rating confirmations generally reflect the overall stable performance of each loan since the last review. All trends are Stable. Additionally, DBRS Morningstar discontinued ratings on three mortgage loan transactions (North Shore Towers Apartments Incorporated, 305 East 40th Owners Corp., and John Hancock Bay Indies MHC) as the loans were paid in full. This concludes DBRS Morningstar’s surveillance of these three mortgage loan transactions. All loans were made by John Hancock Life Insurance Company (the Lender), a subsidiary of Manulife Financial Corporation. All outstanding loans are reported current and paid as agreed according to the Lender.

Thirty-three transactions comprising 37 loans are secured by 25 co-operative apartment properties in New York; New Jersey; Connecticut; and Washington, D.C. DBRS Morningstar notes that one mortgage (Park Royal Owners, Inc.) has an additional loan, which is pari passu to the existing loan, recently placed on the property. This add-on loan was not included in this annual review; however, DBRS Morningstar’s analysis concluded that the additional loan does not have a material impact on the credit quality of the existing loan because of the still low loan-to-value (LTV) ratio on a consolidated basis. The AA (sf) ratings on these 34 transactions reflect (1) the stability of debt payments provided by the co-operative structure of ownership, in which shareowners are highly incentivized to meet their share of the loan payments to protect their ownership interest in their co-operative; (2) the low LTV ratios; and (3) each property’s strong location within a major metropolitan area.

Two transactions (John Hancock Trails West MHC and John Hancock Colony Cove MHC Ellenton FL) are secured by two manufactured housing communities (MHCs) in Arizona and Florida, respectively. The A (high) (sf) ratings on these two transactions reflect (1) the expected stability of debt payments, given the strong operating history and institutional sponsorship; (2) moderate LTV ratios; (3) the strong locations of these properties in well-established communities with demand for highly amenitized MHCs; and (4) the expected partial amortization that will take place over the remaining term of each loan.

One transaction (John Hancock El Segundo California Capital Relief) is secured by an office building in El Segundo, California. The A (high) (sf) rating reflects (1) the expected stability of debt payments, given the strong operating history and institutional-quality sponsorship; (2) a moderate LTV ratio; (3) the property’s strong location in a well-established Los Angeles office submarket; and (4) the expected partial amortization that will take place over the remaining term of the loan.

One transaction (51710411 JH Deerfield Fox Meadow Capital Relief) is secured by Fox Meadow Apartments and Townhomes in Maple Shade, New Jersey. The A (high) (sf) rating reflects (1) the expected stability of debt payments, given the strong operating history and consistent high occupancy of the submarket; (2) a moderate LTV ratio; (3) the property’s convenient location in a fully built-out suburban Greater Philadelphia submarket; and (4) a substantial loan reduction through amortization, with 35.5% of the loan balance reduced from the initial loan amount.

One transaction (527727:11 John Hancock 1111 Pennsylvania Avenue, Washington, D.C. Capital Relief) is secured by the ground lease on a land parcel accommodating an office building at 1111 Pennsylvania Avenue in Washington, D.C. The A (sf) rating reflects (1) the expected stability of debt payment, given the strong operating history and institutional-quality sponsorship; (2) a moderate LTV ratio; (3) the property’s strong location between the White House and the United States Capitol Building in a highly desirable office submarket; and (4) its historic occupancy by a global law firm, ranked the 10th-largest in the United States, with approximately nine years remaining on the lease term.

One transaction (Capital Relief East Side 11th and 28th Ground Lease Loan) is secured by a ground lease on two adjoining parcels accommodating two Class A multifamily buildings at 282 11th Avenue and 525 West 28th Street, New York. The A (high) (sf) rating reflects (1) the expected stability of debt payments; (2) a low LTV ratio; (3) the property’s location in a well-established New York residential submarket; and (4) the ground rent structure, which places the ground rent mortgage in an attractive position in the capital stack.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

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/396929 (May 17, 2022).

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

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was not initiated at the request of the rated entity. The rating was initiated at the request of the Lender.

The rated entity or its related entities did not participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American Single-Asset/Single-Borrower Ratings Methodology (February 23, 2023;
https://www.dbrsmorningstar.com/research/410191)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022; https://www.dbrsmorningstar.com/research/402646)

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022; https://www.dbrsmorningstar.com/research/402153)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008)

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