DBRS Finalizes Provisional Ratings on BAMLL Commercial Mortgage Securities Trust 2016-SS1

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2016-SS1 (the Certificates) to be issued by BAMLL 2016-SS1 Mortgage Securities Trust. The trends are Stable.

-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

The loan is secured by the fee and leasehold interests in a 501,650 sf office building and fee interest in a nearby 965-space parking garage, both of which are located in the Seaport Submarket of Boston, Massachusetts. In December 2015, both properties were purchased by U.S. Core Office Holdings, L.P. for $316.5 million, or approximately $630 psf. Loan proceeds of $166.0 million are being used for the acquisition of the properties. The mortgage loan has an interest rate of 4.24% and is interest-only over the ten-year term.

The office building was constructed in 2014 as a build-to-suit for State Street Corporation (State Street) (AA (low)/DBRS). This location houses back office operations for State Street, consolidating employees from multiple office locations scattered around the city when it opened. State Street’s lease is for 100% of the office building and has an initial lease term through December 2029, with no early termination options. The nearby parking garage was also constructed in 2014 and is leased to a third-party parking garage operator for a term of three years. The parking garage is conveniently located near the subject property, with State Street leasing 250 of the total 965 parking spaces.

The sponsor of the loan, U.S Core Office Holdings, L.P., is majority-owned by nation pension funds of Sweden and the Republic of Korea. The sponsor is minority-owned, and indirectly controlled, by affiliates of Tishman Speyer Properties. Tishman Speyer is a global owner, developer and operator of commercial real estate. The sponsor also contributed $152.7 million of cash equity into the transaction.

The DBRS LTV and DBRS Refi LTV are 92.0%, based on an 8.0% cap rate. The DBRS value represents a 43.0% discount to the appraised value. The DBRS cap rate is far above the current market cap rate (as estimated by the appraisal) of 4.5% and 387 basis points above the cap rate implied by the sponsor’s $316,500,000 purchase price and the Issuer’s UW NCF of $13,070,929. Given the property’s excellent quality and lease to a long-term credit-tenant, there is limited term default risk.

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

All classes have been privately placed.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is North American CMBS Rating Methodology, which can be found on our website under Methodologies.

With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains the description of the information that the third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While DBRS did not require due diligence services outlined in Form-15E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.