DBRS Confirms Ratings on BAMLL Commercial Mortgage Securities Trust 2016-SS1

DBRS Limited (DBRS) has today confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2016-SS1 issued by BAMLL 2016-SS1 Mortgage Securities Trust as follows:

-- 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)

All trends are Stable.

The rating confirmations reflect the overall performance of the transaction, which remains in line with DBRS’s expectations at issuance. This transaction closed in February 2016 and the underlying loan is interest-only (IO) for the ten-year term. The subject loan is secured by the fee and leasehold interests in One Channel Center, a recently constructed 501,650 sf Class A office building, and the adjacent Channel Center Garage containing 965 parking spaces, located in the Seaport submarket of Boston.

The office building was constructed in 2014 to house back-office operations and consolidate employees from other locations for State Street Corporation (State Street) (rated AA (low) by DBRS). State Street is the office building’s sole tenant, on a lease through December 2029, just over three years past maturity with no early termination options available. The nearby parking garage was also constructed in 2014 and is leased to a third-party parking garage operator, VPNE Parking Solutions Inc., through December 2018. The parking garage is conveniently located near the subject property, with State Street leasing 250 of the total 965 parking spaces. The servicer’s October 2016 site inspection confirmed the collateral to be in excellent condition with no deferred maintenance noted.

As of Q3 2016 financials, the loan reported an annualized debt service coverage ratio (DSCR) of 1.95 times (x), compared to the DBRS underwritten (UW) DSCR of 2.05x, reflective of a 3.1% decline in net cash flow (NCF). This slight decline is attributable to DBRS’s long-term credit tenant (LTCT) treatment of State Street, with no below-the-line deductions underwritten. The annualized net operating income (NOI) reflected a slight increase of 3.6% over the DBRS UW figure. According to CoStar, the Seaport submarket remains strong with Class A office vacancy of 4.4% and availability of 4.2%, as the Boston Redevelopment Authority continues to incentivize and promote development and re-development activity in the area.

The loan benefits from low leverage with an original LTV of 51.6%, a strong sponsorship group controlled by Tishman Speyer, an experienced global owner, developer and operator of commercial real estate, as well as an initial $152.7 million of cash equity backing the transaction.

The rating assigned to Class F materially deviates from the lower rating implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology; in this case, the assigned rating reflects the qualitative loan-level factors that are not precisely captured in the quantitative model.

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

The applicable methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 2016), which can be found on our website under Methodologies.

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