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

DBRS Limited (DBRS) 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 B at AA (low) (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)
-- Class F at B (high) (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 is secured by the fee and leasehold interests in One Channel Center. The property is located in the Seaport submarket of Boston and comprises a recently constructed 501,650 sf Class A office building and the adjacent Channel Center Garage containing 965 parking spaces. The loan is interest-only (IO) for the ten-year term.

The property was constructed in 2014 and is fully occupied by State Street Corporation (State Street), an investment-grade tenant rated AA (low) by DBRS. State Street’s lease runs through December 2029, which is over three years past loan maturity with no early termination options available. State Street is currently paying a triple net (NNN) rental rate of $26.50. The Channel Center Garage is under a three-year lease with VPNE Parking Solutions Inc. (VPNE) through to December 2018. VPNE pays an annual base rent of $2.2 million and 50.0% of annual gross revenue above $2.7 million. State Street leases 250 of the 965 parking spaces in the garage. DBRS has asked the servicer for information on the tenant’s plans for the December 2018 lease expiry and the response is pending as of the date of this press release. At issuance, DBRS noted that the development boom in the area in recent years has reduced the number of available surface lots, a factor that combines with the relatively limited parking structure development in the area to suggest significant upside for income from the parking structure as the area continues to grow and parking demands increase.

At Q2 2017, the in-place debt service coverage ratio (DSCR) was 1.92 times (x), compared with the in-place YE2016 DSCR of 1.83x and the DBRS Term DSCR derived at issuance of 2.05x. The Q2 2017 figure is reflective of a 4.4% net cash flow growth over YE2016, resulting from a 2.1% increase in effective gross income and a 1.4% decrease in operating expenses. The NCF declines from the DBRS issuance figure are attributable to DBRS’s long-term credit tenant (LTCT) treatment of State Street, with the contractual rent included on a straight-line basis in the DBRS analysis. According to CoStar, Class A office properties in the Seaport submarket reported a vacancy rate of 5.8% and availability rate of 5.2% as of January 2018, compared with the Q1 2017 vacancy rate of 4.4% and availability rate of 4.2%.

Classes X-A and X-B are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.

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

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance-related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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@dbrs.com.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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