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

DBRS Limited (DBRS) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates issued by BAMLL Commercial Mortgage Securities Trust 2016-SS1 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 stable performance of the transaction, which has remained in line with DBRS’s expectations since 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 is comprised of a 501,650 square foot Class A office building and the adjacent Channel Center Garage containing 965 parking spaces. The $166.0 million fixed-rate loan is fully interest-only (IO) through the ten-year term.

The property was constructed in 2014 and has remained fully occupied by State Street Corporation (State Street), an investment-grade tenant rated AA (low) with a Positive trend 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 rental rate of $26.50, with the next rent step occurring in January 2020. The Channel Center Garage was under a three-year lease with VPNE Parking Solutions Inc. (VPNE), which expired in December 2018. According to the servicer, the borrower is negotiating a renewal with the tenant, however, the terms of the lease are still pending as of the date of this press release. As of January 2019, the subject location is still listed on VPNE’s website as open with parking available. VPNE previously paid an annual base rent of $2.2 million and 50.0% of annual gross revenue above $2.7 million and the garage had a minimum occupancy of at least 25.9% at all times, since State Street was required to lease 250 spaces. At issuance, DBRS noted that the development boom in the area in recent years has reduced the number of available surface lots. This factor, combined with the relatively limited parking structure development in the area, suggests significant upside for income from the parking structure as the area continues to grow and parking demands increase.

As at Q3 2018, the in-place debt service coverage ratio (DSCR) was 1.93 times (x) compared with the in-place YE2017 DSCR of 1.88x and the DBRS Term DSCR of 2.05x derived at issuance. The Q3 2018 figure is reflective of a 2.9% net cash flow growth over YE2017 due to a 1.8% increase in effective gross income. The net cash flow decline from the DBRS issuance figure is attributed to DBRS’s long-term credit tenant 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 13.6% and an availability rate of 9.5% as of January 2019, compared with the January 2018 vacancy rate of 5.8% and availability rate of 5.2%.

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

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

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes loan level-data for most outstanding CMBS transactions (including non-DBRS rated), as well as loan-level and transaction level commentary for most DBRS rated and monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on dbrs.com under Methodologies & Criteria. 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.

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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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

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