DBRS Morningstar Finalizes Provisional Ratings on BSST 2021-1818 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-1818 issued by BSST 2021-1818 Mortgage Trust:

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

All trends are Stable.

Classes X-CP and X-EXT are interest-only classes whose balances are notional.

BSST 2021-1818 is collateralized by the borrower’s fee-simple and leasehold interest in a Class A office and retail building, 1818 Market Street, in the Market Street West submarket of Philadelphia. DBRS Morningstar takes a generally positive view on the credit characteristics of the collateral based on the property's desirable location and the recent improvements and capital that have been applied by the sponsor.

The building benefits from its recently completed renovations and strong leasing performance before the Coronavirus Disease (COVID-19) pandemic. The property was acquired by the sponsor, Shorenstein Realty Investors Eleven, L.P., in 2015 and has seen a rise in occupancy since then. The property also benefits from a desirable office location in Center City, Philadelphia, with below-market rents and strong historical occupancy, which makes it a potentially attractive option for a variety of tenants in the future.

The property has good highway access to I-676, I-76, and I-95, and is also in close proximity to Dilworth Park, which offers commuter and subway access to Center City. The Market Street West submarket remains one of the most desirable office submarkets in Philadelphia because of its high-quality office buildings and increasing demand with a limited new supply. According to CBRE Econometric Advisors, the Market Street West submarket vacancy rate is about 1.0% lower than the Philadelphia Downtown vacancy rate, and the submarket is expected to outperform the broader metropolitan area over the next several years.

The property's sponsor, Shorenstein Realty Investors Eleven, L.P., spent more than $94.1 million ($94.1 per square foot) in capital expenditures, tenant improvements, and leasing costs since 2015. These improvements included common area upgrades to the lobby, elevator and facade renovations, and a new tenant-only fitness center and a conference center. The property also benefits from below-market rents and flexible extension options for tenants. The WSFS Bank lease has two five-year extension options. WSFS Bank has been at the property since 2019, after acquiring the former Beneficial Bank that had been at the property since the acquisition in 2015. In comparison with other nearby office properties, 1818 Market Street has a lower asking rent, which is attractive for bringing in tenants in the future.

The property is currently 84.2% occupied and benefits from credible tenancy, with the top five tenants having a weighted-average (WA) lease term of 10.7 years. The property as a whole has a WA lease expiration of 7.5 years. No tenant at the property occupies more than 10% of total net rentable area (NRA). The largest tenant at the property is WSFS Bank, which occupies 9.7% of the total NRA and accounts for 8.9% of the DBRS Morningstar-adjusted total base rent. WSFS Bank acquired the space following its merger with Beneficial Bank.

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/373262.

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

For supporting data and more information on this transaction, please log into www.viewpoint.dbrsmorningstar.com. DBRS Morningstar provides analysis and in-depth commentary in the DBRS Viewpoint platform.

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

With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is the North American Single-Asset/Single-Borrower Ratings Methodology (March 2, 2021), which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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