DBRS Morningstar Finalizes Provisional Ratings on BPR Trust 2021-TY

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

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

All trends are Stable.

The BPR Trust 2021-TY single-asset/single-borrower transaction is collateralized by the borrower’s fee-simple and leasehold interest in the non-department-store component of Tysons Galleria, a 740,244-square-foot (sf) (488,244 collateral sf) Class A super-regional mall located approximately 15 miles west of downtown Washington, D.C., in McLean, Virginia. The collateral was constructed in 1988 and is anchored by a Neiman Marcus and a Saks Fifth Avenue, both of which own their own stores and do not serve as collateral for this transaction. The property features a third anchor box, which was previously owned and occupied by Macy’s but that was acquired by the transaction borrower in 2016 and subsequently converted into a three-story, multitenant space that is expected to accommodate a variety of entertainment, restaurant, and junior anchor retail users. The approximately $120.0 million redevelopment of the former Macy’s space began in 2019 and is expected to be completed in 2022, with financing for the remaining capital investment and required tenant build-out either reserved for or guaranteed by the transaction sponsor as part of this transaction. Morgan Stanley Bank, N.A.; Barclays Capital Real Estate Inc.; and Wells Fargo Bank, National Association co-originated the mortgage loan to Tysons Galleria L.L.C. and Tysons Galleria Anchor Acquisition, LLC (collectively, the Borrower), which are indirectly owned and controlled by BPR Nimbus LLC (the Guarantor), which is ultimately controlled by Brookfield Property REIT.

Tysons Galleria is well located within an affluent and growing trade area in McLean, Virginia, and benefits from excellent connectivity and accessibility via a plethora of surrounding transit options and regional thoroughfares. The collateral was 92.6% leased as of September 1, 2021, with an overall property occupancy of 95.1% (including the noncollateral Neiman Marcus and Saks Fifth Avenue anchors) reported over the same period. While the property was closed from March 24, 2020, to May 29, 2020, it was open and all in-place tenants were open for business as of the most recent rent roll dated September 1, 2021. The property has maintained generally consistent occupancy rates in recent years, with an average annual occupancy rate of 95.5% achieved between 2017 and 2020. The collateral achieved strong in-line sales of $1,201 per square foot (psf) in 2019 with a then-current in-line occupancy cost of 15.1%. Predictably, total in-line sales declined approximately 22.1% between 2019 and 2020, largely a result of ongoing business closures and declining macroeconomic trends brought on by the onset of the Coronavirus Disease (COVID-19) pandemic. Nonetheless, the collateral achieved average monthly rent collections of 95.4% between April 2020 and May 2021. Additionally, over the trailing 12 month (T-12) period ended June 30, 2021, the collateral achieved comparable in-line sales of $1,416 psf, reflecting a favorable low average occupancy cost of just 12.6% and validating a strong recovery from hardships brought on by the ongoing coronavirus pandemic.

Considering the collateral’s favorable location, generally consistent occupancy trends, evidence of recovering in-line sales, strong sponsorship, and ongoing transformation, DBRS Morningstar has a generally positive view of the credit characteristics of the collateral. Nonetheless, like most regional malls, the collateral will likely continue to contend with secular headwinds facing brick-and-mortar retailers in the long run, and the proliferation of e-commerce continues to gain traction globally. Investors should carefully consider the risks associated with investing in securities backed by regional mall properties; DBRS Morningstar published research on November 17, 2020, that highlighted that regional mall delinquencies were approaching $10 billion with an overall delinquency rate of 18.7%. For additional information, please refer to the commentary titled “CMBS Mall Delinquencies Approach $10 Billion, as the Pandemic Heightens Risk for Upcoming Maturities” on DBRS Morningstar's website.

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.

Class X is an IO certificate that references 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 Morningstar.

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

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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 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/384482.

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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

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