DBRS Morningstar Confirms All Classes of BAMLL Commercial Mortgage Securities Trust 2016-SS1

DBRS Limited (DBRS Morningstar) 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 (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since the last review. The collateral consists of a Class A 501,650-square foot single-tenant office building (One Channel Center) and an adjacent 965-space parking garage structure (Channel Center Garage) in Boston’s growing Seaport District. The $166.0 million fixed-rate loan is interest-only (IO) through the 10-year term. The loan was also structured with a cash sweep period commencing in the event of the sole office tenant occupying, or giving notice to occupy, less than 50.0% of the rentable square footage. The sponsor is minority-owned and indirectly controlled by Tishman Speyer, a strong and experienced institutional owner, developer, and operator of commercial real estate.

The office property was constructed in 2014 and built-to-suit for the current tenant, State Street Corporation, a long-term credit tenant (rated AA by DBRS Morningstar as of November 2021). The current lease extends through December 2029 with no termination options and two five-year renewal options at 95% of fair market rent. The current in-place rental rate is well below market given that the lease was negotiated in 2011/2012, when the market was soft, implying significant potential upside should in-place rents ever reset. As of the September 2021 rent roll, the tenant reported a base rent of $27.50 per square foot, compared with the Reis-reported submarket average rate of $49.83 for Q4 2021.

As of the most recent financials, trailing nine months ended September 30, 2021, debt service coverage ratio (DSCR) was reported at 1.88 times (x), compared with 1.87x at YE2020, 1.92x at YE2019, and the DBRS Morningstar term DSCR of 2.05x. DBRS Morningstar’s term DSCR reflects straight-line rent credit given to State Street Corporation’s scheduled rent steps, which have not yet been realized. The garage portion of the property operates on a lease to VPNE Parking Solutions Inc. that was recently extended to December 2024. The lease extension increased the fixed rental rate to $2.5 million from $2.2 million, the percentage rent to 80% from 50%, and the revenue-sharing threshold to $3.3 million from $2.7 million. The decline in DSCR from YE2019 to YE2020 is attributable to the parking tenant lease structure. In 2019 the subject recorded revenues above $2.7 million and during 2020 only the base rent of $2.2 million was captured.

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.

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 Morningstar.

DBRS Morningstar 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.dbrsmorningstar.com.The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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 [email protected].

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.

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

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