DBRS Morningstar Confirms Ratings on BX Trust 2021-VIEW

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates issued by BX Trust 2021-VIEW (the Issuer):

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class X-CP at AA (sf)
-- Class X-NCP at AA (sf)
-- Class D at AA (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G 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 Morningstar’s expectations since issuance.

The collateral is a first mortgage loan secured by the fee-simple interest in a 509,500-square-foot portion of The Shops at Skyview, a retail complex in downtown Flushing, Queens. The property was built in 2010 and is made up of two retail buildings, the West Retail building and the East Retail building, and a parking garage. The West Retail building is anchored by BJ’s Wholesale Club (BJ’s), and the East Retail building is anchored by a noncollateral tenant, Target. The borrower primarily used whole loan proceeds to refinance existing debt of $306.0 million on the property and contributed approximately $44.8 million of fresh cash equity.

The loan has a two-year initial term, with three 12-month extension options, and pays interest only (IO) at a rate of Libor plus 2.55%. The loan documents also stipulate the borrower maintain an interest rate protection agreement with a strike price of 2.50%, and as of the commencement date of any extension, equal to the greater of (1) 2.50% and (2) the yearly rate of interest that yields a debt service coverage ratio (DSCR) of no less than 1.10 times (x). The loan sponsors are two Delaware LLCs, BRE SkyView Retail Owner LLC and BRE SkyView Parking Owner LLC, which are affiliates of The Blackstone Group, Inc. (Blackstone), a real estate investment group with approximately $196.3 billion in assets under management. The sponsors have invested more than $5.9 million of capital into the property since 2018 to cover leasing allowances and landlord work.

The property benefits from long-term tenancy to desirable retailers in BJ’s and Target, both of which have fared well in the years since the onset of the Coronavirus Disease (COVID-19) pandemic. In addition, 23.5% of the subject’s net rentable area (NRA) is occupied by investment-grade tenants, including Best Buy, Marshalls, Nike, JP Morgan Chase Bank, Osh Kosh, and Starbucks. The property’s two largest collateral tenants are BJ’s (23.7% of the NRA) and Best Buy (8.8% of the NRA), respectively, both original tenants since construction in 2010, with leases expiring in January 2030 and January 2024, respectively. Combined, these tenants represent approximately 33% of the in-place annual rent. In total, the largest eight tenants represent 60.8% of NRA; of these tenants, six have leases that expire beyond 2025.

As of YE2021, the servicer reported an occupancy rate of 75.2%, a DSCR of 2.44x, and an annualized net cash flow (NCF) of $18.7 million, compared with the Issuer’s NCF of $24.2 million and DBRS Morningstar’s NCF of $22.3 million at issuance. The in-place cash flow decline from the DBRS Morningstar figure at issuance is primarily because of an increase in expenses that are likely one-time expenses related to the refinancing. Since the YE2021 reporting period, the property’s occupancy rate has increased to approximately 82% with the addition of Burlington Coat Factory, which occupied a vacant unit representing 6.4% of the collateral NRA in February 2022, with rent commencement in March 2022.

ESG CONSIDERATIONS

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-CP and X-NCP 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.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 4, 2022), 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.

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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