DBRS Morningstar Confirms All Classes of BWAY 2021-1450 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass Through Certificates issued by BWAY 2021-1450 Mortgage Trust as follows:

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

All trends are Stable.

The loan is secured by the fee-simple interest in 1450 Broadway, a 42-storey, 439,786-square-foot (sf) office tower in New York. The collateral consists of approximately 422,500 sf of office space, as well as 9,000 sf of lower-floor retail space and 8,000 sf of storage space. Constructed in 1931 and acquired by the sponsor in 2011, the property has received in excess of $11 million in capital improvements.

The sponsor, ZG Capital Partners (the Zar Group), is a New York-based real estate investment firm with extensive ownership and operating experience. The Zar Group’s holdings include 1450 Broadway, 654 Broadway, and 1410 Lexington Avenue in New York as well as the Bruckner Building in Mott Haven, Connecticut. Loan proceeds of $215.0 million refinanced $168.0 million of existing debt, funded $18.9 million of upfront reserves, and returned $23.8 million of equity to the sponsor.

As of the December 2021 rent roll, the collateral was 81.9% occupied, compared with the issuance occupancy rate of 83.2%. The largest tenants at the property include WeWork (14.0% of the net rentable area (NRA), lease expiry in September 2035), Studio 1 (10.1% of NRA, lease expiry in January 2029), and Iconix Brand Group Inc. (8.0% of NRA, lease expiry in June 2024). WeWork’s lease includes a corporate guarantee from the parent company, WeWork Companies Inc. At issuance, the guarantee was at approximately $6.1 million ($97 per square foot (psf)) and will burn off annually, but never falling below $3.6 million ($53 psf). As of the December 2021 rent roll, WeWork paid $60 psf with annual rent escalations of 2.0%. As of the YE2021 financials, the subject reported a debt service coverage ratio (DSCR) of 1.85 times (x), compared with the DBRS Morningstar DSCR of 1.82x at issuance. According to the July 2022 reserve report, there is $14.6 million held across all reserves, with $10.0 million in leasing reserves and $3.4 million in tenant reserves. According to a Q1 2022 Reis report, the Midtown West submarket of New York reported an office vacancy rate of 10.6%, compared with the Q1 2021 vacancy rate of 9.7%.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Classes X-CP and X-NCP are interest-only (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 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 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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