DBRS Morningstar Confirms All Ratings on BWAY Commercial Mortgage Securities Trust 2013-1515

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2013-1515 issued by BWAY Commercial Mortgage Securities Trust 2013-1515 as follows:

-- Class A1 at AAA (sf)
-- Class A2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class X-B at A (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (sf)
-- Class G at BBB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the underlying collateral, which remains in line with DBRS Morningstar’s expectations since the last rating action.

The transaction is collateralized by an $814.4 million loan secured by the fee interest in a Class A, 1.7 million-square-foot (sf) office tower in the heart of Times Square, within the Midtown Manhattan submarket of New York City. The collateral also features 31,000 sf of ground-floor retail, a four-level, 225-space subterranean parking garage, and two 48-foot by 38-foot LED signage displays.

Since 1989, the property has served as the global headquarters for Paramount (formerly known as Viacom, prior to a full company rebranding in 2022). An American media company whose flagship networks include CBS, Nickelodeon, Comedy Central, and BET, Paramount occupies 96.0% of the net rentable area (NRA) on a lease expiring in June 2031. At its 2019 lease renewal, the tenant absorbed 256,479 sf of available space at the property as a result of its growth and expansion needs. As part of the renewal, its lease was structured with a free rent concession occurring annually between 2019 and 2024, with the maximum ongoing annual amount at $3.0 million.

Other notable tenants include the Minskoff Theater (6.0% of NRA, expiring in June 2044), the sixth-largest Broadway theatre and home to Disney’s long-running “The Lion King” musical production, and Palladium Times Square (formerly the RAD Theatre), a concert and event venue which signed a 20-year lease in 2019.

According to the June 2022 rent roll, the property was 99.6% occupied with an average rental rate of $56.78 per square foot (psf). In comparison, the Midtown West vacancy and asking rate as of Q3 2022 were 12.1% and $69.36 psf, respectively, according to Reis. With no upcoming rollover in the near term, the primary variables to property performance are operational expenses. Annualized net cash flow, per the year-to-date (YTD) September 2022 reporting, is $87.8 million, compared with $82.5 million at year-end (YE) 2021, $72.0 million at YE2020, and $77.4 million at YE2019. It is unclear whether Paramount’s annual rent concession is already reflected in the YTD September 2022 figures. DBRS Morningstar expects continued stable performance for the asset.

Subsequent to an initial 36-month interest-only (IO) period, the 12-year term loan started amortizing in March 2016 based on a 30-year schedule. As of January 2023, the trust balance has amortized by approximately 13.3% to $780.7 million from $900.0 million at issuance. The loan is sponsored by SL Green. Several media sources have reported that the sponsor is in initial planning stages of a redevelopment of the subject property, with hopes to add a casino and hotel. Those reports contain no detail on what, if any, impact there will be on the property’s existing office space, but the plans are not expected to affect the sponsor’s ability to service its current debt obligations. The loan is scheduled to mature in March 2025 and is in prepayment lockout until September 2024.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental, Social or Governance factor(s) 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 (May 17, 2022).

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.

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

The principal methodology North American CMBS Surveillance Methodology (October 3, 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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