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

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of 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 transaction’s overall stable performance, which remains in line with DBRS Morningstar’s expectations at issuance. The collateral office property benefits from a long-term lease to an investment-grade-rated single tenant and a significant equity infusion at acquisition from the minority owner of the loan sponsor.

The transaction is backed by a $166.0 million fixed-rate, 10-year interest-only (IO) loan, which is secured by a 501,650-sqaure-foot Class A single-tenant office building (One Channel Center) and an adjacent 965-space parking garage structure in Boston’s Seaport District. The office property was constructed in 2014 and was built to suit the current tenant, State Street Corporation (State Street), a long-term credit tenant (rated AA with a Stable trend by DBRS Morningstar).

The current lease extends through December 2029 with no termination options and two five-year renewal options at 95% of fair market rent. The lease was signed in 2012, when the rental market was considerably weaker, and the in-place rental rate is well below current market rates. According to the September 2022 rent roll, State Street paid a base rent of $27.50 per square foot (psf), compared with the Q3 2022 submarket average of $69.50 psf as reported by Reis. State Street’s next rent step is in January 2025, when the annual base rent will increase to $28.50 psf. The servicer reported a trailing six months ended June 30, 2022, debt service coverage ratio (DSCR) of 2.02 times (x), compared with 1.83x at YE2021 and the DBRS Morningstar DSCR at issuance of 2.05x, which reflects straight-line rent credit given to State Street’s scheduled rent steps over the loan term. The garage portion of the property operates on a lease to VPNE Parking Solutions Inc., expiring in December 2024 with a fixed rental rate of $2.5 million.

The loan includes a cash sweep period that will be triggered if State Street occupies, or has given notice to occupy, less than 50.0% of the rentable square footage. The sponsor of the loan, U.S Core Office Holdings, L.P., is majority owned by national pension funds of Sweden and the Republic of Korea. The sponsor is minority owned, and indirectly controlled, by affiliates of Tishman Speyer Properties, a global owner, developer, and operator of commercial real estate, which contributed $152.7 million of cash equity into the transaction.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no environmental, social, and 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 (May 17, 2022).

Classes X-A and X-B are IO certificates 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.

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

The principal methodology is the 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 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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