DBRS Morningstar Confirms All Ratings on BSST 2021-SSCP Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the following ratings on the Commercial Mortgage Pass-Through Certificates, Series 2021-SSCP issued by BSST 2021-SSCP Mortgage Trust:

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

All trends are Stable.

The rating confirmations reflect the stable performance of a deal early in its lifecycle with limited reporting and minimal changes to the underlying performance since issuance. The collateral consists of a portfolio of 32 industrial/logistics properties and one laboratory property across 11 states recently acquired by a joint venture between Raith Capital Partners, LLC and Equity Industrial Partners. In addition to $238 million in loan proceeds, the sponsors contributed approximately $79.4 million in cash equity to fund the acquisition. The portfolio comprises primarily newer (weighted-average build year of 2005) single-tenant industrial assets located in secondary markets.

As of the September 2022 rent rolls, the collateral properties were 97.8% occupied, up from the issuance figure of 92.8%. The majority of the portfolio’s scheduled near-term rollover is concentrated in 2023, with tenants representing 16% of the combined net rentable area (NRA) scheduled to expire by the end of the year. In total, tenants representing 57% of the NRA have leases expiring before the maximum extended maturity in April 2026. The tenant roster is diverse, considering the size of the portfolio, and portfolio occupancy has remained above 94% over the past six years.

According to the financials for the trailing 12 months ended September 30, 2022, net cash flow was reported at $17.0 million, compared with the DBRS Morningstar net cash flow of $16.6 million at issuance. According to Reis, the U.S. national average rental rate for warehouse/logistics properties was $8 per square foot (psf) as of February 2023. The collateral properties are representative of the national average with rental rates ranging between $3 psf and $16 psf. DBRS Morningstar notes the long-term growth and stability of the warehouse and logistics sector, given the sustained reliance on and growing demand for e-commerce and home delivery services, factors that should continue to contribute to the overall stable performance of the sector.

The loan has a partial pro rata/sequential-pay structure, which allows for pro rata paydowns for the first 30.0% of the unpaid principal balance. DBRS Morningstar considers this structure to be credit negative, particularly at the top of the capital stack. The borrower can release individual properties subject to customary requirements. The prepayment premium for the release of individual assets is generally 105.0% of the allocated loan amount for the first 30.0% of the original principal balance of the mortgage loan and 110.0% thereafter. As of the January 2023 remittance, no properties have been released and there has been no paydown to the trust certificates.

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 (May 17, 2022).

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 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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577