DBRS Morningstar Confirms Ratings on BX Trust 2021-VIEW

DBRS Inc., (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2021-VIEW issued by BX Trust 2021-VIEW as follows:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (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 (sf) portion of The Shops at Skyview, a retail complex in downtown Flushing, Queens. The property, constructed in 2010, consists 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 used whole loan proceeds to refinance existing debt of $306.0 million and contributed approximately $44.8 million of cash equity, demonstrating a strong commitment to the property.

The loan has a two-year initial term, with three 12-month extension options, and pays interest only (IO) through the fully extended maturity date of June 2026. 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 2.50% and the yearly rate of interest that yields a debt service coverage ratio (DSCR) of no less than 1.10 times (x). According to the servicer, the borrower has not yet provided notice to extend the loan and the servicer is currently awaiting the borrower’s determination regarding the upcoming June 2023 maturity. 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. Since 2018, the sponsors have invested more than $5.9 million of capital into the property for leasing allowances and landlord work.

The property’s two largest collateral tenants are BJ’s (23.7% of the net rentable area (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 more than 30% of the in-place annual rent. Approximately 23.5% of the subject’s NRA is occupied by investment-grade tenants, including Best Buy, Marshalls, Nike, JPMorgan Chase Bank, OshKosh, and Starbucks. In total, the largest eight tenants represent 60.8% of NRA, six of which have leases that expire beyond 2025.

As of YE2022, the servicer reported net cash flow (NCF) of $20.2 million is up 7.9% from the YE2021 NCF of $18.7 million but represents a -16.2% variance from the Issuer’s NCF of $24.2 million and a -9.6% variance from DBRS Morningstar’s NCF of $22.3 million at issuance, primarily due to an increase in expenses. Servicer reported effective gross income as of YE2022 is stable to improving. The property is 88.4% leased and 87.4% physically occupied, as of YE2022, up from an occupancy rate of 79.9% at issuance. Since issuance, Burlington (6.4% of NRA) has taken occupancy as a new tenant.

Prior to issuance, the sponsor exercised the early termination option for Nordstrom Rack in February 2020 to begin construction and plans for an upscale food hall that was slated to be delivered in 2022, converting approximately 33,000 sf of vacant retail space to fast casual dining options on two levels of the mall; however, the servicer has confirmed that the food hall project is no longer underway, and the space is being actively marketed for lease on the property’s website.

The DBRS Morningstar ratings assigned to classes E through G are higher than the results implied by the loan-to-value ratio sizing benchmarks given a stressed analysis with an updated NCF of $19.7 million, reflecting the increased expenses since issuance. These variances are warranted given property occupancy, and revenues have continued to exhibit stable to improving performance. DBRS Morningstar will continue to monitor expenses and gather additional information related to the increases.

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 (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.

Class X-NCP is an IO certificate 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 North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American Single-Asset/Single-Borrower Ratings Methodology (February 23, 2023;
https://www.dbrsmorningstar.com/research/410191/north-american-single-assetsingle-borrower-ratings-methodology)

Rating North American CMBS Interest-Only Certificates (December 19, 2022;
https://www.dbrsmorningstar.com/research/407577)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022;
https://www.dbrsmorningstar.com/research/402646/dbrs-morningstar-north-american-commercial-real-estate-property-analysis-criteria)

North American Commercial Mortgage Servicer Rankings (September 8, 2022;
https://www.dbrsmorningstar.com/research/402499/north-american-commercial-mortgage-servicer-rankings)

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022;
https://www.dbrsmorningstar.com/research/402153/interest-rate-stresses-for-us-structured-finance-transactions)

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].