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

DBRS Limited (Morningstar DBRS) confirmed its credit 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 credit rating confirmations reflect Morningstar DBRS' current outlook for the transaction as evidenced by the stable performance of the underlying collateral, a 501,650-square-foot Class A single-tenant office building (One Channel Center) and an adjacent 965-space parking garage structure in Boston's Seaport District.

The collateral was constructed in 2014 and was built to suit for the current tenant, State Street Corporation (State Street), a long-term credit tenant (confirmed at AA with a Stable trend by Morningstar DBRS as of December 2024). The property was built to house back-office operations for State Street's global headquarters, formerly located nearby at 1 Lincoln St. However, in September 2023, State Street moved to a new global headquarters in the Bullfinch Crossing area of Boston, consolidating its U.S. offices into 21 floors of the 48-story building at One Congress Street. Concurrently, State Street made four contiguous floors totalling approximately 36.0% of the net rentable area (NRA) available for sublease at One Channel Center.

State Street's lease at the subject property extends through December 2029 (four years post loan maturity) and is structured without any termination options. Although the developments outlined above suggest refinance risk is elevated, the property will continue to generate sufficient cash flow to cover debt service obligations in the near-to-moderate term. Should the sponsor fail to successfully repay the loan at the December 2025 maturity date, the loan structure allows for the servicer to take control of State Street's lease payments for the remainder of the term via cash management. As such, the property's in-place cash flow stream would be available to facilitate a partial paydown of the loan's principal balance. Additional mitigating factors include the loan's low going-in loan-to-value ratio (LTV) as suggested by the appraised value at issuance, the sponsors' significant equity infusion at closing for the subject loan and the first loss Class E certificate balance of $19.4 million, which has a below investment-grade credit rating assigned by Morningstar DBRS.

The $166.0 million fixed-rate, 10-year interest-only 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 the 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, who contributed $152.7 million of equity in conjunction with the acquisition of the property. The land upon which the office portion of the collateral sits is subject to a ground lease, which was created to allow the development to benefit from the Chapter121A tax agreement with the City of Boston. Though this structure involves PILOT-type payments over the loan term, the loan is secured by both the fee and leasehold interests; therefore, even without the leasehold collateral in place, the lender is still protected.

As noted above, State Street's lease extends through December 2029 with no termination options and two five-year renewal options at 95.0% of fair market rent. The lease was signed in 2012, when rental rates were considerably lower, and as such, the in-place rental rate is well below current market rates. According to the June 2024 rent roll, State Street paid a base rent of $27.50 per square foot (psf); however, a rent step occurred in January 2025, increasing the base rent to $28.50 psf. According to Q4 2024 Reis data, the South Station/Ft. Point Channel submarket reported an average asking rental rate and average vacancy rate of $51.76 psf and 10.5%, respectively.

The servicer reported a trailing six months ended June 30, 2024, debt service coverage ratio (DSCR) of 2.08 times (x), compared with 2.24x at YE2023 and the Morningstar DBRS 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 formerly operated on a lease to VPNE Parking Solutions Inc. (VPNE), which expired in December 2024, and was structured with a fixed rental rate of $2.5 million per annum. The borrower received another bid from a local operator in Boston, the terms of which represent an improvement over the former VPNE lease. According to the servicer, the three-year lease is structured with no free rent or improvement concessions.

In the analysis for this review, Morningstar DBRS maintained the 7.5% cap rate applied at the previous credit rating action in April 2024, resulting in a Morningstar DBRS value of $192.4 million, a variance of -40.2% from the issuance appraised value of $322.0 million. The Morningstar DBRS value implies an LTV of 86.3%, compared with the LTV of 51.6% on the issuance appraised value. In addition, Morningstar DBRS maintained positive qualitative adjustments totaling 5.75% in the LTV sizing benchmark to reflect the low cash flow volatility and Class A property quality.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at (August 13, 2024) https://dbrs.morningstar.com/research/437781.

Classes X-A and X-B 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (December 13, 2024) https://dbrs.morningstar.com/research/444617.

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

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 info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

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

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

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

-- North American Single-Asset/Single-Borrower Ratings Methodology (December 13, 2024)
https://dbrs.morningstar.com/research/444612

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024)
https://dbrs.morningstar.com/research/439702

-- Legal Criteria for U.S. Structured Finance (December 3, 2024)
https://dbrs.morningstar.com/research/444064

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024)
https://dbrs.morningstar.com/research/438283

-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024)
https://dbrs.morningstar.com/research/428623

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279 (July 17, 2023).

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.