Morningstar DBRS Finalizes Provisional Credit Ratings on Benchmark 2025-V13 Mortgage Trust Herald Center Loan-Specific Certificates

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the following classes of Herald Center Loan-Specific Certificates, issued by Benchmark 2025-V13 Mortgage Trust (the Trust):

-- Class HCB at AA (low) (sf)
-- Class HCC at A (low) (sf)
-- Class HCD at BBB (low) (sf)
-- Class HCE at BB (low) (sf)
-- Class HCRR at BB (low) (sf)

All trends are Stable.

The Herald Center Loan-Specific Certificates are secured by the borrower's fee-simple interest in a mixed-use nine-story retail and office/university property totaling 267,207 square feet (sf) in the Herald Square area of Manhattan. Herald Square is between Midtown and Koreatown and is a highly trafficked retail corridor of New York City that was recently revitalized with increased public pedestrian space, including seating areas and bike lanes. The property is between West 34th Street, 6th Avenue, West 33rd Street, and 7th Avenue, and is surrounded by a mix of commercial developments, including the flagship Macy's store. The property was built in 1902, rebuilt in 1986, and renovated in 2015 by the borrower, who acquired the property in 1986. The property is in a prime location for accessibility, situated above the 34th Street-Herald Square Subway Station, which provides access to the B, D, F, M, N, Q, R, and W trains and 0.2 miles from Penn Station, which provides access to the 1, 2, 3, A, C, E, LIRR, PATH, and Amtrak trains.

The Herald Center is currently 97.9% leased with a weighted average remaining lease term of 25.1 years. There are eight tenants at the property, including two antenna tenants, T-Mobile Northeast, LLC and New Cingular Wireless PCS, LLC. The property is anchored by H&M and other retail tenants Verizon, Bank of America, and Hey Tea. Three of the property's retail tenants have investment-grade credit ratings, including H&M, Bank of America, and Verizon. Yeshiva University's (Yeshiva) dental school will begin occupying 155,025 square feet on floors five through nine plus a mezzanine entry area in phases beginning in 2025. Yeshiva University is a private Orthodox Jewish university based in the lower east side neighborhood of Manhattan. The Joint Industry Board of the Electrical Industry (JIBEI) leases 29,279 sf of office space on the fourth floor. The three largest tenants at the property are Yeshiva University, H&M, and the Joint Industry Board of the Electrical Industry. These tenants collectively represent 92.5% of square footage and 79.2% of Morningstar DBRS gross rent.

Following closing, the borrower will convert the property to a leasehold condominium structure, whereby one unit totaling 112,182 sf will be retained by the borrower, and the other unit, totaling 155,025 sf, will be conveyed to Yeshiva University. Under its lease agreement, Yeshiva University will be required to pay common charges, including ground rent. As a result of the condominium structure, real estate taxes are anticipated to decrease significantly as Yeshiva University will apply for and be granted tax exemption under Section 420-a of the New York Real Property Tax Law.

The sponsor of the transaction is JEMB Realty Corporation, a family-run real estate development, investment, and management group based in New York City. The firm was established in 1990 and has an asset base across the U.S. and Canada totaling more than 7 million square feet. The same borrower owns Herald Towers, which are located across 6th Avenue from the collateral.

Overall, Morningstar DBRS has a favorable view of the credit characteristics of the collateral. Given its central location in a prime retail corridor of Manhattan, investment-grade tenant concentration, easy accessibility via transit, incoming university tenant, and knowledgeable local sponsorship, Herald Center is poised to benefit from the diversification of its mixed-used offerings.

Morningstar DBRS' credit rating on the Certificates addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Distribution Amounts and Interest Distribution Amounts for the rated classes.

Morningstar DBRS' credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the credit ratings do not address Yield Maintenance Premiums.

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 (August 13, 2024) https://dbrs.morningstar.com/research/437781.

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

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

With regard to due diligence services, Morningstar DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

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

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

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

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