Morningstar DBRS Confirms Credit Ratings on All Classes of Benchmark 2021-B25 Mortgage Trust Amazon Seattle Loan-Specific Certificates

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on the following classes of Amazon Seattle Loan-Specific Certificates issued by Benchmark 2021-B25 Mortgage Trust:

-- Class 300P-A at A (high) (sf)
-- Class 300P-B at BBB (high) (sf)
-- Class 300P-C at BB (sf)
-- Class 300P-D at B (sf)
-- Class 300P-E at B (low) (sf)
-- Class 300P-RR at B (low) (sf)

All trends are Stable.

The credit rating confirmations reflect the stable performance of the underlying collateral, which remains in line with Morningstar DBRS' expectations at the last credit rating action in April 2024. The Amazon Seattle Loan-Specific Certificates are secured by the fee-simple interest in a Class A office property known as Amazon Seattle, as well as its leasehold interest in a parking lease covering certain spaces at an adjacent parking garage. Amazon Seattle is a redeveloped Class A office building in the heart of the Seattle central business district and consists of approximately 680,000 square feet (sf) of office space and 94,000 sf of retail space. The $455 million whole loan is composed of $234.9 million of senior A notes, one junior B note of $155.1 million (the Amazon Seattle Trust Subordinate Companion Loan), and a mezzanine loan of $65 million. The Amazon Loan-Specific Certificates total $155.1 million and are collateralized by only the Amazon Seattle Trust Subordinate Companion Loan. The interest-only loan is structured with an anticipated repayment date in April 2030 and a final maturity date in May 2033.

The property was originally constructed in 1929 as the flagship location of prominent Seattle-based department store The Bon Marché and has since been granted landmark status by the city of Seattle. In 2017, the previous owner began a three-phase, comprehensive transformation to convert the property into office space for Amazon. The previous owner completed the first two phases of the project at a cost of $160.0 million and the final phase of the repositioning project, Amazon's final expansion and conversion, was completed and all of Amazon's space was delivered by February 2022 in accordance with the loan agreement.

According to the September 2024 rent roll, the property is 94.6% leased to four tenants. The office component of the collateral is fully occupied by investment-grade tenant Amazon (88.3% of the net rentable area) on a triple net lease that extends through May 2033, with three five-year renewal options available. There are no future termination options or outs in the lease. Moreover, it is noteworthy that the Amazon lease is guaranteed by the parent company, Amazon.com, Inc., however, the guarantee cap amount is scheduled to reduce each year until the lease's initial expiry in 2033. Although the site inspection dated August 2024 noted that physical occupancy at the office was approximately 10% given work-from-home flexibility, as per recent media articles, Amazon revised its return to office mandate to five-days per week beginning in January 2025, marking a significant increase in foot traffic in downtown Seattle since the beginning of the COVID-19 pandemic. According to Reis, office properties within the Central Seattle submarket reported an average vacancy rate of 21.0% in Q4 2024, a slight increase from 20.0% in Q4 2023; however, the five-year forecasted vacancy rate is expected to decrease to 15.3%. Despite the softening submarket metrics, Amazon has demonstrated its commitment to the property by completing various amenity projects during the pandemic to revitalize the space. As per the financial statement for the trailing-six-month period ended June 30, 2024, the annualized net cash flow (NCF) was reported at $26.8 million, lower than the Morningstar DBRS NCF of $29.0 million, which applies straight-line credit to Amazon's rent over the loan term given its consideration as a long-term credit tenant.

The April 2024 Morningstar DBRS credit rating analysis and action included an updated collateral valuation. For more information regarding the approach and analysis conducted, please refer to the press release titled "Morningstar DBRS Takes Rating Actions on North American Single-Asset/Single-Borrower Transactions Backed by Office Properties," published on April 15, 2024. Morningstar DBRS maintained the valuation approach from the April 2024 review, which was based on a capitalization rate of 7.50% applied to the Morningstar DBRS net cash flow of $29.0 million. Morningstar DBRS also maintained positive qualitative adjustments to the loan-to-value ratio sizing benchmarks totaling 6.0% to reflect the subject property's quality and generally long-term in-place tenancy of the investment-grade tenant. The Morningstar DBRS concluded value of $386.9 million represents a -39.9% variance from the issuance appraised value of $644.0 million.

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/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 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
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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 03, 2024)
https://dbrs.morningstar.com/research/444064

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

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.

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