Morningstar DBRS Confirms Credit Ratings on All Classes of SLG Office Trust 2021-OVA

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2021-OVA issued by SLG Office Trust 2021-OVA as follows:

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

All trends are Stable.

The credit rating confirmations and Stable trends reflect the transaction's overall stable performance, as the collateral office building, which benefits from its prime location and prestige as one of New York's best-in-quality trophy assets, demonstrated a high occupancy rate of nearly 100.0% and a healthy debt service coverage ratio of 2.35 times as of the annualized trailing nine-month (T-9) period ended September 30, 2024.

The $3.0 billion mortgage loan is secured by the borrower's fee-simple interest in One Vanderbilt, a 1.6 million-square-foot (sf) Class A office high-rise in Midtown Manhattan, New York. In addition to more than 1.5 million sf of luxury office space, the property includes a 67,000-sf observation deck (the Summit) and approximately 32,000 sf of high-end commercial space and is directly adjacent to Grand Central Terminal. The property was developed by the sponsor, SL Green Realty Corp., which owns 71.0% of the property. The remaining 29.0% is owned by the National Pension Service of Korea, one of the largest pension funds in the world, and Hines Interests Limited Partnership, one of the largest privately held real estate investors. The fixed-rate loan is interest only (IO) throughout its 10-year loan term and matures in July 2031.

For the T-9 period ended September 30, 2024, the loan reported an annualized net cash flow (NCF) of $201.4 million, compared with the YE2023 NCF of $165.1 million and the Morningstar DBRS NCF of $179.0 million. According to the September 2024 rent roll, the property's occupancy rate was 99.4%, with an average rental rate of $124.57 per sf (psf), up from 96.7% and $91.51 psf, respectively, as of the December 2022 rent roll. According to Reis, in Q4 2024, the average vacancy rate and asking rental rate for Class A office properties in the Grand Central submarket were 12.2% and $88.82 psf, respectively. Morningstar DBRS also notes that the property benefits from long-term, investment-grade tenancy, including the two largest tenants, TD Bank and Securities (20.8% of net rentable area (NRA); expiring July 2041) and Carlyle Investment Management (11.8% of NRA; expiring September 2041), which, combined, account for approximately 65.0% of annual rental income, further contributing to the positive credit profile.

For this credit rating action, Morningstar DBRS maintained the same analytical approach as for the prior credit rating action in April 2024, when Morningstar DBRS updated its value for the collateral buildings to reflect an increased capitalization (cap) rate of 6.25%, up from the issuance cap rate of 6.00%. The Morningstar DBRS NCF of $179.0 million derived at issuance, which straight-lined several tenants' rent over the loan's term to account for consideration as long-term credit tenants, was maintained and the resulting value was $2.9 billion, a variance of -42.7% from the issuance appraised value of $5.0 billion and an implied all-in loan-to-value ratio (LTV) of 104.8%. The increased cap rate reflects Morningstar DBRS' view that there has been a secular shift for the office sector, which has resulted in generally increased risks for the property type. Morningstar DBRS also maintained positive qualitative adjustments to the LTV sizing benchmarks, which total 11.25%, to reflect the subject's exceptional quality, desirable location, and limited cash flow volatility.

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) at https://dbrs.morningstar.com/research/437781.

Class X 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 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 (February 28, 2025), https://dbrs.morningstar.com/research/448963.

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

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 Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448962
-- 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

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