Morningstar DBRS Confirms Credit Ratings on All Classes of DBGS 2021-W52 Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of DBGS 2021-W52 Mortgage Trust Commercial Mortgage Pass-Through Certificates issued by DBGS 2021-W52 Mortgage Trust as follows:

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

All trends are Stable.

The credit rating confirmations and Stable trends reflect the overall stable performance of the underlying collateral, which generally remains in line with Morningstar DBRS' expectations since the previous credit rating action in April 2024, when the credit ratings for Classes C, D, E, and F were downgraded by one to two notches. The April 2024 credit rating actions were the result of a lower Morningstar DBRS Value, which was updated to reflect a higher capitalization (cap) rate, as further described below. Although Morningstar DBRS believes the recent occupancy declines for the subject collateral property, as well as the generally increased credit risks for office properties in the post-COVID-19 pandemic environment, remain noteworthy considerations, the subject property benefits from a recent $128.0 million renovation executed by the borrower, Harbor Group International, LLC, (Harbor), and lease renewals for the two largest tenants, Wachtell Lipton (28.7% of the net rentable area (NRA), lease extended through July 2034) and Orrick, Herrington & Sutcliffe (24.2% of the NRA, lease extended through August 2043).

The subject transaction's underlying loan is collateralized by 51 West 52nd Street (also known as the Black Rock Building or the CBS Building), consisting of approximately 880,000 square feet (sf), in a Class A, office high-rise property in Midtown Manhattan. The building was constructed in 1963 as the headquarters for CBS Corporation (CBS). CBS merged with Viacom in 2019 and has since fully vacated the property. Inclusive of the CBS vacancy, occupancy was most recently reported at 77.0% as per the December 2024 rent roll, approximately 20.0% below the occupancy figure of 96.7% at issuance.

The $420 million mortgage loan, along with $378.1 million in borrower equity, was used to acquire the property for $760 million, pay $32.6 million in closing costs and fund $5.5 million in upfront tax reserve. At issuance, there was additional mezzanine financing of $25.0 million, providing additional upfront reserves for tenant improvement and leasing costs (TI/LC) and capital expenditures. The associated mezzanine loan provides for up to $113.4 million in future advances that would be reserved for additional future leasing costs ($87.9 million), additional capital improvement ($15.0 million), and future shortfalls ($10.5 million). At issuance, Harbor noted the future advances would fund planned renovations to reposition the collateral and achieve higher rental rates that are in line with some of Midtown Manhattan's premier trophy assets. Several articles have noted that Harbor completed the planned upgrades at the property by April 2024, which included upgrades to the lobby, a new elevator, upgraded interior spaces and an addition of a tenant lounge, fitness center, and private café in the basement.

The interest-only (IO), floating-rate loan had an initial maturity of October 2024; however, the borrower exercised the first of three one-year extension options available, and the loan is now scheduled to mature in October 2025. There are no performance triggers, financial covenants, or fees required for the borrower to exercise any of the extension options; however, the execution of each option is conditional upon, among other things, no events of default and the borrower's purchase of an interest rate cap agreement with a strike rate at 3.5% for each extension term.

The loan has been on the servicer's watchlist since November 2022 due to the commencement of the additional reserve sweep period. The cash sweep fund is capped at $25.0 million, with 40.0% allocated to a shortfall reserve, 45.0% to leasing cost reserve, and 15.0% to a capital improvement reserve. In addition, the lease sweep trigger also commenced in March 2023 after CBS began vacating its space. Per the loan agreement, excess cash flow will be swept up to $150 per square foot (psf). Morningstar DBRS has requested confirmation of the reserve balances, and the servicer's response is pending.

As of the most recent reporting, the loan reported a YE2024 debt service coverage ratio (DSCR) of 0.40 times (x), compared with the Morningstar DBRS DSCR of 3.38x at issuance. The cash flow was most recently reported at $15.5 million with the YE2024 financial reporting. In comparison, YE2023 net cash flow (NCF) was $28.6 million, and the Morningstar DBRS NCF derived at issuance was $33.8 million. The NCF declines are attributable to the fluctuation in the collateral's occupancy rate over the past few years, primarily due to the departure of CBS (formerly occupied 32.3% of the NRA) upon lease expiry dates in August 2023 and August 2024. The low in-place DSCR is attributable to the cash flow decline and the loan's floating interest rate structure; however, Morningstar DBRS notes an interest rate cap is in place, with a 3.5% strike rate, as noted above.

According to the December 2024 rent roll, Orrick Herring (24.2% of NRA) is downsizing its space by approximately 67,738 sf at the November 2026 lease expiry as part of a long-term renewal through August 2043 for a reduced footprint representing 16.4 % of the NRA. With the lease renewal, the tenant will receive rental abatements and a tenant improvement allowance, along with an increased rental rate of $95.33 psf, compared with the previous rental rate of $82.86 psf. As per Reis, office properties located in the Plaza submarket reported an average vacancy rate of 12.1% and an effective rental rate of $81.24 psf, compared with the subject's vacancy rate of 23.1% and average rental rate of $80.87 psf.

In the analysis for this review, Morningstar DBRS maintained the valuation approach from its April 2024 review, which was based on a capitalization rate of 7.5% applied to the Morningstar DBRS NCF of $33.8 million. Morningstar DBRS also maintained positive qualitative adjustments to the loan-to-value ratio sizing benchmarks totaling 4.0% to reflect the recent renovations that improve the quality of the asset and the stability of demand for buildings near major transportation arteries, such as the Grand Central Terminal. The Morningstar DBRS Value of $450.5 million represents a -42.2% variance from the issuance appraised value of $780.0 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, 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.

Classes X-CP and X-EXT 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 (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 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 (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 03, 2024), https://dbrs.morningstar.com/research/444064
-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025), https://dbrs.morningstar.com/research/450750
-- 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 (July 17, 2023), 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.