DBRS Morningstar Confirms Ratings on All Classes of BWAY Commercial Mortgage Securities Trust 2013-1515

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates Series 2013-1515 issued by BWAY Commercial Mortgage Securities Trust 2013-1515 as follows:

-- Class A1 at AAA (sf)
-- Class A2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class X-B at A (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (sf)
-- Class G at BBB (low) (sf)

All trends are Stable.

The transaction consists of an $814.4 million loan secured by the fee interest in a Class A, 1.7 million square foot (sf) office tower in the Times Square submarket of Midtown Manhattan, New York City. The loan has a 12-year term and has been amortizing on a 30-year schedule after an initial three-year interest-only (IO) period. As of the April 2021 reporting, the loan has amortized by 9.5%.

The collateral is a 54-story tower originally built in 1972 consisting of 1.7 million sf of office space; the 1,200-seat Minskoff Theatre; the 2,000-seat RAD Theater (formerly known as the PlayStation Theater); 31,000 sf of ground-floor retail; a four-level, 225-space subterranean parking garage; and two 48-foot by 38-foot LED signage displays. The subject is located in the heart of Times Square, one of the world’s most iconic tourist destinations, between 44th and 45th Streets along 7th Avenue.

The property serves as the global headquarters for Viacom Inc. (Viacom), which has occupied the property since 1989 and has gradually expanded as space has become available. At loan closing, Viacom occupied 79.0% of the net rentable area and had signed a 16-year lease extension running from June 2015 through June 2031. As part of the lease renewal, the sponsor also granted Viacom additional office space of up to 191,691 sf, subject to the sponsor’s timely delivery. Through year-end 2019, Viacom had assumed occupancy of floors 11 and 12, totaling 64,788 sf.

Viacom also received free-rent concessions on the space it leased at issuance. The free-rent period runs from 2019 to 2024 and totals $78.0 million, $67.0 million of which the sponsor reserved from 2016 to 2018 ($22.3 million annually); the reserve balance as of the April 2021 remittance was $1.7 million. The largest one-year free-rent concession of $64.6 million occurred in 2019, with annual concessions in 2020 to 2024 ranging from $2.4 million to $3.0 million.

Other significant tenants at the property include the Minskoff Theatre, which has a lease through June 2044 and currently hosts Disney’s “The Lion King” musical production, and the RAD Theater, a concert and event space venue formerly known as the PlayStation Theater, which signed a 20-year lease in late 2019. Both venues have been closed amid the ongoing Coronavirus Disease (COVID-19) pandemic, and are both expected to continue to suffer declines in traffic and bookings through the next few years as the effects of the pandemic continue. While some small city theaters reopened in April 2021, the larger Broadway theaters are not expected to resume shows until September 2021. The ground-floor retail portion of the collateral is 100.0% occupied by six tenants, including Line Friends, Junior’s Cheesecake, and Skechers USA, Inc. There are no scheduled lease expiries until February 2022 (Luxottica Group S.p.A., occupying 2,729 sf).

Performance has been generally in line with issuance assumptions to date. It should be noted that a small portion of overall revenue is attributable to percentage rent and parking revenue, which may be more susceptible to fluctuations in the short term because of the pandemic restrictions. The lack of traffic for the theater tenants has the largest impact on percentage rent. Total revenue for 2020 was down $8 million from the prior year.

Although the revenue declines and uncertainty for the theatre tenants are noteworthy risk factors for this deal, considerations including the long-term lease to Viacom and the sponsor’s financial wherewithal and experience as well as the overall desirability of the collateral improvements and location suggest the loan will to continue to perform relatively in line with DBRS Morningstar’s expectations.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 696-6293