DBRS Morningstar Finalizes Provisional Ratings to BX Trust 2021-VIEW

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings to the following classes of the Commercial Mortgage Pass-Through Certificates to be issued by BX Trust 2021-VIEW (BX Trust 2021-VIEW):

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

All trends are Stable.

The BX Trust 2021-VIEW single-asset/single-borrower transaction is collateralized by the borrower’s fee-simple interest in The Shops at Skyview, a 509,500-square foot (sf) retail complex in Flushing in Queens, New York. The property is well located in a densely populated, high-traffic location. The subject benefits from strong anchors, including Target (noncollateral), BJ’s Wholesale Club, and Skyfoods, with estimated 2020 sales of $344 per sf (psf), $678 psf, and $721 psf, respectively. The sponsor has invested more than $5.9 million in capital into the property since 2018 to cover in leasing allowances and landlord work.

The property has been significantly affected by the mitigation strategies and the economic fallout attributable to the ongoing Coronavirus Disease (COVID-19) pandemic. Collections dropped to a low of 79.4% during Q2 2020 because a number of tenants were either bankrupt or had gone dark; however, collections improved to 97.3% as of March 2021. The property will likely continue to experience stress in the short and medium term until the pandemic abates and the economy recovers. Like most retail properties, the property will need to contend with the secular headwinds facing brick-and-mortar retailers in the long run. The sponsor's $44.8 million equity contribution to the transaction, along with the execution of a $26.7 million guaranty for potential future tenant improvement and leasing commission (TI/LC) obligations at the property, demonstrates a reassuring level of commitment to the property.

The property is well located within the heart Flushing, Queens, which is one of the most densely populated neighborhoods in the country. According to Experian Marketing Solutions, the neighborhood’s population was 772,048 and had 271,061 households within a three-mile radius in 2020,. The subject benefits from its high-traffic location in the second-highest DBRS Morningstar Market Rank of 7. The property has strong visibility and is easily accessible via public transportation or by vehicle. One of the draws of the center is its six-level parking garage with 2,256 parking spaces. Most of the municipal parking lots in Flushing are now privatized, and street parking is limited hourly meter parking. The property’s competitive parking rates and ample parking spaces make it a desirable shopping destination for many locals.

The borrower is primarily using whole loan proceeds to refinance existing debt on the property of $306.0 million and is contributing approximately $44.8 million of fresh cash equity. DBRS Morningstar views cash-in re-financings more favorably than when the sponsor is withdrawing significant equity, which can result in a reduced stake.

The sponsor for the mortgage loan is an affiliate of The Blackstone Group, Inc. (Blackstone), whose real estate group was founded in 1991 and has approximately $196.3 billion in investor capital under management. Blackstone is also one of the world's largest industrial landlords, with a global real estate portfolio that is valued at approximately $329.0 billion.

The loan is interest only (IO) for the entire fully extended term. The lack of principal amortization during the loan term can increase the refinance risk at maturity. The loan leverage is considered moderate at a 64.8% loan-to-value ratio (LTV) based upon the market appraised value and a DBRS Morningstar Issuance LTV of 89.5%. Furthermore, there is no additional debt allowed other than trade payables and other items outlined within loan documents, capped at 5% of the initial loan amount.

Rollover during the fully extended loan term is concentrated in years 2024 and 2025, when approximately 14.8% and 13.8% of the net rentable area (NRA) expires, respectively, including a handful of major tenant leases such as Best Buy (expiring January 2024; 8.8% of the NRA), Marshall’s (expiring October 2025; 8.8% of the NRA), Chuck E. Cheese (expiring December 2025; 3.5% of the NRA), and Old Navy (expiring January 2024; 3.2% of the NRA). The loan has also executed a reserve guaranty for approximately $26.67 million for potential future TI/LC obligations at the property.

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-CP and X-NCP 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.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrsmorningstar.com. DBRS Morningstar provides analysis and in-depth commentary in the DBRS Viewpoint platform.

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

With regard to due diligence services, DBRS Morningstar 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 DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is North American Single-Asset/Single-Borrower Ratings Methodology (March 2, 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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

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