DBRS Morningstar Confirms Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-410T

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-410T issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-410T:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, with the collateral office property benefiting from investment-grade tenancy, a recent redevelopment, and relatively healthy submarket dynamics, despite more recent challenges for the office sector amid the effects of the Coronavirus Disease (COVID-19) pandemic and increases in remote work.

The transaction is collateralized by the borrower’s fee-simple interest in a 20-story, Class A office building in Manhattan, located on 10th Avenue between 33rd Street and 34th Street. The building is well situated in the highly desirable Hudson Yards/Penn Station submarket with good commuter rail and subway hubs positioned to the east and west of the building. Additionally, the property is close to Madison Square Garden and the High Line. The building underwent a complete redevelopment costing $145.5 million between 2020 and 2021 that was overseen by the prior owner, SL Green. The subject loan sponsor, an affiliate of 601W Companies, acquired the property in 2021 for $952.5 million. The property upgrades as part of the redevelopment primarily consisted of new retail storefronts, lobby renovations, and the addition of a rooftop amenity space with sweeping southern views.

Whole loan proceeds of $705 million consist of seven senior A notes totaling $408 million, one junior B note totaling $157 million, a senior mezzanine loan totaling $20 million, and one junior mezzanine loan totaling $120 million. The $485 million subject transaction consists of six senior A notes totaling $300 million and one junior mezzanine loan totaling $185 million. The loan is interest only (IO) throughout its fully extended 10-year term and has an anticipated repayment date (ARD) in January 2028. The terms of the ARD require that, should the loan remain outstanding beyond that date, it will incur additional interest and will begin hyper-amortizing, with the fully-extended maturity date occurring in March 2032.

According to the rent roll dated September 2022, the property was 97.4% occupied, remaining in line with issuance. Investment grade tenants include Amazon.com, Inc. (Amazon) (53.1% of net rentable area (NRA); expiring May 2037), and First Republic Bank (33.5% of NRA; expiring August 2036). Both tenants have termination options, with Amazon’s option effective as of 2032 with a 600-day notice requirement and First Republic Bank’s first and second options effective as of 2030 and 2035, respectively, with an 18-month notice requirement. In both cases, the options come with penalties to be paid by the tenants in question. The loan is structured with cash sweep and reserve requirements that would be triggered should either tenant exercise a termination option. According to Reis, Class A properties within a one-mile radius reported vacancy and average rental rates of 8.0% and $82.43 per square foot (psf), respectively. The subject property reported vacancy and average rental rates of 2.6% and $81.85 psf, respectively. The redevelopment and high quality offerings at the property entice tenants as the flight to quality continues.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929 (May 17, 2022).

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

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

The principal methodology is the North American CMBS Surveillance Methodology (October 3, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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@dbrsmorningstar.com.

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.

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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