DBRS Morningstar Confirms All Ratings on Benchmark 2021-B25 Mortgage Trust Amazon Seattle Loan-Specific Certificates

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the following classes of Amazon Seattle Loan-Specific Certificates issued by Benchmark 2021-B25 Mortgage Trust:

-- Class 300P-A at AA (low) (sf)
-- Class 300P-B at A (low) (sf)
-- Class 300P-C at BBB (low) (sf)
-- Class 300P-D at BB (low) (sf)
-- Class 300P-E at B (high) (sf)
-- Class 300P-RR at B (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the loan, which is consistent with DBRS Morningstar’s expectations at issuance. The Amazon Seattle Loan-Specific Certificates are secured by the fee-simple interest in a Class A office property known as Amazon Seattle, as well as its leasehold interest in a parking lease covering certain spaces at an adjacent parking garage. Amazon Seattle is a redeveloped Class A office building in the heart of the Seattle central business district and is demised with approximately 680,000 square feet (sf) of office space and 94,000 sf of retail space. The $455 million whole loan is composed of $234.9 million of senior A notes, one junior B note of $155.1 million (the Amazon Seattle Trust Subordinate Companion Loan), and a mezzanine loan of $65 million. The Amazon Loan-Specific Certificates total $155.1 million and are collateralized by only the Amazon Seattle Trust Subordinate Companion Loan. The Amazon Seattle loan is structured with an anticipated repayment date in April 2030 and a final maturity date in May 2033.

The property was originally constructed in 1929 as the flagship location of prominent Seattle-based department store The Bon Marché and has since been granted landmark status by the city of Seattle. In 2017, the previous owner began a three-phase, comprehensive transformation to convert the property into office space for Amazon. The previous owner completed the first two phases of the project at a cost of $160.0 million and the final phase of the repositioning project, Amazon’s final expansion and conversion, was completed and all of Amazon’s space was delivered by February 2022 in accordance with the loan agreement.

According to the September 2022 rent roll, the property was 94.6% occupied, up from 91.5% occupied as of September 2021, with Amazon occupying 88.3% of the net rentable area. Despite maintaining remote working options for employees at this location throughout the Coronavirus Disease (COVID-19) pandemic, Amazon continued to demonstrate its commitment to the property by completing various amenity projects for the space during the pandemic. Added perks included the construction of a rooftop dog park and sidewalk pet relief stations. In a February 2023 letter to its employees, Amazon’s CEO announced that the company is shifting from its current remote working environment to a hybrid work schedule with employees required to come into the office three days per week, effective May 1, 2023. Amazon’s triple net lease extends through May 2033 with three five-year renewal options available. There are no future termination options or outs in the lease. The annualized September 2022 net cash flow (NCF) of $26.5 million is up from $24.5 million as of year-end 2021 and the DBRS Morningstar NCF of $24.9 million, which applies straight-line credit to Amazon’s rent over the loan term given its consideration as a long-term credit tenant.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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 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 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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