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BSST 2021-1818 Mortgage Trust

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BSST 2021-1818 Mortgage Trust Presale: BSST 2021-1818 Mortgage Trust March 18, 2021 PRIMARY CREDIT ANALYST Preliminary Ratings Cathy Saint Louis New York Market value Debt yield + 1 (212) 438 4642 Class(i) Preliminary rating Preliminary amount ($)(ii) LTV (%)(iii) decline (%)(iv) (%)(v) cathy.saintlouis A AAA (sf) 75,440,000 45.0 73.3 17.5 @spglobal.com X-CP AAA (sf) 75,440,000(vi) N/A N/A N/A SECONDARY CONTACT X-EXT AAA (sf) 75,440,000(vi) N/A N/A N/A Natalka H Chevance New York B AA- (sf) 16,760,000 55.0 67.3 14.4 + 1 (212) 438 1236 C A- (sf) 12,580,000 62.5 62.9 12.6 natalka.chevance @spglobal.com D NR 32,720,000 N/A N/A N/A E NR 18,500,000 N/A N/A N/A F NR 19,250,000 N/A N/A N/A G NR 26,650,000 N/A N/A N/A H NR 9,800,000 N/A N/A N/A JRR(vii) NR 11,200,000 N/A N/A N/A Note: This presale report is based on information as of March 18, 2021. The ratings shown are preliminary. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed as evidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (i)The certificates will be issued to qualified institutional buyers according to Rule 144A of the Securities Act of 1933. (ii)Approximate, subject to a permitted variance of plus or minus 5.0%. (iii)Based on the $222.9 million mortgage loan and S&P Global Ratings' value. (iv)Reflects the approximate decline in the $282.1 million "as-is" appraised value that would be necessary to experience a principal loss at the given rating level. (v)Based on S&P Global Ratings' net cash flow and the mortgage loan balance. (vi)Notional balance. The notional amount of the class X-CP and class X-EXT certificates will be equal to the certificate balance of the class A certificates. (vii)Eligible horizontal residual interest. LTV--Loan-to-value ratio, based on S&P Global Ratings' values. N/A--Not applicable. NR--Not rated. Profile Expected closing date March 30, 2021. Loan A two-year, floating-rate, interest-only, first-lien mortgage loan totaling $222.9 million that will mature on March 9, 2023, with three 12-month extension options. Collateral The mortgage loan is secured by the borrower's fee and leasehold interest in 1818 Market Street, a 37-story, 999,828 sq. ft., class A- multi-tenant office building located in the Philadelphia central business district. www.standardandpoors.com March 18, 2021 1 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer 2613621 on the last page. Presale: BSST 2021-1818 Mortgage Trust Profile (cont.) Payment structure Principal payments will be made sequentially to the class A certificates and then to classes B, C, D, E, F, G, H, and JRR, in that order. Interest payments will be made sequentially to class A, X-CP, and X-EXT, pro rata, based on the interest due, and then to classes B, C, D, E, F, G, H, and JRR, in that order. Realized losses are allocated in reverse sequential order, starting with the class JRR certificates. Mortgage loan originator, Barclays Capital Real Estate Inc. seller Retaining sponsor RREF IV-D AIV RR H LLC (an affiliate of Rialto Capital Advisors LLC). Borrower SRI Eleven 1818 Market L.P. Borrower sponsor Shorenstein Realty Investors Eleven L.P. Master servicer KeyBank N.A. Special servicer Rialto Capital Advisors LLC. Trustee and certificate Wells Fargo Bank N.A. administrator Rationale The preliminary ratings assigned to BSST 2021-1818 Mortgage Trust's commercial mortgage pass-through certificates 2021-1818 reflect S&P Global Ratings' view of the collateral's historic and projected performance, the sponsor's and manager's experience, the trustee-provided liquidity, the loan terms, and the transaction's structure. We determined that the mortgage loan has a beginning and ending loan-to-value (LTV) ratio of 133.0%, based on S&P Global Ratings' value. S&P Global Ratings believes there remains high, albeit moderating, uncertainty about the evolution of the coronavirus pandemic and its economic effects. Vaccine production is ramping up and rollouts are gathering pace around the world. Widespread immunization, which will help pave the way for a return to more normal levels of social and economic activity, looks to be achievable by most developed economies by the end of the third quarter. However, some emerging markets may only be able to achieve widespread immunization by year-end or later. We use these assumptions about vaccine timing in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly. Strengths The transaction exhibits the following strengths: - The mortgage loan is secured by the borrower's fee and leasehold interest in a 37-story, 999,828 sq. ft., class A- office building, including a 408-space parking garage. Built in 1972 and renovated between 2015 and 2021, the property is prominently located in the Philadelphia central business district (CBD). The building amenities include a new fitness center, a new conference center, and a bike room. The property's net rentable area (NRA) primarily consists of office (95.8%), with the remainder allocated to storage space (2.2%) and retail (2.0%). - Situated on the southeast corner of Market Street and 19th Street, the property benefits from its desirable CBD location in Philadelphia's Center City neighborhood. The property is www.standardandpoors.com March 18, 2021 2 © S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimer 2613621 on the last page. Presale: BSST 2021-1818 Mortgage Trust approximately two blocks west of the Suburban Station underground concourse, which provides access to Southeastern Pennsylvania Transportation Authority's (SEPTA) regional rail and subway system, and 1.5 miles east of Amtrak's 30th Street Station. The 19th Street trolley station is located on the plaza outside the property. - The sponsor purchased the property in April 2015 and has spent approximately $94.1 million ($94 per sq. ft.) as of February 2021, including approximately $29.5 million on construction-related expenses for extensive renovations and approximately $64.6 million in tenant improvements and leasing costs (TIs/LCs). Following the completion of most of the renovations in 2018, the sponsor executed 591,873 sq. ft. of new and renewal leases, at an average base rent of $33.96 per sq. ft., compared to in-place base rents of $28.84 per sq. ft. for leases that commenced prior to 2018. Occupancy increased to 86.2% in March 2020 (pre-pandemic) from 79.3% in 2016, though it has declined slightly since to 85.2% as of the January 2021 rent roll. - The property benefits from Shorenstein Properties LLC's (Shorenstein) experienced sponsorship. Founded over 50-years ago, Shorenstein is a fully integrated institutional real estate investment company that owns and manages high-quality office and residential properties across the U.S. The company currently manages a portfolio of approximately 23 million sq. ft. across 12 funds, with a gross value of approximately $9.0 billion. Shorenstein also provides asset management, leasing, property management, and construction services to the properties in its portfolio through its wholly owned subsidiary, Shorenstein Realty Services L.P. - The loan is structured with a hard in-place lockbox and in-place cash management, as determined by S&P Global Ratings. A cash sweep event will occur upon an event of default or if the debt yield falls below 7.0% for two consecutive quarters. The net operating income (NOI) debt yield, based on the sponsor's 2021 budget cash flow, the issuer's cash flow, and S&P Global Ratings' cash flow is 7.5%, 7.9%, and 7.2%, respectively. There are also ongoing reserves for taxes, insurance (except a blanket policy), ground rent, capital expenditures, and leasing expenses. - The transaction structure holds the borrowers responsible for expenses that would typically result in shortfalls to the certificateholders, such as special servicing, workout, and liquidation fees, as well as costs and expenses incurred from the special servicer's appraisals and inspections. If deemed recoverable from the liquidation proceeds, the servicer must make administrative advances (provided the collateral has sufficient value) to prevent interest shortfalls that might otherwise arise from these expenses if the borrowers do not pay them on time. Risk Considerations In our analyses, we considered the following risks for this transaction include: - U.S. CMBS delinquencies may increase this year due to the economic slowdown resulting from the COVID-19 pandemic and the associated containment efforts, including social distancing, restrictions on travel, and government-mandated closures of certain businesses. Lodging and retail assets have been disproportionately affected due to closures and low occupancy levels, with retail further affected by nonpayment and rent relief requests. Multifamily and self-storage properties may be negatively impacted if unemployment rates rise and disposable income levels decline, or if there is a moratorium on evictions. Delinquencies on office-backed loans have only shown a marginal increase as of February 2021. However, the office market is facing pressure from the population shift from larger, denser cities to work-from-home www.standardandpoors.com March 18, 2021 3 © S&P Global Ratings.
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