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.

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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

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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

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arrangements and corporate cost-cutting strategies that favor a shrinking real estate footprint that may lead to reduced demand, especially in CBDs. The spread between availability rates and vacancy rates in certain CBD markets continues to increase, indicating limited leasing and heightened lease terminations. However, as the vaccine rollout progresses, commercial real estate users may begin to make more definitive longer-term decisions on how they will address their real estate needs going forward.

- The mortgage loan is highly leveraged with an S&P Global Ratings' LTV ratio of 133.0%. The LTV ratio, based on the appraiser's "as-is" valuation of $282.1 million, is 79.0%. Our estimate of long-term sustainable value is 40.6% lower than the appraiser's as-is valuation, a variance driven primarily by our higher vacancy, TIs/LCs expenses, and our capitalization rate assumption.

- The mortgage loan is interest-only (IO) for its entire five-year extended term, and there will be no scheduled amortization during the loan term. Compared with an amortizing loan, an IO loan bears a higher refinance risk because of the higher loan balance at maturity. We reduced our LTV recovery thresholds across the capital structure to account for this lack of amortization.

- The mortgage loan has a low debt service coverage (DSC) ratio of 0.84x, calculated using the loan's 3.44% spread, the 3.50% LIBOR cap, and S&P Global Ratings' net cash flow (NCF) for the property, which is 16.9% lower than the issuer's NCF. The loan's actual DSC, based on the loan's LIBOR floor of 0.25%, the 3.44% spread, and S&P Global Ratings' NCF, is 1.59x.

- The mortgage loan pay interest at a floating rate indexed to one-month LIBOR (floored at 0.25%) plus the 3.44% spread. Increases in LIBOR will raise the interest amount payable on the underlying loan, thus decreasing the loan's DSC. To hedge against the risk of rising interest rates, the borrower entered into an interest rate cap agreement with SMBC Capital Markets Inc. that is guaranteed by SMBC Derivative Products Ltd. at a 3.50% strike price during the initial term. During the extension terms, the strike price must not be greater than the greater of the initial strike price or the rate that, when added to the spread, results in a DSC of not less than 1.10x. The interest rate cap agreement is structured so that the interest cap counterparty can support ratings up to 'AAA (sf)' according to our counterparty criteria. As a result, our analysis did not include an additional interest rate stress.

- The property has experienced strong leasing momentum, primarily in 2018 and 2019, that increased occupancy to 86.2% in March 2020 (pre-pandemic) from 79.6% in 2016, though it has declined slightly since to 85.2% as of the January 2021 rent roll. In addition, the property's NOI declined 26.4% to approximately $8.7 million in 2020 from approximately $11.8 million in 2016. According to management, the NOI decline primarily reflects the 2018 termination of the Five Below lease (60,000 sq. ft.; 6.0% of NRA), free rent for tenants who signed new leases in 2018 through 2020, an approximately 40.0% decrease in 2020 parking income, and higher year-over-year expenses, specifically insurance, repairs and maintenance, professional fees, and elevator expenses. We assumed an overall vacancy rate of 18.0% in our derivation of long-term sustainable NCF, and a 7.75% capitalization rate in our valuation of the property.

- As of the January 2021 rent roll, the property was 85.2% leased, as calculated by S&P Global Ratings, to 61 tenants from industries, including financial services, technology, legal, consulting, health care, and research. The property faces moderate tenant rollover, with 29.3% of leased NRA and 34.5% of gross rent expiring during the five-year fully extended loan term. Favorably, the rollover is staggered with no more than 6.9% of NRA or 9.2% of gross rent expiring in any one year during the same period. In addition, the loan is structured with an ongoing rollover reserve of $1.50 per sq. ft. per year ($1.5 million). We assumed an overall vacancy rate of 18.0% in our derivation of long-term sustainable NCF to account for the rollover risk.

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- Three of the top five tenants (22.1% of NRA; 24.4% of gross rent) have various lease termination and/or contraction options that they can exercise with a minimum of six- to 12-months' notice. WSFS Financial Corp. (WSFS; 9.7 of NRA; 9.9% of gross rent; December 2028 lease expiration) has the right to terminate effective June 30, 2024, with a 12-month prior written notice and the payment of a termination fee of six months' rent plus any unamortized costs associated with the lease, approximately $4.8 million. eResearch Technology Inc. (5.9% of NRA; 7.1% of gross rent; February 2032 lease expiration) has two termination options (outside of the five-year fully extended loan term) effective Feb. 29, 2028, and Feb. 28, 2031, with a 12-month prior written notice and the payment of a termination fee of approximately $3.7 million and $1.0 million, respectively. Berger Montague P.C. (Berger; 4.4% of NRA; 4.8% of gross rent; August 2034 lease expiration) has the right to terminate (outside of the five-year fully extended loan term) or reduce its square footage effective Aug. 31, 2029, with a 12-month prior written notice and the payment of a termination or contraction fee of approximately $4.2 million.

- Hana, a flexible workspace provider and wholly owned subsidiary of CBRE Group Inc., leases 50,745 sq. ft. of the ninth and 10th floors (5.1% of NRA; 6.3% of gross rent). Hana's 11-year lease was executed in December 2019, with an anticipated lease start date of November 2020. However, due to build-out delays, the lease start date was pushed to January 2021 and expires January 2032. We understand that coworking tenants has not yet occupied the space, but according to management, it is currently marketing the 10th floor space for coworking use. Hana's initial base rent is $34.00 per sq. ft., with 2.5% annual escalations and no termination or contraction options. Hana received a concession package of 12-months of free rent and a $70.00 per sq. ft. TI allowance. The Hana leases are guaranteed by CBRE Inc. for approximately $3.9 million for the first three years of the lease, which, if no event of default occurs under the lease, begins to burn off 33.0% each year, ending Jan. 30, 2024. CBRE Inc. is not rated by S&P Global Ratings, and we did not give credit for the guarantee in our analysis. To account for the exposure to a coworking tenant, we reduced Hana's base rent to the appraiser's market rent assumption of $32.50 per sq. ft. We also deducted approximately $1.6 million from our long-term sustainable value because there was no upfront reserve for the remaining free rent obligations associated with Hana's leases. There was no outstanding TI allowance at closing.

- Although the property is located in Philadelphia, which we consider a primary market, the submarket vacancy and availability rates are both above 10.0%. However, the availability rates are well below the approximately 17%-22% levels currently seen in other CBD submarkets on the East Coast, such as Downtown Washington, D.C., Midtown Manhattan, and Boston's Financial District. According to CoStar, the property is in the three- to five-star Market Street West submarket, which is one of the tightest major CBD office submarkets on the East Coast. As of year-end 2020, the submarket vacancy rate, availability rate, and gross asking rent were 10.4%, 13.6%, and $34.69 per sq. ft., respectively. The submarket's historical five- and 10-year average vacancy rates were 8.9% and 9.8%, respectively, with a 10.3% five-year forecasted vacancy rate. As of the January 2021 rent roll, the property's in-place vacancy and gross rent were 14.8% and $34.09 per sq. ft., respectively. We assumed an overall vacancy rate of 18.0% in our derivation of long-term sustainable NCF.

- According to the appraiser, given the capital improvements and lease-up at the property, there is a risk of reassessment in the future. In Pennsylvania, real property may not be reassessed upon sale, instead, property reassessments are generally initiated upon completion of a major capital project. Though recent case law appears to prohibit the assessing authorities' ability to "spot assess" a particular property, local school boards and city authorities continue to challenge the assessments on certain high-profile properties. However, the subject's leases are modified gross. Therefore, we generally expect tax increases to be passed on to the tenants.

- The loan proceeds were used to refinance approximately $174.1 million and fund closing costs

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(approximately $4.8 million) and an upfront ground rent reserve ($75,534) before returning approximately $43.9 million (19.7% of total financing) to the sponsor. Shorenstein purchased the property in April 2015 for approximately $184.8 million ($185 per sq. ft.) and spent approximately $94.1 million as of February 2021 in capital expenditures and TI/LCs for a total cost basis of $278.9 million ($279 per sq. ft.).

- The transaction is concentrated by sponsor, property type, and geographic location. The collateral consists of one loan secured by one office property in Philadelphia. We considered this concentration when assessing the underlying property and the loan. The borrower is structured as bankruptcy-remote, special-purpose entity (SPE).

- The loan does not have a warm body carve-out guarantor. We believe this limitation generally lessens the disincentive provided by a full nonrecourse carve-out related to "bad acts" or voluntary bankruptcy.

- Although the SPE borrower is structured with a nonconsolidation opinion and one independent director, the independent director can be removed without cause with 30 days' notice.

- The transaction documents include provisions for the transaction parties to seek rating agency confirmation (RAC) that certain actions will not result in a downgrade or withdrawal of the then-current ratings on the securities. The definition of RAC in the transaction documents includes an option for the transaction parties to deem their RAC request satisfied if, after having delivered a RAC request, the transaction parties have not received a response to the request within a certain period of time. We believe it is possible for a situation to arise where an action subject to a RAC request would cause us to downgrade the securities according to our ratings methodology, even though a RAC request is deemed to be satisfied according to this provision.

Collateral Description

The property is located at 1818 Market Street, between South 18th and South 19th Streets, in the heart of Philadelphia's Center City neighborhood, approximately three blocks from both City Hall and Rittenhouse Square. The building is a 37-story, 999,828 sq. ft., class A- office building, including a 408-space parking garage. The parking spaces are for tenants and transient customers and consists of 50.0% monthly contracts, 39.0% transient daily customers, and 11.0% ecommerce daily customers (booked online).

Constructed in 1972 and renovated in 2015 through 2021, the property's approximately 30,000 sq. ft. floor plates, 12.5-foot slab-to-slab ceilings, and concrete, waffle-slab design allow for both traditional and open and collaborative workspaces.

The property includes 19,865 sq. ft. of retail space, of which 10,173 sq. ft. is currently leased to Bank of America, Republic First Bank, a private dental practice, and Saxbys Coffee. Saxbys is currently dark and has been delinquent on its rent since March 2020. Management is in discussions with Saxbys to temporarily convert the lease to a percentage rent payment structure if the company reopens for business. One of the three vacant retail spaces was previously occupied by Marathon Grill, an approximately 7,800 sq. ft. full-service restaurant. However, due to the pandemic-related slowdown in its business, Marathon Grill terminated its lease in August 2020.

A small portion of the property is encumbered by a ground lease that began on May 15, 1972, and will end on May 14, 2081. The leasehold portion of the property, which consists of approximately 16% (7,040 sq. ft.) of the total ground area (42,385 sq. ft.) and contains no improvements, sits

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under the plaza on the corner of Market Street and South 19th Street. The annual ground rent payment, which initially was $50,000, increases each year by the consumer price index and is currently $302,139 (1.0% of S&P Global Ratings' effective gross income), of which 25.0% was escrowed at loan closing. The loan is also structured with ongoing monthly ground lease reserves. The borrower is obligated to purchase the demised premises upon expiration of the full 99-year term of the lease at a value to be established by a selected MAI appraiser. The purchase price will not be less than $1.0 million or more than 20 times the rent paid in the final year.

Shorenstein purchased the property in April 2015 from a tenancy-in-common (TIC) group. The ownership group comprised 34 TIC entities representing over 130 individuals, and the property's leasing and building operations suffered due to the complex ownership structure. Since acquiring the property in 2015, Shorenstein has spent approximately $94.1 million ($94 per sq. ft.) as of February 2021 in construction-related expenses ($29.5 million) and TIs/LCs ($64.6 million). Some of the extensive renovations included common area upgrades ($6.1 million), elevator modernization ($4.5 million), façade repairs ($4.5 million), lobby improvements ($2.0 million), a new tenant-only fitness center ($1.3 million), and a new tenant-only conference center ($0.7 million). According to the appraiser, the renovations and added amenities have enabled the property to compete at the top of its competitive set.

As of the January 2021 rent roll, the property was 85.2% leased to 61 tenants. The 10-largest tenants account for 46.5% of the NRA or 53.8% of gross rent, as calculated by S&P Global Ratings, with a weighted average remaining lease term of 9.5 years. The overall property exhibits a weighted average remaining lease term of 7.5 years.

Table 1

Top 10 Tenants

% of % of gross Annual base rent per Tenant NRA (sq. ft.) NRA rent(i) sq. ft.($) Lease expiration

WSFS Financial Corp. 96,807 9.7 9.9 25.35 December 2028 eResearch Technology Inc. 59,376 5.9 7.1 34.77 February 2032

McCormick Taylor Inc. 59,218 5.9 7.8 37.64 December 2033

Hana (coworking) 50,745 5.1 5.7 32.50 January 2032

Berger Montague P.C. 44,165 4.4 4.8 31.05 August 2034

Medical Guardian LLC 35,433 3.5 3.9 31.57 March 2026

Market Resource Partners 30,234 3.0 3.9 36.75 July 2029

Coalition of Cancer Cooperative 30,003 3.0 3.7 33.56 January 2030 Groups

Penn Interactive Ventures LLC 29,609 3.0 3.5 34.85 March 2028

United Healthcare Services Inc. 29,609 3.0 3.5 33.46 December 2024

Total/average 465,199 46.5 53.8 32.30 N/A

(i)Gross rent represents base rent and expense reimbursements. N/A--Not applicable.

The property's tenant rollover schedule is detailed below (table 2).

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Table 2

Tenant Rollover

Year NRA (sq. ft.) % of NRA % of S&P Global Ratings' in-place gross rent

Vacant 147,614 14.8 N/A

2021 35,304 3.5 3.3

2022 17,258 1.7 2.3

2023 69,409 6.9 9.2

2024 67,240 6.7 7.9

2025 45,287 4.5 5.2

2026 57,988 5.8 6.6

2027 34,617 3.5 4.2

2028 126,416 12.6 13.5

2029 47,320 4.7 6.0

2030 92,023 9.2 11.2

2031 - - -

Thereafter 259,352 25.9 30.8

Total 999,828 100 100.0

NRA--Net rentable area. N/A--Not applicable.

Stout Risius Ross LLC (Stout; 0.9% of the NRA; 1.1% of gross rent), a boutique investment bank and advisory firm, recently executed a new lease at the property in February 2021. The approximately eight-year lease term is from Oct. 1, 2021, to June 30, 2029, with an initial gross rent of $35.50 per sq. ft. The leased space is on the 31st floor of the property. Stout's concession package includes nine months of free rent and $60.00 per sq. ft. in TI allowance. Stout has no contraction or outs in its lease. However, it has the right to terminate effective July 31, 2027, with a 12-month prior written notice and payment of a $246,973 termination fee. In addition, we deducted $804,785 from our long-term sustainable value because there was no upfront reserve for the gap rent, free rent, and TI allowance for the Stout lease.

Hunt & Ayres P.C. (0.3% of NRA; 0.3% gross rent) recently executed a six-month lease extension to July 2021, at a base rent of $24.58 per sq. ft., representing a 18.1% discount to its prior base rent of $30.00 per sq. ft. The short-term extension allowed Hunt & Ayres, P.C. to retain its existing space, while assessing the pandemic's impact on its business and real estate needs.

Two tenants, The Richardson Co. (Richardson; 1.6% of NRA; 1.8% of gross rent; Aug. 31, 2021, lease expiration) and Mitchell & Titus LLP (Mitchell & Titus; 1.6% of NRA; 1.1% of gross rent; April 2021 lease expiration) are planning to downsize their existing footprint at the property upon their 2021 lease expirations. Management has indicated that Richardson is discussing a potential lease extension in which it would relocate within the building from its current 28th floor space and downsize to approximately 10,000 sq. ft. at $36.00 per sq. ft. with a lease term of 88 months from its existing 15,481 sq. ft. at $33.31 per sq. ft. gross rent. Mitchell & Titus is also discussing a potential lease extension in which it would relocate within the building from its current 29th floor space and downsize to approximately 3,500 sq. ft. from its existing 10,000 sq. ft. at $32.25 per sq. ft. gross rent. Our vacancy rate of 18.0% accounts for both the potential downsizing of both tenants.

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The Bancorp Inc. (Bancorp; 1.5% of NRA and gross rent), has subleased its entire space on the 28th floor to American Cancer Society through Aug. 31, 2025, at a base rent of $21.25 per sq. ft., representing an approximately 21.0% discount to Bancorp's base rent of $26.75 per sq. ft. Our long-term sustainable NCF reflect a base rent of $24.00 per sq. ft. for this space, which is the average of Bancorp's direct base rent and the sublease base rent.

Site Visit

S&P Global Ratings toured the property on March 1, 2021, with a representative from Barclays Capital Real Estate Inc. and Shorenstein Realty Services. The property is well located along Market Street and is easily accessible via car or public transit. Overall, the property appeared in good condition from the exterior and interior.

We viewed the top floor of the property, which is occupied by Market Resource Partners, and has a class A office build-out with unobstructed southern facing views of Philadelphia. We also toured each of the top tenant spaces: WSFS, eResearch Technology Inc., McCormick Taylor Inc., Hana, Berger, Medical Guardian LLC, Coalition of Cancer Cooperative Groups, and Penn Interactive Ventures LLC (Penn Interactive). The McCormick Taylor space serves as the company's headquarters and the impressive space features a custom steel staircase connecting the two leased floors. The WSFS spaces were slightly dated, in need of a refresh, and more in line with a class B+ build-out. Conversely, the recently completed Penn Interactive space reflects a class A office build-out. The Penn Interactive's space appeared largely unoccupied because most of the employee desks lacked monitors.

We toured the Hana space on the ninth and 10th floors. However, only the 10th floor was fully built-out, and it had the typical coworking layout coworking businesses provide. There were no Hana tenants or subtenants in the space at the time of our tour.

The building's new 3,415 sq. ft. conference center is located on the ninth floor and is a desirable amenity for building tenants to have meetings or events.

We also toured the second floor, which is the crossover floor for the building's two elevator banks and where the new tenant-only fitness center is located. The fitness center was closed for tenant use due to COVID-19 restrictions. However, it is nicely equipped with various exercise machines, treadmills, a Peloton bike, yoga room, and locker rooms. There is one vacant office space on the second floor, which would likely require a below-average rental rate to lease, given its atypical layout. It previously served as the building lobby when it was initially constructed.

The ground floor tenants comprise Bank of America, First Republic Bank along Market Street, with Saxbys located in the lobby. Due to the pandemic and the resulting limited foot traffic at the property, Saxbys is closed for business and has been delinquent on its rent since March 2020. There is one vacant restaurant space located on the west side of the property, and it was previously occupied by Marathon Grill. The space is well located with access to the outdoor plaza, but there has been a lack of interest due to the pandemic. Social distancing measures and messages were present throughout the property, with a limit of four passengers per elevator and multiple hand sanitizer stations throughout. There was no temperature check required to enter the building.

COVID-19 Update

As of February 2021, the property is open and operating. However, most tenants are operating on a limited basis due to the pandemic, with an approximately 15.0% physical occupancy. According to

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management, monthly rent collection has ranged from 96.0% to 98.0% since April 2020. However, three tenants are operating under COVID-19-related lease amendments. Simon & Simon P.C. (3.0% of NRA; 3.3% of gross rent) has been paying 50.0% of its rent since September 2020. Management has agreed for Simon & Simon to pay 50.0% of its rent through March 2021, then revert to paying 100.0% starting in April 2021, and then pay back the deferred rent balance over six months from October 2021 through March 2022. The second tenant, U.S. Legal Support Inc. (0.9% of NRA; 1.1% of gross rent) paid 75.0% of its rent from May 2020 through December 2020 and has been paying back the deferred rent balance, which has a January 2021 through June 2021 repayment period. The third tenant, Penn Interactive (3.0% of NRA; 3.5% of gross rent), an interactive gaming business, executed a new lease at the property in March 2020 but delayed its commencement date from March 2020 to November 2020 due to the pandemic. The 86-month lease term is from Nov. 23, 2020, to March 31, 2028, with an initial gross rent of $34.30 per sq. ft. Penn Interactive's concession package includes four months of free rent and $67.75 per sq. ft. in TI allowance. We deducted $27,964 million from our long-term sustainable value because there was no upfront reserve for the remaining free rent obligations associated with the lease. There was no outstanding TI allowance at closing.

Two tenants, Saxbys (0.1% of NRA; 0.2% of gross rent) and Agile Cat LLC (0.3% of NRA; 0.4% of gross rent) are both delinquent with no repayment arrangement in place since March 2020 and August 2020, respectively. Management is in discussions with Saxbys to temporarily convert the lease to a percentage rent structure if Saxbys reopen for business. Management is also in discussions with Agile Cat to pay 50.0% of its delinquent rent and continue paying 50.0% of rent until September 2021, and then pay back the deferred rent balance over the following 12 months.

Market Summary

Philadelphia office market

The property is located in the Market Street West submarket of the Philadelphia CBD, which is part of the Philadelphia-Camden-Wilmington metropolitan statistical area (MSA). Philadelphia MSA's total employment is at approximately 3.0 million workers. According to the Bureau of Labor Statistics (BLS), the Philadelphia MSA unemployment rate was approximately 6.5%, based on preliminary December 2020 data, which was slightly below the 6.7% national average during the same period. According to BLS, employment levels in the Philadelphia MSA grew at an average annual rate of 1.0% from 2014 to 2019, compared with the national average of 2.4% during the same period. However, Philadelphia CBD's unemployment rate was elevated above 15.0% from April 2020 through August 2020. And although it has since declined to 9.3%, based on preliminary December 2020 data, it is still significantly higher than the pre-pandemic unemployment rate of 5.4% in December 2019.

The Philadelphia CBD office market, which includes the Market Street West submarket, contains over 62.5 million sq. ft. across three submarkets. The Market Street West submarket is the largest of the three submarkets, with more than 39.8 million sq. ft. or 63.7% of Philadelphia's CBD office NRA.

As of fourth-quarter 2020, vacancy and availability rates for the three- to five-star Market Street West submarket increased 2.1% and 3.3% year over year to 10.4% and 13.6%, respectively, according to CoStar. As of fourth-quarter 2020, the average asking gross rental rate for three- to five-star properties was $34.69 per sq. ft. However, it is expected to decline 2.5% to $33.82 per sq. ft. in 2021, before rebounding to $35.01 in 2023, according to CoStar.

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Philadelphia's high construction labor costs have kept new office construction limited for nearly 20 years, according to Costar, and is one reason why the Market Street West submarket office availability rates are at 14.1% as of March 2021--well below the current approximately 17%-22% levels currently seen in other CBD submarkets on the East Coast, such as Downtown Washington, D.C., Midtown Manhattan, and Boston's Financial District. In addition, Market Street West offers affordable office rents when compared to other East Coast CBD submarkets, despite having similar public transportation and amenities. And while the pandemic has resulted in significant loss absorption, the appraiser notes that there hasn't been a significant urban exodus of businesses out of this CBD thus far.

Structural Issues

We reviewed the structural matters we believed were relevant to our analysis. This review included analysis of the major transaction documents, including the offering circular, trust and servicing agreement, and other relevant documents and opinions, to understand the transaction's mechanics and its consistency with applicable criteria. We also conducted a structural review of the first-mortgage loan and cash management agreements.

Historical Cash Flow And S&P Global Ratings' Cash Flow Notes

We reviewed the historical cash flows, the issuer- and appraiser-reported cash flows, to determine our view of a sustainable cash flow for the property. We summarize the historical and S&P Global Ratings' NCF for the property in table 3A.

Table 3A

Historical Cash Flow

S&P Global 2016 2017 2018 2019 2020 Budget Banker Ratings

Income ($)

Gross potential ------32,501,941 32,320,469(i) rent

Base rent 19,660,359 20,131,147 18,371,257 18,691,494 19,017,149 26,997,859 - -

Less: vacancy ------(4,480,471) (6,135,526)(ii) loss

Expense 1,237,539 1,022,003 1,544,104 1,422,950 1,066,672 1,211,546 1,482,187 1,765,787(iii) reimbursement

Parking income 2,362,774 2,259,936 2,334,228 2,655,640 1,608,236 2,062,500 2,213,886 2,177,636(iv)

Other income - - 314,601 66,483 351,891 398,266 - -

Other 131,626 125,900 151,446 127,837 104,864 97,074 97,074 97,074(v) non-rental income

Other rental - - 83,667 137,167 115,850 118,947 122,717 112,228(vi) income

Effective gross 23,392,298 23,538,986 22,799,303 23,101,571 22,264,662 30,886,192 31,937,334 30,337,667 income

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Table 3A

Historical Cash Flow (cont.)

S&P Global 2016 2017 2018 2019 2020 Budget Banker Ratings

Operating expenses ($)

Real estate 2,708,007 2,716,594 2,955,410 3,060,548 3,152,871 3,152,871 3,413,478 3,413,478(vii) taxes

Property 353,709 327,022 328,166 368,230 405,632 520,362 393,371 393,371(vii) insurance

Utilities 935,044 1,204,952 1,365,180 1,423,804 1,301,522 1,358,243 1,358,243 1,362,663(viii)

Repairs and 905,747 1,034,312 1,023,264 1,267,897 1,467,950 1,026,113 1,026,113 1,057,805(ix) maintenance

Janitorial 2,121,232 2,173,061 2,194,796 2,739,532 2,206,549 2,563,576 2,563,576 2,563,576(vii)

Management 726,125 775,204 695,588 708,229 681,891 848,889 958,120 1,000,000(x) fees

Professional 185,336 152,977 207,052 143,387 220,396 121,650 121,650 172,188(ix) fees

General and 886,016 929,032 964,890 985,719 995,655 1,059,111 1,059,111 995,655(xi) administrative

Other expenses 379,750 357,385 387,046 101,945 428,595 110,654 110,654 110,654(vii)

Ground rent - - - 296,238 - 302,139 302,139 302,139(vii)

Elevator 339,371 295,786 343,794 409,986 430,814 411,816 411,816 409,986(xii)

Engineers 717,493 720,857 838,676 811,252 880,390 940,087 940,087 940,087(vii)

Garage 677,720 636,777 697,578 777,364 549,111 712,580 712,580 712,580(vii) expenses

General 681,455 811,093 806,927 873,419 878,610 934,937 934,937 934,937(vii) building

total operating 11,617,005 12,135,052 12,808,367 13,967,550 13,599,986 14,063,028 14,305,876 14,369,120 expense

Net operating 11,775,293 11,403,934 9,990,936 9,134,021 8,664,676 16,823,164 17,631,458 15,968,548 income

Leasing ------749,871 753,165(xiii) commissions

Tenant ------749,871 1,619,156(xix) improvements

Capital ------199,966 349,940(xx) expenditures

Parking garage ------12,240(xxi) capex

Total capital ------1,699,708 2,734,501 item

Net cash flow ($) 11,775,293 11,403,934 9,990,936 9,134,021 8,664,676 16,823,164 15,931,751 13,234,047

Haircut to issuer ------(16.9) NCF (%)

Capitalization rate ------7.75 (%)

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Table 3A

Historical Cash Flow (cont.)

S&P Global 2016 2017 2018 2019 2020 Budget Banker Ratings

Add to value ($) ------(3,112,316)(xxii)

S&P Global ------167,649,579 Ratings' value ($)

S&P Global ------168 Ratings' value per sq. ft. ($)

See table 3B for full footnote references. NCF--Net cash flow.

Table 3B

Cash Flow Notes

(i) Based on signed leases and the in-place rent roll dated Jan. 19, 2021, including contractual rent steps through February 2022. Base rent for Hana, Shorenstein Realty Services L.P., Bancorp, and Saxbys adjusted down. Vacant spaces are generally grossed up at the lowest of average in-place and the appraiser's market rent.

(ii) Based on an 18.0% vacancy.

(iii) Grossed-up reimbursements, based on banker underwritten figure and vacant spaces grossed up at the average in-place for each tenant type.

(iv) Based on the average of 2016, 2017, 2018, 2019, 2020, and the appraiser's forecast. Parking income accounts for 7.2% of effective gross income.

(v) Based on the budget.

(vi) Based on the average of 2016, 2017, 2018, 2019, and 2020.

(vii) Based on banker underwritten figure.

(viii) Based on the average of 2019 and 2020.

(ix) Based on average of 2016, 2017, 2018, and 2019. One-time items were included in 2020.

(x) Based on the greater of $1.0 million and 1.5% of effective gross income.

(xi) Based on the 2020 expense.

(xii) Based on the 2019 expense.

(xiii) Based on 4.0% for new leases and 2.0% for renewals.

(xix) Calculated according to table 4 below.

(xx) Based on $0.35 per sq. ft.

(xxi) Based on $30 per parking space. The property has 408-parking spaces.

(xxii) Based on unfunded landlord obligations not reserved at loan origination for six tenants.

To calculate TI costs as part of our NCF for the major tenant types at the property, we used the TI costs, renewal probabilities, and assumed lease terms listed in table 4.

Table 4

S&P Global Ratings' Leasing Costs

Office Hana Retail Saxbys

New TIs ($/sq. ft.) 30.00 30.00 23.50 17.50

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Table 4

S&P Global Ratings' Leasing Costs (cont.)

Office Hana Retail Saxbys

Renewal TIs ($/sq. ft.) 15.00 15.00 11.75 8.75

Renewal probability (%) 65 60 65 65

Assumed lease term (years) 10 10 10 10

TIs--Tenant improvements.

Property Evaluation Details

During our property evaluation, we:

- Conducted a site inspection of the subject property;

- Analyzed and valued the property, which included reviewing property-level operating statements, issuer-provided data, and the borrowers' budgets; and

- Reviewed management and sponsorship, including meeting with on-site personnel; the third-party appraisal, environmental, and engineering reports for the property; the structural matters we believe are relevant to our analysis, as outlined in our criteria; and the current drafts of the major transaction documents, including the loan agreement, offering circular, and trust and servicing agreement to verify compliance with our criteria and to understand the mechanics of the underlying loan and the transaction.

Scenario Analysis

We performed several 'AAA' stress scenario analyses to determine how sensitive the certificates are to a downgrade over the loan term.

Effect of declining NCF

A decline in NCF may constrain cash flows available for debt service. A decline in cash flows may occur because of falling rental rates and occupancy levels, changes to operating expenses, or other factors that may decrease a property's net income. To analyze how a decline in cash flows would affect our ratings, we developed scenarios in which the NCF from the property decreases by 10%-40% from our current cash flow, which for purposes of determining our value, is 16.9% lower than the issuer's underwritten NCF. (See table 5 for these scenarios' potential effect on our 'AAA' rating, holding constant our 7.75% capitalization rate for the mortgage loan.)

Table 5

Effect Of Declining NCF On S&P Global Ratings' Credit Ratings

Decline in S&P Global Ratings' NCF (%) 0.00 (10.00) (20.00) (30.00) (40.00)

Potential 'AAA' rating migration AAA AA A+ BBB+ BB

NCF--Net cash flow.

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The certificates issued by BSST 2021-1818 Mortgage Trust contain stated interest at one-month LIBOR plus a fixed margin. While the original deadline for LIBOR cessation was December 2021, the phase out date is now expected after June 2023 for most U.S. dollar LIBOR maturities, such as the one- and three-month maturities. In 2019, the Federal Reserve's Alternative Reference Rates Committee (ARRC) published recommended guidelines for fallback language in new securitizations and the language in this transaction is generally consistent with its key principles: trigger events, a list of alternative rates, and a spread adjustment. We will continue to monitor reference rate reform and take into account changes specific to this transaction when appropriate.

Related Criteria

- Criteria | Structured Finance | General: Global Framework For Payment Structure And Cash Flow Analysis Of Structured Finance Securities, Dec. 22, 2020

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation And Special-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology And Assumptions, March 8, 2019

- General Criteria: U.S. Government Support In Structured Finance And Public Finance Ratings, Dec. 7, 2014

- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk In Structured Finance Transactions, Oct. 9, 2014

- Criteria | Structured Finance | CMBS: Insurance Criteria For U.S. And Canadian CMBS Transactions, June 13, 2013

- General Criteria: Methodology And Assumptions: Assigning Ratings To Bonds In The U.S. Based On Escrowed Collateral, Nov. 30, 2012

- Criteria | Structured Finance | CMBS: CMBS Global Property Evaluation Methodology, Sept. 5, 2012

- Criteria | Structured Finance | CMBS: Rating Methodology And Assumptions For U.S. And Canadian CMBS, Sept. 5, 2012

- General Criteria: Global Investment Criteria For Temporary Investments In Transaction Accounts, May 31, 2012

- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

- Criteria | Structured Finance | CMBS: Assessing Borrower-Level Special-Purpose Entities In U.S. CMBS Pools: Methodology And Assumptions, Nov. 16, 2010

- Criteria | Structured Finance | General: Global Methodology For Rating Interest-Only Securities, April 15, 2010

- Criteria | Structured Finance | General: Methodology For Servicer Risk Assessment, May 28, 2009

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Related Research

- Global Structured Finance 2021 Outlook: Market Resilience Could Bring Over $1 Trillion In New Issuance, Jan. 8, 2021

- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five Macroeconomic Factors, Dec. 16, 2016

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