Presale Report SFO 2021-555
Total Page:16
File Type:pdf, Size:1020Kb
Presale Report SFO 2021-555 DBRS Morningstar Capital Structure April 27, 2021 Commercial Mortgage Pass-Through Certificates Description Rating Action Balance ($) BLTV (%) DBRS Morningstar Rating Trend Chaz Schmidt Class A New Rating - Provisional 638,400,000 47.50 AAA (sf) Stable Senior Analyst Class B New Rating - Provisional 79,400,000 53.96 AA (sf) Stable +1 646 560-4597 [email protected] Class C New Rating - Provisional 70,300,000 59.25 AA (low) (sf) Stable Class D New Rating - Provisional 111,400,000 67.62 A (low) (sf) Stable Audrey Chew-Pei Lee Vice President Class E New Rating - Provisional 164,600,000 80.00 BBB (low) (sf) Stable +1 646 560-4522 Class F New Rating - Provisional 75,900,000 85.70 BB (sf) Stable [email protected] Class HRR New Rating - Provisional 60,000,000 90.21 BB (low) (sf) Stable Ed Dittmer Class R New Rating - Provisional n/a 90.21 NR Stable Senior Vice President 1. NR = Not Rated. +1 212 806-3285 2. The provisional rating for Class HRR is recommended at BB (low) because it is within the 1.0% LTV tolerance range for rounding of that class. [email protected] The result is a one notch deviation from the analytical-tool implied rating. Kurt Pollem Managing Director +1 212 548-6394 [email protected] Erin Stafford Managing Director +1 312 332-3291 [email protected] DBRS Viewpoint Click here to see this deal. DBRS Viewpoint is an interactive, data- driven, loan and property level platform that provides users with access to DBRS Morningstar presale reports, surveillance updates, transaction information, and contextual comparable data in a user-friendly manner. Complimentary registration and access to the transaction is available. Page 2 of 36 SFO 2021-555 | April 27, 2021 Table of Contents Capital Structure ............................................................................................................................................... 1 Collateral Spotlight ........................................................................................................................................... 3 Transaction Summary ....................................................................................................................................... 6 DBRS Morningstar Perspective ........................................................................................................................ 7 Strengths ........................................................................................................................................................... 7 Concerns............................................................................................................................................................ 8 Summary of the Debt Capital Structure ......................................................................................................... 10 Collateral Summary......................................................................................................................................... 11 Tenant Summary and Lease Terms ................................................................................................................ 13 Market Overview ............................................................................................................................................. 15 Submarket Overview ....................................................................................................................................... 16 Lease and Sales Comparable ......................................................................................................................... 17 DBRS Morningstar NCF Analysis ................................................................................................................... 19 DBRS Morningstar Valuation ......................................................................................................................... 20 Third-Party Reports ......................................................................................................................................... 20 Site Inspection ................................................................................................................................................ 21 Rating Rationale ............................................................................................................................................. 23 Priority of Payments ........................................................................................................................................ 23 Loan-Level Legal and Structural Features ..................................................................................................... 24 Transaction Legal and Structural Features .................................................................................................... 30 Methodologies ................................................................................................................................................ 33 Surveillance ..................................................................................................................................................... 33 Glossary ........................................................................................................................................................... 34 Definitions ....................................................................................................................................................... 35 Page 3 of 36 SFO 2021-555 | April 27, 2021 Collateral Spotlight Page 4 of 36 SFO 2021-555 | April 27, 2021 Page 5 of 36 SFO 2021-555 | April 27, 2021 Source: DBRS Morningstar. Page 6 of 36 SFO 2021-555 | April 27, 2021 Transaction Summary Trust Characteristics Trust Loan Notional Balance ($) 1,200,000,000.00 No. Properties 3 Structure REMIC Property Type Office DBRS Morningstar BLTV (%) 90.21 Location(s) San Francisco, CA DBRS Morningstar ELTV (%) 90.21 DBRS Morningstar Cap Rate (%) 6.5 DBRS Morningstar NCF Debt Yield (%) 7.21 DBRS Morningstar Value ($) 1,330,200,434.78 DBRS Morningstar NCF DSCR (x) 3.37 Quality/Volatility Adjustment (%) 8.0 Appraised LTV (%) 58.50 Herfindahl Adjustment (%) n/a Issuer NCF DSCR (x) 3.48 DBRS Morningstar NCF Variance -3.34 (%) Rated Final Distribution Date in May 9, 2038. Participants Depositor J.P. Morgan Chase Commercial Mortgage Securities Corp., Mortgage Loan Sponsors JPMorgan Chase Bank, National Association Trustee Wells Fargo Bank, National Association Master Servicer Midland Loan Services, a Division of PNC Bank, National Association Special Servicer Situs Holdings, LLC Certificate Administrator Wells Fargo Bank, National Association Operating Advisor Park Bridge Lender Services LLC, SFO 2021-555 is a single-asset/single-borrower transaction collateralized by the borrower’s fee-simple interest in the 555 California Street Campus (the Campus), a 1.8 million-sf Class A office complex in the North Financial District of San Francisco. J.P. Morgan will fund the total debt of $1.2 billion for the refinancing of the Campus. The IO floating-rate, $1.2 billion loan has an initial term of two-years with five one-year extension options. The total capitalization of $2.0 billion includes $850.0 million of sponsor equity, which will be used to refinance $532.7 million of existing debt, return $616.0 million of sponsor equity, fund $19.8 million of outstanding TI/LC reserve and $12.5 million of free rent, fund capital improvement reserves for Bank of America for $6.9 million, and pay $12.0 million of closing costs. The transaction has a slightly elevated Morningstar Issuance LTV of 90.21%, based on the trust debt. The LTV based on the appraised value of $2.1 billion is 58.5%. The sponsor is a 70/30 joint venture between Vornado Realty L.P. and Donald J. Trump. The loan is 100% controlled by Vornado Realty Trust, a publicly traded real estate investment trust and a member of the S&P 500 Index. Vornado’s portfolio is concentrated in New York City, Chicago, and San Francisco. Vornado acquired the Campus in 2007 and has invested $164.8 million ($90.63 per square foot (psf)) into the Campus since 2016. Page 7 of 36 SFO 2021-555 | April 27, 2021 DBRS Morningstar Perspective DBRS Morningstar has a positive view on the near- to midterm sustainability of the Campus’ net cash flow (NCF), based on its location, tenancy, and historical performance. The Campus is in the North Financial District in the San Francisco central business district (CBD) market. According to the Q4 2020 appraisal information, the North Financial District has 26.3 million sf of inventory with an overall occupancy rate of 82.4% and a direct weighted-average (WA) Class A rent of $85.96 psf, compared with the South Financial District’s total inventory of 27.9 million sf, occupancy rate of 87.7%, and direct WA Class A rent of $85.44 psf. The North Financial District has no office space under construction at this time. Although the North Financial District has a high overall vacancy rate, the Campus significantly outperforms the submarket. As of the February 1, 2021, rent roll, the Campus was 92.7% occupied, including the vacant property, 345 Montgomery, which has completed its renovation. The Campus has a WA occupancy rate of 95.3% since 2010 and benefits from a granular rent roll with only one tenant, Bank of America at 18.1% of net rentable area (NRA), accounting for more than 10.0% of NRA. Additionally, Bank of America