Morningstar DBRS Confirms Credit Ratings on All Classes of NYC Commercial Mortgage Trust 2021-909, Series 2021-909

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the following classes of Commercial Mortgage Pass Through Certificates, Series 2021-909 issued by NYC Commercial Mortgage Trust 2021-909, Series 2021-909 as follows:

-- Class A at AAA (sf)
-- Class X at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)

All trends are Stable.

The credit rating confirmations and Stable trends reflect the transaction's overall performance, as the collateral office building reported a healthy YE2024 debt service coverage ratio (DSCR) and occupancy rate of 2.20 times (x) and 95.6%, respectively, supporting the credit rating actions.

The underlying loan is secured by the leasehold interest in a 32-story, 1.35 million-square-foot (sf) Class A office property located at 909 Third Avenue in Midtown Manhattan. The office portion of the collateral sits atop 492,375 sf of flex industrial space, which is occupied by the United States Postal Service's (USPS) main New York City mail-handling facility. The property is subject to a ground lease that is scheduled to expire in May 2041, with one remaining option to extend to November 2063.

The fixed-rate loan is interest only (IO), with a 10-year term maturing in April 2031. The trust loan of $250.0 million consists of $135.6 million of senior debt and $114.4 million of junior debt; additional senior notes are held outside the trust. The loan sponsor, Vornado, is a leading landlord in New York City whose portfolio is filled with office properties concentrated in Midtown Manhattan. Since acquisition, Vornado's commitment to the property is demonstrated through an investment of more than $184 million of capital, including more than $46.9 million of base building upgrades.

The subject property tenancy is composed of a roster that includes a handful of investment-grade rated tenants that account for more than half of the building's net rentable area (NRA) and gross rent, which have lease expiries that extend between 2027 and 2038. The USPS has been a tenant at the property since 1968 and currently occupies 36.5% of the NRA on a lease expiring in October 2028. The tenant has two five-year extensions remaining, bringing the fully extended lease expiration date to October 2038. Given the unique nature of the space, its mission-critical location in the heart of Manhattan, the tenant's renewal history, and its well-below-market rents reported at $13.06 per sf (psf) as of the January 2025 rent roll, Morningstar DBRS expects that the USPS will continue to renew and believes there is substantial long-term upside embedded in this space.

According to the January 2025 rent roll, the occupancy rate is 95.6%, with an average in-place rent of $46.35 psf for all tenants ($66.83 psf when excluding USPS lease) compared with the Reis Q4 2024 Plaza submarket vacancy rate of 11.9% and average asking rent of $101.89. In the near term, Morningstar DBRS notes that tenant, Geller & Company LLC (9.3% of NRA and 13.9% of base rent) has an upcoming lease expiration in April 2025, and the space is currently listed as available on the sponsor's website, which will result in a temporary decline in net cash flow (NCF). Media articles have pointed to several deals and dwindling availability that highlights an uptick in demand for spaces on Third Avenue, given the proximity to Grand Central Terminal, amid rent increases for adjacent Park Avenue and Sixth Avenue buildings. Given the property benefits from its desirable location along Third Avenue in the Plaza submarket and its strong sponsorship in Vornado, Morningstar DBRS expects the space to be backfilled in the near to moderate term with cash flow rebounding soon thereafter. Aside from Geller & Company LLC, tenant rollover is minimal over the next 12 months with less than 2.0% of the NRA having lease expirations.

Based on the YE2024 financials, the loan reported an NCF of $25.3 million (with a DSCR of 2.20x) compared with the YE2023 figure of $25.9 million (with a DSCR of 2.26x), and the Morningstar DBRS figure of $26.3 million. In its analysis, Morningstar DBRS straight-lined USPS' rent over the term of the loan, given its consideration as a long-term credit tenant.

The April 2024 Morningstar DBRS credit rating analysis and action included an updated collateral valuation. For more information regarding the approach and analysis conducted, please refer to the press release titled "Morningstar DBRS Takes Rating Actions on North American Single-Asset/Single-Borrower Transactions Backed by Office Properties," published on April 15, 2024. For purposes of this credit rating action, Morningstar DBRS maintained the valuation approach from the April 2024 review, which was based on a capitalization rate of 7.0% applied to the Morningstar DBRS NCF of $26.3 million. Morningstar DBRS also maintained positive qualitative adjustments to the loan-to value ratio (LTV)-sizing benchmarks, which total 5.50% to reflect the property's investment-grade tenancy, upside potential for the USPS space given the below-market rent, property quality, and prominent location occupying the full eastern block of Third Avenue between 54th Street and 55th Street. The Morningstar DBRS concluded value of $378.0 million represents a -44.0% variance from the issuance appraised value of $675.0 million and an implied all-in LTV of 92.6%.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND 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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781.

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

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448963.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448962
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.