Morningstar DBRS Confirms Credit Ratings on All Classes of BPR Trust 2021-TY

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on the Commercial Mortgage Pass-Through Certificates, Series 2021-TY issued by BPR Trust 2021-TY as follows:

-- Class A at AAA (sf)
-- Class X-EXT at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class D at AA (low) (sf)
-- Class E at BBB (high) (sf)
-- Class F at BBB (sf)
-- Class HRR at BBB (low) (sf)

All trends are Stable.

The credit rating confirmations and Stable trends reflect the stable performance of the asset as evidenced by continued growth in tenant sales and year-over-year cash flow growth. Although an increase in the floating-rate debt service has resulted in downward pressure on the debt service coverage ratio (DSCR) figure, the credit profile of the transaction remains in line with Morningstar DBRS' expectations at issuance.

The $425.0 million loan is secured by the borrower's fee-simple and leasehold interest in the in-line space of Tysons Galleria, a 740,244-square-foot (sf) (488,244 collateral sf) Class A super-regional mall located 15 miles west of downtown Washington, in McLean, Virginia. The noncollateral anchors are Neiman Marcus and Saks Fifth Avenue. A third anchor space formerly occupied by Macy's was redeveloped between 2019 and 2021, with the space converted into a 200,000-sf, three-story, multitenant wing leased to entertainment, restaurant, and retail users. The loan's sponsor, Brookfield Real Estate Income Trust, acquired space from Macy's in 2019 and invested approximately $120.0 million into its redevelopment. The transaction benefits from experienced sponsorship as the sponsor is owned by affiliates of Brookfield Asset Management Inc., one of the largest retail real estate companies in the United States.

The interest-only (IO) loan's initial maturity was slated for September 2023 and the borrower has exercised two of the three available one-year extension options. To hedge exposure to elevated interest rate environments, the borrower is required to purchase a replacement interest rate cap agreement with a 3.0% strike price for each loan extension term. Notice to exercise each extension is not required 30 days prior to loan maturity; the borrower has not yet provided notice to exercise the final extension option as of this writing.
According to the March 2025 rent roll, the mall was 89.5% leased (including the noncollateral tenants), below the year-end (YE) 2024 and issuance figures of 92.8% and 95.1%, respectively. The redeveloped Macy's space features four junior anchors and five in-line tenant spaces, which were collectively 96.3% occupied as of the March 2025 rent roll. In the next 12 months, tenants representing almost 7.0% of net rentable areas (NRA) are scheduled to roll; however, the borrower has successfully signed eight new in-line tenant leases that represent 4.5% of NRA and are not included in the March 2025 rent roll. Some of the major new tenants include Cartier, Balenciaga, Liljenquist & Beckstead, Max Mara, and Tory Burch.

The annualized September 2024 net cash flow (NCF) figure of $43.5 million surpassed the YE2023 figure of $42.8 million and is notably above the Morningstar DBRS NCF of $34.4 million derived at issuance. Because of the floating-rate nature of the loan, annualized debt service as of September 2024 increased by approximately 6.5% since YE2023 and 196.5% from issuance, putting significant downward pressure on the DSCR figure. The DSCR was reported at 1.26 times (x) according to the September 2024 annualized financials, a slight decline from the 1.32x YE2023 DSCR and well below the 3.22x figure from issuance.

The subject benefits from its prime location and luxury retail tenants, which draw demand from both the affluent local population and travelers. According to the December 2024 tenant sales report, trailing-12 month (T-12) in-line tenant sales were reported at $1,838 per square foot (psf), compared with the December 2023 T-12 figure of $1,792 psf. Total mall sales (excluding noncollateral tenants) were reported at $1,396 psf for the same period, a slight increase from the T-12 December 2023 figure of $1,361 psf, but significantly higher than issuance ($1,159 psf) and 2019 pre-pandemic ($1,055 psf) levels.

For this review, Morningstar DBRS maintained the Morningstar DBRS NCF of $34.4 million and a capitalization rate of 6.5% in its analysis, resulting in a Morningstar DBRS value of $528.5 million, which represents a -18.7% haircut from the issuance As-Is appraised value of $650.0 million. The resulting Morningstar DBRS whole-loan LTV is 80.4%, compared with the issuer's As-Is figure of 65.4% and As-Stabilized figure of 60.7%. Morningstar DBRS also maintained positive qualitative adjustments totaling 8.0% to reflect the low cash flow volatility, high quality of the asset, and healthy market fundamentals.

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 (May 16, 2025): https://dbrs.morningstar.com/research/454196.

Class X-EXT is an interest-only (IO) certificates that reference 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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings.

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

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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.

-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025): https://dbrs.morningstar.com/research/450750.

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at (July 17 2023): https://dbrs.morningstar.com/research/417279.

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