Combined, these loans represent 15.2% of the pool. Three additional loans-360 Spear, MGM Grand & Mandalay Bay, and the Grace Building-were assigned investment-grade shadow ratings at issuance. DBRS Morningstar took a conservative approach and analyzed the loan with a stressed LTV reflective of the dark value for this review, which had very little impact on the overall CMBS Insight Model results. While the termination of the lease would undoubtedly alter the loans performance, the appraiser’s dark value at issuance of $92.6 million implies there is substantial value in the property without a LTCT, as the loan-to-value ratio (LTV) based on the senior debt and dark appraised value is equal to 44.9%. The property benefits from its 2016 construction and modern appearance, and institutional sponsorship provided by KKR Real Estate Select Trust Inc., which provided 25.2% of the financing as part of the acquisition and had $510 billion assets under management as of Q1 2023. The loan is IO through the 10-year anticipated repayment date (ARD) period but is structured to hyper-amortize sequentially first to the senior loan and second to the mezzanine loan over six years and nine months if the loan is not paid prior to the ARD. Loan proceeds of $41.6 million, along with a $38.4 million mezzanine loan, and $26.9 million of sponsor equity was primarily used to facilitate the $105.6 million acquisition of the property and fund upfront reserves. Given the uncertainty surrounding the status of the lease and JPM’s obligation for the remaining term, DBRS Morningstar has removed the shadow rating on the loan, as it is no longer clear if the credit features from issuance, namely the long-term credit-tenant treatment (LTCT) analyzed for FRB, remain consistent with investment-grade characteristics. DBRS Morningstar has asked the servicer for confirmation of the status of FRB’s lease, which JPM has the right to affirm or reject at the collateral property. (JPM rated AA with a Stable trend by DBRS Morningstar, most recently confirmed as of December 7, 2022). government announced it had taken control of FRB and sold the bank to JPMorgan Chase Bank, N.A. The loan is secured by a 70,543-square-foot (sf) office building in Palto Alto, California, with FRB occupying 76.0% of the property’s net rentable area on a lease through October 2037. Four of these loans, representing 5.0% of the pool, are being monitored for credit-related reasons, including First Republic Center (Prospectus ID#13, 2.7% of the pool), which was added to the watchlist in June 2023 following a cash sweep activation triggered by First Republic Bank’s (FRB) insolvency. There are, however, seven loans on the servicer's watchlist, representing 10.6% of the pool, including two loans in the top 15. Although the office sector has seen significant challenges in the current economic environment, the majority of office properties secured in this transaction continue to perform as expected, reporting a weighted-average debt service coverage ratio of more than 2.50 times as of the YE2022 financial reporting.Īs of the August 2023 remittance, there are no delinquent or specially serviced loans. In general, the office sector has been challenged, given the low investor appetite for the property type and high vacancy rates in many submarkets as a result of the shift in workplace dynamics. The pool is concentrated with loans backed by office properties, which represent 46.2% of the pool, followed by mixed-use and industrial properties, which represent 22.7% and 11.6% of the pool, respectively. As noted at issuance, the pool is expected to pay down by only 3.6% prior to maturity. An additional 12 loans, representing 12.1% of the pool, have partial IO periods that remain active. Amortization will be limited through the life of the deal as there are 34 loans, representing 77.9% of the pool, that are interest only (IO) for the full term. There has been minimal amortization, with only 0.8% collateral reduction since issuance. Per the August 2023 reporting, all 53 loans remain in the pool, with no losses or defeasance to date. At closing, the transaction consisted of 53 fixed-rate loans secured by 65 properties with the pooled certificates totaling $1.53 billion. The rating confirmations reflect the overall stable performance of the transaction since issuance in 2021. DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of the Commercial Mortgage Pass-Through Certificates, Series 2021-B23 issued by Benchmark 2021-B23 Mortgage Trust:
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