KBRA Downgrades Five Ratings and Affirms All Other Ratings for BSREP 2021-DC

KBRA downgrades the ratings on five classes and affirms all other outstanding ratings for BSREP 2021-DC, a CMBS single-borrower transaction. The rating actions follow a surveillance review of the transaction and are driven by a continued decline in KNCF and KBRA value stemming from weak office fundamentals in the respective property submarkets. In addition, higher interest rates and a more challenging financing market for Class B office properties could negatively affect the loan’s refinancing prospects in the absence of the infusion of additional equity.

The transaction was originally secured by a $443.1 million first-lien mortgage loan collateralized by eight properties, including the borrower’s fee simple interests in seven office properties and the leasehold interest in one office property, all of which are located in the Washington, D.C. MSA. Since last review, one property, Fairgate at Ballston ($35.4 million ALA, 8.4% of the original loan balance), was sold and released from the trust, resulting in a current loan balance of $377.6 million as of the July 2025 remittance period. Previously, Courthouse Square ($22.1 million ALA, 5.0% of the original loan balance) was sold and released from the trust. The floating-rate, interest-only loan had an initial term of two years and allows for three one-year extension options. The borrower exercised its second extension option, and the loan matures in August 2025. The borrower has indicated that it intends to exercise its final one-year extension option. However, the servicer indicated the strike rate is currently under review and the balance of the extension documents are being drafted.

KBRA analyzed the cash flow for the properties utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $23.4 million and a KBRA value of $258.7 million ($213 per sf). The resulting in-trust KLTV is 145.9%, compared to 131.9% at last review and 112.2% at securitization. Due to the portfolio’s low occupancy and DSC, as well as weakening office sector demand, KBRA maintains the loan’s K-LOC designation and its KPO of Underperform.

Details for the classes with ratings changes are as follows:

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