Fitch Ratings has affirmed four classes of VASA Trust 2021-VASA, commercial mortgage pass-through certificates series 2021-VASA.
RATING ACTIONS
Entity / Debt
Rating
Prior
VASA Trust 2021-VASA
A 92230AAA4
LT
AAAsf
Affirmed
AAAsf
A-IO 92230AAY2
LT
AAAsf
Affirmed
AAAsf
A-Y 92230AAU0
LT
AAAsf
Affirmed
AAAsf
A-Z 92230AAW6
LT
AAAsf
Affirmed
AAAsf
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VIEW ADDITIONAL RATING DETAILS
KEY RATING DRIVERS
Stable Performance: The affirmations reflect stable overall property-level performance that remains in line with issuance expectations. Fitch's updated net cash flow (NCF) of $31.5 million is up approximately 1.4% since issuance primarily due to base rent increases. Fitch's analysis also maintained the issuance capitalization rate of 8.0%. The most recent servicer-reported NCF debt service coverage ratio (DSCR) as of September 2023 was 0.93x.
The loan is interest-only and has an initial two-year term with three, one-year extension options; the fully extended anticipated repayment date (ARD) is in April 2026. If the loan is not repaid by April 2026, the loan will hyper-amortize through the final maturity in July 2029. The borrower (Brookfield Strategic Real Estate Partners III) exercised the first extension option in April 2023. According the servicer, the borrower has not yet provided its intentions regarding the upcoming April 2024 maturity.
WeWork; Long-Term, Investment-Grade Guarantee: At issuance, the office component of the property was 100% leased to WeWork (79.2% of NRA and 92.5% of base rent). When the property was initially constructed, it was leased to LinkedIn Corporation with a lease commencing in August 2017 and extending through July 2029. Microsoft Corporation (AAA/Stable) had recently acquired LinkedIn, and in October 2017, that lease was assigned to 391 San Antonio Road Tenant LLC (WeWork) and occupied by Facebook on an enterprise lease. As a condition of the assignment, Microsoft executed a guarantee of the lease that extends through July 31, 2029, more than three years beyond the fully extended ARD.
WeWork recently terminated the lease assignment and the lease has reverted to the original tenant, LinkedIn (Microsoft). According to the servicer, LinkedIn is not utilizing any of the non-occupied office space; however, there are three tenants (approximately 20% of the office NRA) continuing to occupy space under a sublease or legacy license agreement from WeWork. The guarantee of the lease from Microsoft remains in place through July 2029.
High Fitch Leverage: The $505.6 million mortgage loan ($876psf) has a Fitch DSCR and loan to value ratio (LTV) of 0.69x and 128.5%, respectively.
Property Quality and Location: The subject is located in Mountain View, CA. It was built in 2017 and carries a LEED Gold Certification. The WeWork space included an initial tenant improvement allowance of $57.50psf, and the operator of ICON Theater has invested $19.0 million ($375psf/$1.9 million per screen) to build out its space. The property is located less than a half-mile from the San Antonio stop of the CalTrain system, providing easy access through the West Bay from San Francisco to San Jose.
The collateral is part of a larger master development, which includes a 157-key Hyatt Centric (non-collateral), The Village Shops, approximately 90,000sf of retail space anchored by Safeway (non-collateral), and The Village Residences, a 330-unit luxury apartment building that is also owned by Brookfield but not part of the subject collateral.
Institutional Sponsorship: The property is being acquired by an affiliate of Brookfield Property Partners, Brookfield Strategic Real Estate Partners III. Brookfield Property Partners has ownership interests in more than 250 properties totaling in excess of 140 million sf throughout the U.S.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Downgrades are possible with a significant decline in asset occupancy and/or a significant deterioration in property cash flow.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Fitch rates the classes A, A-Y, A-Z and A-IO at 'AAAsf'; therefore, upgrades are not possible. The Stable Rating Outlooks for the classes reflect the stable performance that is consistent with issuance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
WEWORK INC. 
