DBRS Morningstar Affirms Ratings for All Categories of KREST Commercial Mortgage Securities Trust 2021-CHIP

DBRS Limited (DBRS Morningstar) has confirmed ratings for all categories of KREST Commercial Mortgage-Backed Securities Trust 2021-CHIP, 2021-CHIP series, as follows.

Class A to AAA (fs)

Class XA to AA (sf)

Class B to AA (low) (sf)

Class C to A (low) (sf)

Class D to BBB (low) (sf)

Class E to BB (low) (sf)

Class F to B (sf)

The rating confirmations reflect recent vintage and the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations at issuance. The transaction is secured by the fee simple interest in HQ@First, a 603,666 square foot (sf) LEED Gold certified office campus in San Jose, California. The property was designed and built in 2010 as a bespoke build for the network equipment producer, Brocade Communications Systemswhich occupied the campus until its acquisition by Broadcom, Inc. in 2017. In 2019, investment grade tenant, Micron Technology, Inc. (Micron) signed a 16-year lease for 100% of the property to serve as its Silicon Valley Headquarter. The 10-year loan is Interest Only (IO) and is structured with an early repayment date beginning in August 2031 and a final maturity date in November 2034.

The $408.0 million the entire loan includes $230 million in senior debt and $178.0 million in junior debt. The operation object of $267.0 million consists of $89.0 million senior debt and all junior debt.

The building benefits from a long-term institutional quality lease which results in a stable long-term cash flow with annual contractual rent increases of 3%. Micron’s lease expires on December 31, 2034, and has two five-year extension options at fair market rates as long as the tenant is not in default under the lease. Micron has leased the entire property with the intention of expanding in space over time, but has sublet approximately 20.0% of the net leasable area to Z-scale until September 2026which uses the space as its headquarters. Zscaler the sublease is structured with contractual expansion options in October 2022 and October 2025. According to Reis, the airport/Milpita the submarket recorded a vacancy rate in Q1 2022 of 24.6%, with an asking rent of $35.61 per square foot (psf), compared to Q1 2021 vacancy rate of 28.2% and asking rent of $34.77 psf, which is relatively lower than Micron’s rental rate of $41.83 psf for 2022.

Based on the most recent financial statements, the loan reported a period of six months ended December 31, 2021, debt service coverage ratio (DSCR) of 1.39x(x), versus DBRS Morningstar DSCR of 2.16x at issuance. DBRS Morningstar’s free cash flow analysis includes linearizing Micron’s rent over the term of the loan given its consideration as a long-term credit tenant. The sponsor of the transaction is KKR Real Estate Select Trusta private REIT for retail investors sponsored by KKR & Co. Inc.


No environmental, social and governance factors had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors in the DBRS Morningstar Analytical Framework is available in DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings>.

Class XA is an IO certificate that references a single rated slice or multiple rated slices. The IO rating reflects the lowest rated applicable benchmark obligation tranche adjusted up one notch if senior in the cascade.

All ratings are subject to monitoring, which could result in ratings being upgraded, downgraded, revised, confirmed or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information about this transaction and the underlying loans, including DBRS Morningstar metrics, commentary, servicing agent reported cash flow, and other performance-related data.

For free access to this content, please register with the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and service data for most current CMBS transactions (including transactions not rated by DBRS Morningstar), as well as loan and transaction level commentary for most rated transactions. and monitored by DBRS Morningstar.


All figures are in WE dollars unless otherwise specified.

The primary methodology is the North American CMBS Monitoring Methodology (March 4, 2022), which can be found on dbrsmorningstar.com under Methodologies and Criteria. For a list of structured finance related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not all related methodologies listed in a Principal Structured Finance Asset Class Methodology can be used to assess or monitor an individual structured finance or debt security.

DBRS Sovereign Morningstar group publishes reference macroeconomic scenarios for rated sovereigns. DBRS Morningstar’s analysis considered impacts consistent with baseline scenarios as set out in the following report: https://www.dbrsmorningstar.com/research/384482>.

Related regulatory information pursuant to National Instrument 25-101 Designated Rating Organizations is incorporated by reference and can be found by clicking the link under Related Documents or by contacting us at info@dbrsmorningstar.com’ >info@dbrsmorningstar. com.

The rated entity or its related entities participated in the rating process for this rating metric. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the relevant appendix for more information on the sensitivity of the assumptions used in the rating process.

For more information about this credit or this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com’ >info@dbrsmorningstar.com.

DBRS Limited

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Toronto, ON M5H 3M7 Canada

Such. +1 416 593-5577


Date Issued	Debt Rated	Action	Rating	Trend	Attributesi

US = Lead Analyst based in the USA

CA = Lead Analyst based in Canada

EU = Lead Analyst based in EU

UK = Lead Analyst based in UK

E= EU approved

U= UK approved

Unsolicited participation with access

Unsolicited participation without access

Unsolicited Non Participating

14-Jun-22	Class A	Confirmed	AAA (sf)	Stb	CA
14-Jun-22	Class X-A	Confirmed	AA (sf)	Stb	CA
14-Jun-22	Class B	Confirmed	AA (low) (sf)	Stb	CA
14-Jun-22	Class C	Confirmed	A (low) (sf)	Stb	CA
14-Jun-22	Class D	Confirmed	BBB (low) (sf)	Stb	CA
14-Jun-22	Class E	Confirmed	BB (low) (sf)	Stb	CA
14-Jun-22	Class F	Confirmed	B (sf)	Stb	CA

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