DBRS Morningstar Confirms Ratings on HGI CRE CLO 2021-FL1, Ltd.

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of commercial mortgage-backed notes issued by HGI CRE CLO 2021-FL1, Ltd. (the Issuer) as follows:

-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since issuance. In conjunction with this press release, DBRS Morningstar has published a Surveillance Performance Update report with in-depth analysis and credit metrics for the transaction and with business plan updates on select loans. To access this report, please click on the link under Related Documents below or contact us at [email protected].

The initial collateral included 23 mortgage loans or senior notes secured by multifamily properties with an initial cut-off date balance totaling $498.2 million. Most of the loans contributed at issuance were secured by cash flowing assets, with stated business plans and loan structures to stabilize the collateral. The transaction included a 180-day ramp-up acquisition period, which was completed in December 2021 when the cumulative loan balance totaled $549.9 million.

The transaction includes an 18-month reinvestment period, expiring with the November 2022 Payment Date. During this period, reinvested principal proceeds are subject to Eligibility Criteria, which include a rating agency no-downgrade confirmation by DBRS Morningstar for all new mortgage assets and funded companion participations exceeding $1.0 million, among others. Of important note, all reinvestment collateral must be secured by multifamily properties, excluding student housing and senior housing. Since issuance, seven loans with a cumulative balance of $98.0 million have been added to the trust. As of the February 2022 reporting, the Reinvestment Account had a balance of $28.4 million available to the collateral manager to purchase additional loan interests into the transaction.

As of the February 2022 remittance, a total of 28 loans secured by 31 properties remain in the trust with an aggregate principal balance of $546.8 million. In general, borrowers are progressing toward completing their stated business plans. Through January 2022, the collateral manager had released $5.8 million in loan future funding to seven individual borrowers to aid in property stabilization efforts. An additional $31.8 million of unadvanced loan future funding allocated to 16 individual borrowers remains outstanding. All loans in the total pool are secured by multifamily properties across 11 states, with the heaviest concentrations in Texas (17.7% of the cumulative funded loan balance) and Florida (16.0% of the cumulative funded loan balance). Multifamily properties have historically seen lower probability of default lower expected losses within the DBRS Morningstar model.

According to the February 2022 remittance, there are no loans in special servicing and three loans (9.6% of the pool) on the servicer’s watchlist. Two of the loans, Park Terrace (Prospectus ID#5, 5.9% of the pool) and GA Cardinal (Prospectus ID#20, 2.1% of the pool), were flagged for deferred maintenance, while Oak Creek (Prospectus ID#22, 1.8% of the pool) is being monitored because of an insurance claim as a result of fire damage.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the 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 every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The rated entity or its related entities did participate in the rating process for this rating action. 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 related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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