DBRS Morningstar Confirms the Ratings on RLGH Trust 2021-TROT

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2021-TROT issued by RLGH Trust 2021-TROT as follows:

-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)
-- Class A-Y at AAA (sf)
-- Class A-Z at AAA (sf)
-- Class A-IO at AAA (sf)

All trends are Stable.

The $299.3 million loan is collateralized by the borrower’s fee-simple and leasehold interests in 53 properties, including 48 flex industrial properties, three industrial properties, one parcel of land, and one unanchored retail strip-center, totaling approximately 2.6 million square feet across six business parks in the Raleigh-Durham region of North Carolina. The Raleigh-Durham metro area is known as the Research Triangle, which is an attractive region for research and development, advanced technology, and biotechnology. The two-year floating-rate loan is interest only (IO) for the full term, with a scheduled maturity of April 2023 plus three one-year extension options available. The portfolio has a weighted-average (WA) year built of 1995 and is composed primarily of older buildings in what is considered to be a smaller and secondary market. The sponsors, a joint venture partnership between Equus and AIG, contributed $132.9 million in cash equity as a part of the transaction to acquire the portfolio for a purchase price of $422.3 million. Equus is a private real estate investment firm focused on commercial real estate investments. AIG is the real estate investment arm of AIG Inc. and focuses real estate investments globally.

The collateral portfolio benefits from a diversified tenant roster, with only six of the portfolio's 53 properties currently leased to single tenant users. At issuance, the portfolio was leased to 306 distinct tenants across multiple industries with a WA occupancy rate of 95.3%. Performance was noted to have been stable through these years of the ongoing Coronavirus Disease (COVID-19) pandemic, with the servicer most recently reporting an occupancy rate of 96.0% for year-end (YE) 2021. The stable occupancy pairs with stable cash flow trends from issuance, with the servicer reporting a YE2021 net cash flow (NCF) figure of $22.2 million, which is above the DBRS Morningstar NCF figure of $21.7 million. Tenant rollover is particularly concentrated in 2022 and 2023, with leases representing 14.8% and 23.2% of in-place base rent scheduled to expire, respectively. Of these, the servicer has confirmed two small tenants that combine for less than 1.0% of the total square footage have confirmed their leases will not be renewed, with the remainder expected to renew, according to the borrower.

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.

Class A-IO is an IO certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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 for this transaction.

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.

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

The principal methodology is the 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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