DBRS Morningstar Confirms Ratings on LoanCore 2021-CRE5 Issuer Ltd.

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of notes issued by LoanCore 2021-CRE5 Issuer Ltd. (the Issuer):

-- 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 (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 transaction closed in June 2021 with an initial collateral pool of 20 floating-rate mortgage loans secured by 45 mostly transitional properties with a cut-off balance of $909.6 million, excluding approximately $140.9 million of future funding participations and $353.8 million of pari passu debt. Most loans were in a period of transition with plans to stabilize and improve asset value. The transaction included a 180-day ramp-up period during which the Issuer could use $125.0 million of funds deposited into the unused proceeds account to acquire additional collateral, subject to eligibility criteria as defined at issuance. The ramp-up period effectively concluded in September 2021 when the cumulative loan balance totalled $1.03 billion. The transaction is also structured with a Reinvestment Period through the June 2023 payment date, whereby the Issuer may acquire additional loan collateral participations into the trust. As of May 2022, the Reinvestment and Replenishment Account had a balance of $74.0 million.

As of the May 2022 remittance, the pool comprised 23 loans secured by 34 properties with a cumulative trust balance of $960.6 million. Since issuance, five loans have successfully repaid from the pool, including the $65 million pari passu note of 345 Park Avenue South, which repaid with the May 2022 reporting. Since issuance, nine loans with a cumulative trust balance of $207.1 million have been contributed to the trust. In general, borrowers are progressing toward completing the stated business plans as through May 2022, the collateral manager had advanced $48.0 million in loan future funding allocated to eight individual borrowers to aid in property stabilization efforts; however, only $7.1 million has been advance to five individual borrowers since the subject CMBS transaction closed. An additional $46.3 million of unadvanced loan future funding allocated to 11 individual borrowers remains outstanding with $17.0 million allocated to the borrower of the 999 E Street NW loan and $10.1 million allocated to the borrower of the One Whitehall loan for capital improvements, leasing costs, and operating shortfalls.

Loans contributed during the initial ramp-up and subsequent ongoing reinvestment periods have been characterized with similar leverage as loans in the pool at closing as the current weighted-average appraised as-is loan-to-value (LTV) and stabilized LTV ratios are 76.3% and 66.2%, respectively. In comparison with issuance, these figures were 70.6% and 65.5%, respectively.

The collateral pool is concentrated by property type as nine loans (37.5% of the current pool balance) are secured by multifamily properties, five loans (28.6% of the current pool balance) are secured by office properties, and three loans (11.0% of the current pool balance) are secured by retail properties. The collateral has a concentration of properties in suburban markets with 15 loans, representing 68.6% of the current pool balance, compared with the suburban concentration at closing of 15 loans, representing 56.8% of the pool balance. The transaction continues also benefits from properties located in urban markets, which historically have benefitted from greater demand and liquidity. As of May 2022, there are seven loans, totalling 31.4% of the pool balance located in urban markets in comparison with 12 loans, representing 37.8% of the pool at closing.

As of May 2022 reporting, all loans remain current, and there are two loans on the servicer’s watchlist, representing 8.5% of the pool balance. These loans were both placed on the servicer’s watchlist because of upcoming loan maturity dates; however, both loans feature extension options. According to an update provided by the collateral manager, the borrowers of the Boulder County Business Center (Prospectus ID#6, 5.8% of the current pool balance) and Boardwalk at Sorrento Court (Prospectus ID#18, 2.2% of the current pool balance) loans, which have loan maturities in June and July 2022, respectively, are each exploring loan modification options. An additional three loans in the pool (10.3% of the current pool balance) have been modified since the CMBS transaction closed in June 2021. Loan modification terms have included waivers on certain extension option conditions and the allowance of borrowers to access funds held in reserves to be fund shortfalls or rent relief for certain tenants. The lender has generally required some type of concession from the borrower, and as a result of these loan modifications, many of these loans will remain in a cash management period.

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.

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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