DBRS Morningstar Confirms All Ratings on BDS 2021-FL8 Ltd.

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of notes issued by BDS 2021-FL8 Ltd. (the Issuer):

-- Class A 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. For access to this report, please click on the link under Related Documents below or contact us at [email protected].

The transaction closed in July 2021, with a cut-off pool balance totalling approximately $576.4 million, excluding approximately $47.2 million of future funding commitments. At issuance, the pool consisted of 23 floating-rate mortgage loans secured by 23 mostly transitional real estate properties. The majority of the collateral was in a period of transition, with plans to stabilize and improve asset value. The collateral pool for the transaction is static; however, the Issuer has the right to use principal proceeds to acquire fully funded future funding participations subject to stated criteria. The replenishment period ends on or about the August 2023 Payment Date. As of the May 2022 remittance, the Replenishment Account had a balance of $654.

As of May 2022, the pool comprises 21 loans secured by 21 properties with a cumulative trust balance of $528.8 million. Since issuance, two loans with a former cumulative trust balance of $55.3 million have successfully repaid from the pool, resulting in collateral reduction of 8.3%. In general, borrowers are progressing toward completion of their stated business plans. Through May 2022, the collateral manager had advanced $8.3 million in loan future funding to 11 individual borrowers to aid in property stabilization efforts. The largest loan advances of $1.6 million and $1.5 million have been to the borrowers of the Summerhill Place and Arbors on Oakmont loans, respectively. Both borrowers are using the funds to renovate and upgrade unit interiors and tenant amenities as well as upgrade exterior items across the respective properties. An additional $35.1 million of unadvanced loan future funding allocated to 16 individual borrowers remains outstanding. The largest individual allocation of unadvanced future funding, $10.5 million, is to the borrower of the Eleven One Eleven loan, which is secured by an office property in Reston, Virginia. The borrower’s business plan is to fund leasing costs and minor capital improvements associated with maintaining the current property occupancy rate of 93.5%. In addition, a secondary component of the borrower’s business plan revolves around the sale of a 1.5-acre parcel of land to a local home developer at a minimum purchase price of $6.0 million.

The pool is concentrated by property type as 19 loans, representing 85.4% of the current trust balance, are secured by traditional multifamily assets. The remaining two loans, representing 14.6% of the current pool balance, are secured by office assets. The property type composition of the transaction remains similar from issuance when multifamily and office properties represented 86.7% and 13.3% of the pool balance, respectively. The pool continues to be composed of properties in suburban markets, those identified with a DBRS Morningstar Market Rank of 3, 4, and 5. As of May 2022, this includes 17 loans, representing 80.1% of the current trust balance. At issuance, 19 loans, representing 81.9% of the trust balance, were secured by properties in suburban markets. The transaction is also concentrated by loan size, as the largest 10 loans represent 65.3% of the pool. Overall pool leverage has remained relatively consistent from issuance. According to the May 2022 reporting, the weighted-average (WA) as-is appraised loan-to-value ratio (LTV) was 70.7% and the WA stabilized appraised LTV was 67.9%. In comparison, these figures were 70.8% and 67.5%, respectively, at closing.

There are currently no delinquent loans nor any loans on the servicer’s watchlist. Additionally, the collateral manager confirmed that no loans in the transaction have been modified and no borrowers have submitted forbearance requests.

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/396929.

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.

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 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/396929.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577