DBRS Morningstar Confirms Ratings of SREIT Trust 2021-IND

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-IND issued by SREIT Trust 2021-IND:

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F 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 expectations since issuance. The loan is secured by the fee-simple interest in a portfolio of 15 industrial properties totalling nearly 2.5 million square feet, generally concentrated throughout infill areas of the Phoenix (11 properties representing 85.9% of the portfolio’s net rentable area (NRA)) and Las Vegas (four properties representing 14.1% of the portfolio’s NRA) metropolitan statistical areas. Both markets placed in the top 10 nationally in terms of population growth between 2017 and 2019 and are generally high-growth markets with favourable industrial demand trends.

The floating-rate interest-only loan of $341.2 million has an initial term of 24 months, with three one-year extension options available. The loan proceeds were used to finance the borrowers’ acquisition of the underlying portfolio and cover closing costs associated with the transaction. The mortgage loan represents a 70.3% loan-to-value ratio based on the appraiser estimated portfolio value of $485.3 million at issuance. The sponsor, Starwood Real Estate Income Trust, Inc. (SREIT), contributed more than $165.4 million of the $487.4 million purchase price. The portfolio benefits from institutional-quality sponsorship from Starwood Capital Group Holdings, L.P. (Starwood), which indirectly controls SREIT. Starwood is a private investment firm that has raised more than $60.0 billion of equity capital since its inception in 1991 and reported management interests in at least $95.0 billion in assets at the time of securitization.

As of September 2022, the servicer-reported occupancy rate for the portfolio has increased to 99.0% from 98.0% at issuance. The tenant roster is relatively granular with no single tenant occupying more than 5.2% of the total NRA. The annualized June 2022 net cash flow (NCF) was reported at $18.17 million compared with the Issuer’s NCF of $17.97 million at issuance and the DBRS Morningstar NCF of $16.35 million at issuance. Overall, the portfolio benefits from favourable tenant granularity, strong sponsor strength, favourable asset quality, and strong leasing trends, all of which contribute to potential cash flow stability over time.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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 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 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].

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