DBRS Morningstar Confirms Ratings on Eight Single-Asset/Single-Borrower Transactions Issued in 2021

DBRS Limited (DBRS Morningstar) conducted its surveillance review of 55 classes of Commercial Mortgage Pass-Through Certificates from eight single-asset/single-borrower commercial mortgage-backed security (CMBS) transactions. DBRS Morningstar confirmed its ratings on all 55 classes. All eight transactions closed in November and December of 2021 and, given their recent vintage, there is limited updated financial reporting. The rating confirmations reflect the overall stable performance, based on the information made available since issuance, and all trends are Stable.

The eight transactions confirmed by DBRS Morningstar are MED Trust 2021-MDLN (MED 2021-MDLN), Morgan Stanley Capital I Trust 2021-PLZA (MSC 2021-PLZA), DBGS 2021-W52 Mortgage Trust (DBGS 2021-W52), BX Trust 2021-ACNT (BX 2021-ACNT), ELP Commercial Mortgage Trust 2021-ELP (ELP 2021-ELP), STWD Trust 2021-LIH (STWD 2021-LIH), MTK 2021-GRNY Mortgage Trust (MTK 2021-GRNY), and CSMC 2021-BHAR.

MED 2021-MDLN is a sale-leaseback transaction to Medline Industries LP (Medline), a leading U.S. manufacturer and distributor of healthcare supplies. The mission-critical portfolio consists of 49 distribution, manufacturing, and office properties across 30 states. As a part of the transaction, the Medline operating company (OpCo) signed a brand-new, 15-year absolute triple-net (NNN) unitary master lease covering all the properties in the portfolio. The master lease has no termination options and has two five-year renewal options. The servicer reported a Q2 2022 debt service coverage ratio (DSCR) of 2.11 times (x), and an annualized net cash flow (NCF) of $159.1 million, which is above DBRS Morningstar’s NCF of $114.7 million at issuance. As of June 2022, the portfolio was 100% occupied.

MSC 2021-PLZA is secured by the fee-simple interest in Park Avenue Plaza, a 45-story, 1.16 million-sf LEED Platinum office tower located along Park Avenue between 52nd Street and 53rd Street in Midtown Manhattan’s Plaza submarket. According to the April 2022 rent roll, the property was 99.4% leased with a weighted-average (WA) remaining lease term of approximately 14.7 years, inclusive of future starting leases. Two major tenants, BlackRock and Aon Services Corporation, which collectively account for approximately 584,515 sf (50.4% of NRA) and represent approximately 53.0% of base rent, have given notice that they will be vacating their respective leased premises upon expiry of their leases in April 2023. DBRS Morningstar did not receive updated financial reporting for this review, but, given the forward starting leases that account for 56.2% of the upcoming known vacancy, along with the substantial loan structure, including upfront reserves and a five-year full cash flow sweep with funds available for future accretive leasing, DBRS Morningstar expects overall property performance to remain stable.

DBGS 2021-W52 is secured by the borrower's fee-simple interest in 51 West 52nd Street (Black Rock Building), an 878,000-square foot, Class A office high-rise in Midtown Manhattan. The largest tenants include CBS (32.3% of NRA), Watchell, Lipton, Rosen & Katz (Watchell, 28.2% of NRA), and Orrick, Herrington, & Sutcliffe (24.3% of NRA). As of YE2021, the property was 96.7% occupied, in line with issuance. At loan closing, the collateral had a WA remaining lease term of only 3.3 years across its tenant base, with all leases in-place scheduled to roll prior to the fully extended loan term. CBS has already notified it intends to vacate at the end of its various lease terms, which expire in 2023 and 2024. Watchell has been a tenant at the property for over 30 years. The total debt financing, which represents a significant cash-equity investment from the sponsor at issuance, includes substantial reserves for repositioning and retenanting the collateral through the loan term.

BX 2021-ACNT is secured by the fee-simple and leasehold interests in a portfolio of 89 industrial properties located across 19 states with a WA year built of 2004. The collateral properties are a mix of last-mile e-commerce, light industrial, warehouse and institutional quality logistics assets. The portfolio benefits from a granular rent roll, a strong sponsor, favourable asset quality, and strong leasing trends. As of June 2022, the portfolio occupancy was 98.3%, and the Q2 2022 annualized NCF was reported to be $113.6 million, in line with the issuance occupancy of 98.5% and the DBRS Morningstar NCF of $112.1 million.

ELP 2021-ELP is secured by the borrower’s fee-simple and leasehold interests in a portfolio of 142 industrial properties totalling approximately 28.0 million square feet (sf) across 18 markets and 17 states. The subject portfolio benefits from both geographic diversification and tenant granularity. Approximately 15.8% of the DBRS Morningstar in-place base rent is attributable to investment-grade tenants, including Amazon.com Inc., Geodis, and Cummins Inc. (Cummins). No single property accounts for more than 3.8% of the portfolio’s NRA. As of June 2022, the portfolio was approximately 96% occupied, and the annualized Q2 2022 DSCR was reported to be 2.90x.

STWD 2021-LIH is secured by the fee-simple interest in 12 affordable housing multifamily properties totalling 2,966 units located throughout five Florida markets, including Orlando, Tampa, Daytona Beach, West Palm Beach, and Jacksonville. Since acquisition in 2016, the sponsor has invested approximately $15.6 million ($1.3 million per property) across the portfolio. As per June 2022 rent rolls, the portfolio reported a consolidated occupancy of 98.2%, in line with the occupancy of 98.6% at issuance. The annualized Q2 2022 DSCR was 2.27x. The underlying properties are considered to be in strong, high-growth markets with favourable multifamily demand trends in and around the Florida affordable housing market. Four of the underlying properties, representing 28.3% of the allocated loan balance ($76.6 million of total Allocated Loan Amount), are in Tampa and Daytona Beach, Florida, near an area recently affected by Hurricane Ian. The loan agreement requires the borrower to insure the mortgaged properties and DBRS Morningstar’s issuance analysis included a review of insurance coverage. DBRS Morningstar will continue to review servicer reporting to determine if the properties have sustained damage.

MTK 2021-GRNY is secured by the borrower’s fee-simple interest in Gurney’s Montauk Resort and Seawaters Spa, a full-service resort and spa that spans more than 20 acres along the ocean in Montauk, New York, approximately two and a half hours from New York City by car. Since acquiring the asset in 2013, the sponsors have spent approximately $54.1 million in upgrades across the resort, and recently completed a nearly $20 million renovation and expansion of the property’s spa. Additional ongoing updates include the winterization of certain rooms to increase the resort’s year-round appeal. Similar to other luxury full-service leisure hotels in drive-to hospitality markets, the property exhibited strong performance throughout the coronavirus pandemic. According to Smith Travel Research, RevPAR for the trailing 12-month period (T-12) ended May 2022 was $567.45, up considerably from the pre-pandemic YE2019 RevPAR of $443.88 but down from the T-12 ended September 2021 RevPAR of $675.81. The property continues to outperform its competitive set from an occupancy, ADR, and RevPAR perspective; the property’s RevPAR penetration rate was 139.6% for the T-12 ended May 2022.

CSMS 2021-BHAR is secured by the fee-simple interest in the St. Regis Bal Harbour Resort, a 216-key luxury full-service hotel in Miami Beach, Florida. The property features four upscale restaurants, multiple swimming pools, approximately 14,000 sf of amenities, and more than 33,000 sf of indoor/outdoor event space. According to Smith Travel Research, the T-12 occupancy of 72.1%, ADR of $1,199, and RevPAR of $865 represent year-over-year increases of 20.4%, 13.9%, and 37.1%, respectively. The property continues to outperform its competitive set, although DBRS Morningstar expects ongoing performance will stabilize downward following a period of extremely high demand during the pandemic resulting from Florida’s more relaxed travel restrictions and international travel barriers.

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 (May 17, 2022).

Classes X-CP and X-EXT (DBGS 2021-W52), X (MSC 2021-PLZA), X-CP and X-EXT (MTK 2021-GRNY), and X-CP and X-NCP (CSMC 2021-BHAR) are interest-only (IO) certificates that reference 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 these transactions.

The DBRS Viewpoint platform provides additional information on these transactions 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 (October 3, 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.

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

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