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

DBRS Limited (DBRS Morningstar) conducted its surveillance review of 28 classes of Commercial Mortgage Pass-Through Certificates from four single-asset/single-borrower commercial mortgage-backed security (CMBS) transactions. DBRS Morningstar confirmed its ratings on all 28 classes. All four transactions closed in November and December 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 four transactions confirmed by DBRS Morningstar are Morgan Stanley Capital I Trust 2021-ILP (MSC 2021-ILP), BX Trust 2021-RISE (BX 2021-RISE), COMM 2021-2400 Mortgage Trust (COMM 2021-2400), and GS Mortgage Securities Corporation Trust 2021-DM (GSMS 2021-DM).

MSC 2021-ILP is secured by the borrower’s fee-simple interest in a portfolio of 61 industrial properties totalling approximately 6.9 million square feet (sf) across eight markets and five states. Approximately 69.0% of the portfolio’s net rentable area (NRA) is in Chicago, Phoenix, Dallas-Fort Worth, Philadelphia, Houston, and San Antonio, which are all in the top 10 largest cities in the U.S. DBRS Morningstar continues to take a favourable view on the long-term growth and stability of the logistics and industrial sector. The portfolio benefits from tenant granularity, strong sponsor strength, and strong leasing trends, all of which contribute to potential cash flow stability over time. No updated financial reporting has been made available ahead of this review. As of June 2022, the weighted-average (WA) portfolio occupancy was approximately 97.0%, up from 94.8% at issuance.

BX 2021-RISE is collateralized by the borrower’s fee-simple interest in 17 Class A and B suburban multifamily properties totalling 6,410 units across seven states and 15 distinct submarkets throughout the U.S. The portfolio is primarily concentrated in Georgia (three properties, 1,497 units, 23.3% of net cash flow (NCF)), Texas (four properties, 1,354 units, 17.6% of NCF), and Florida (two properties, 872 units, 15.7% of NCF). The servicer reported a WA portfolio occupancy rate of 94.6% and a WA debt service coverage ratio (DSCR) of 2.95 times (x) as of June 2022, relatively unchanged from the issuance occupancy rate and DSCR of 95.4% and 2.92x, respectively. At closing, one of the properties, Cortland Mountain Vista in Mesa, Arizona, was indirectly acquired by the guarantor and had a mortgage in place that did not permit prepayment freely until after December 31, 2021. As a result, the property had its corresponding allocated loan amount (ALA) of approximately $86.5 million (7.2% of the total ALA) held back until the debt lockout expired. The property was subsequently contributed to the portfolio as planned.

COMM 2021-2400 is secured by the first-lien mortgage of the 2400 Market Building, a Class A office and retail property that was converted from a warehouse in 2019, located along the Schuylkill River in Philadelphia. The property consists of 502,486 sf of office space, 80,392 sf of retail space, and 9,598 sf of storage space. As of the year-to-date (YTD) ended June 30, 2022, the annualized NCF of $14.3 million is relatively in line with the YE2021 figure of $13.3 million. According to the July 2022 rent roll, the top three tenants occupy 75.1% of the property's NRA and hold long-term leases at the property, with the earliest termination option available in 2031. The largest tenant is Aramark Services, occupying 50.1% of the NRA, with a lease expiration in October 2034. There are no lease rollovers during the initial two-year term of the loan, and only 4.1% of the NRA is scheduled to roll over prior to the loan’s final maturity in 2026. Given the property’s favourable quality, relatively stable tenancy, and strong location, DBRS Morningstar expects cash flow to remain stable over time.

GSMS 2021-DM is secured by the borrower’s fee-simple and leasehold interests in 18 Class A and B multifamily properties, which are in Florida (58.6% of ALA), Utah (19.3% of ALA), and Massachusetts (22.1% of ALA). Sixteen of the 18 properties are affordable-housing properties in Florida, five of which are age-restricted properties. Per the June 2022 rent rolls, the collateral had a WA occupancy of 96.3%, which is relatively in line with the issuance occupancy rate of 98.7%. The portfolio reported a consolidated DSCR of 2.76x for the trailing six months ended June 2022, compared with the DBRS Morningstar DSCR of 2.84x at issuance. DBRS Morningstar generally views the underlying markets as highly desirable for multifamily assets, with strong growth potential and favourable population statistics.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no environmental, social, and 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 (COMM 2021-2400) 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.

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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