DBRS Morningstar Confirms Ratings on GS Mortgage Securities Corporation Trust 2021-STAR Commercial Mortgage Pass-Through Certificates, Series 2021-STAR

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2021-STAR issued by GS Mortgage Securities Corporation Trust 2021-STAR as follows:

-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)

All trends are Stable. Classes H, HRR, P, and ELP are not rated by DBRS Morningstar.

The rating confirmations reflect a deal that is early in its lifecycle with limited reporting and minimal changes to the underlying performance of the transaction since issuance.

The loan is secured by the fee-simple interest in seven Class A suburban properties totaling 2,494 units across five states and five distinct multifamily submarkets throughout the U.S. The portfolio is primarily concentrated in Florida (three properties, 1,004 units, 37.0% of net cash flow (NCF)), Texas (one property, 583 units, 25.6% of NCF), and Arizona (one property, 360 units, 16.0% of NCF). The transaction sponsorship is a joint venture between Starlight Group Property Holdings Inc (Starlight), Public Sector Pension Investment Board (PSPIB), and Future Fund Board of Guardians (Future Fund). The two-year floating-rate loan is interest-only for the full term, with an initial two-year term and three one-year extension options available for a fully extended maturity date of December 2026.

The sponsor’s current business plan features an estimated capital expenditure of $29.08 million, which includes the renovation of 1,214 units across the portfolio during the first three years of the loan term, and improvements to common areas including renovated clubhouses, common rooms, gyms, and dog parks. While DBRS Morningstar did not give any credit to potential upside in cash flow from the sponsor’s business plan, the portfolio’s generally favorable asset quality and location in high-growth markets make it well positioned to maintain stable operating performance through the loan term. DBRS Morningstar requested but did not receive updated site inspections for the underlying properties.

As per June 2022 financial reporting, the portfolio’s consolidated occupancy was 93.02%, slightly below the occupancy of 94.33% at issuance. The annualized Q2 2022 NCF and debt service coverage ratio (DSCR) were $27.3 million and 4.03 times (x), respectively, as reported by the servicer, compared with DBRS Morningstar’s NCF and DSCR of $25.4 million and 3.33x. Three of the underlying properties, representing 37.3% of the allocated loan amount (ALA) ($175.6 million of total ALA), are in Tampa, 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.

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).

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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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