DBRS Morningstar Confirms Ratings on BX Commercial Mortgage Trust 2021-CIP

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2021-CIP issued by BX Commercial Mortgage Trust 2021-CIP as follows:

Class A at AAA (sf)
Class A-1 at AAA (sf)
Class B at AA (low) (sf)
Class C at A (low) (sf)
Class D at BBB (low) (sf)

All trends are Stable.

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 transaction is collateralized by the borrower’s fee-simple and leasehold interests in a portfolio of 101 industrial properties totalling more than 15.2 million square feet across 23 markets and 15 states in some of the nation’s core midwestern and coastal industrial markets. The portfolio benefits from geographic diversity, with locations across numerous strong-performing coastal gateway and midwestern industrial markets, including markets in Chicago, Indianapolis, Baltimore, New Jersey/New York City, Los Angeles, and Inland Empire in California. BREIT Operating Partnership L.P. (Blackstone) acquired the subject portfolio from affiliates of Cabot Properties for a purchase price of approximately $2.3 billion.

DBRS Morningstar continues to take a favourable view on the long-term growth and stability of the warehouse and logistics sector. The portfolio exhibits strong functionality metrics, with weighted-average (WA) clear heights of approximately 29.8 feet and a portfolio WA year built of 2007. No single tenant comprises more than 4.1% of the DBRS Morningstar concluded in-place base rent. Investment-grade-rated tenants account for approximately 25.2% of the DBRS Morningstar concluded in-place base rent, including 10 tenants who qualified for long-term credit tenant treatment in the DBRS Morningstar net cash flow based on long-dated lease maturity, providing further cash flow stability.

The deal closed in December 2021, and there has been minimal updated financial reporting since then. According to a consolidated operating statement dated June 2022, the portfolio has an occupancy rate of 96.1%, a slight decrease from 98.1% in December 2021. The portfolio’s debt service coverage ratio (DSCR) from the same operating statement is 1.68 times (x), a slight decline from the DBRS Morningstar DSCR of 1.77x at issuance. The floating-rate, interest-only loan has an initial scheduled maturity of December 2023, and three one-year extension options available for a fully extended maturity date of December 2026.

The DBRS Morningstar loan-to-value on the trust loan is high, at 153.55%. The very high leverage nature of the transaction, combined with the lack of amortization, could potentially result in elevated refinance risk and/or loss severities in an event of default. The loan allows for pro rata paydowns associated with property releases for the first 30.0% of the unpaid principal balance. As of November 2022, there have been no property releases to date.

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 (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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