DBRS Morningstar Confirms All Ratings of SMRT Commercial Mortgage Trust 2022-MINI

DBRS Limited (DBRS Morningstar) confirmed the ratings on the classes of SMRT Commercial Mortgage Trust 2022-MINI, Commercial Mortgage Pass-Through Certificates, Series 2022-MINI as follows:

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-CP at A (sf)
-- Class X-NCP at A (sf)
-- Class C at A (low) (sf)

All trends are Stable.

The rating confirmations and Stable trends reflect a deal that is early in its lifecycle with limited updated financial reporting since issuance. DBRS Morningstar believes the current and projected performance of the underlying collateral remains in line with issuance expectations. The transaction is collateralized by the borrower’s fee-simple interest in a portfolio of 18 self-storage facilities totaling 56,042 units (of which 80.2% are climate controlled) and approximately 2.1 million rentable square feet (sf) located throughout Manhattan, New York. The loan was structured with conditional release provisions. To date, all of the original 18 collateral properties remain in the pool. The interest-only loan has an initial two-year term with three one-year extension options and is interest-only for its fully extended term.

The portfolio exhibits historically strong operating metrics, with occupancies averaging approximately 93.2% since 2009. Portfolio performance remained steady during the Coronavirus Disease (COVID-19) pandemic despite widespread disruption across commercial real estate asset classes. As of June 2022, the portfolio reported an occupancy rate of 91.5%. The portfolio derives its revenue from a variety of income sources, namely self-storage (88.1% of the DBRS Morningstar effective gross income (EGI)), commercial leasing (6.5% of EGI), WorkSpace (2.8% of EGI), parking (1.2% of EGI), antenna and billboard (1.0% of EGI), and Full Service Plus (0.3% of EGI). The commercial leasing revenue is derived from 171,663 sf at six properties with approximately 72.4% of base rent derived from investment-grade tenants. The WorkSpace revenue is derived from two locations at 5030 Broadway (134 offices) and 131 Varick Street (84 offices).

The portfolio benefits from an experienced institutional sponsor in StorageMart. StorageMart is currently one of the largest privately held pure-play self-storage owners/operators in Canada and the United States. As part of the subject loan, the sponsor contributed approximately $1.2 billion of cash equity to facilitate the portfolio acquisition. Given the portfolio’s desirable locations, the appraiser’s concluded land value was approximately $1.6 billion, which covers 77.7% of the first-mortgage loan balance of $2.1 billion.

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).

Classes X-CP and X-NCP 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.

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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