DBRS Morningstar Confirms All Ratings on BX 2022-MVRK Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2022-MVRK issued by BX 2022-MVRK Mortgage Trust as follows:

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

All trends are Stable.

This transaction closed slightly less than a year ago, in March 2022, and there have been no material changes since issuance. The rating confirmations reflect the recent vintage and DBRS Morningstar’s view that the transaction is performing as expected.

The transaction is secured by the borrower’s fee-simple interest in a portfolio of 77 industrial properties totaling approximately 7.1 million square feet. The properties are primarily a mix of light industrial and warehouse property types, with limited manufacturing exposure. The properties are located across 10 states with proximity to major population centers, with the largest three concentrations in Texas, California, and Minnesota, which combine for almost 60% of the portfolio’s total net rentable area (NRA). The loan is sponsored by Blackstone Real Estate Partners IX L.P., which is indirectly owned by Blackstone Inc., the largest global investment firm in the world.

The $900 million subject transaction was used to recapitalize the portfolio and is interest only throughout its fully extended loan term. Additionally, there is a $120 million mezzanine loan held outside of the trust. The loan is structured with an initial two-year loan term with three one-year extension options that bring the fully extended loan maturity to March 2027.

According to the September 2022 rent rolls, the portfolio was 94.1% occupied, in line with 95.2% at issuance. The largest tenants include Living Spaces Furniture, LLC (11.2% of NRA), Razor USA, LLC (8.4% of NRA), and International Impulse, Inc. (2.9% of NRA). While 61.7% of NRA is scheduled to roll throughout the fully extended loan term, the portfolio is leased to 123 unique tenants and benefits from its granular rent roll, with the largest concentration of rollover (23.3% of NRA) scheduled four years out from loan closing, in 2026. At issuance, DBRS Morningstar noted that the weighted-average base rents were approximately 12.0% less than market rates, suggesting the potential for upside in some locations if tenants were to vacate and new leases secured. The annualized net cash flow (NCF) for the year-to-date period ended September 30, 2022, was $43.7 million and remains above the DBRS Morningstar-derived NCF of $39.9 million at issuance, despite below-market rental rates.

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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