DBRS Morningstar Confirms Ratings on BSPRT 2021-FL6 Issuer, Ltd.

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of notes issued by BSPRT 2021-FL6 Issuer, Ltd. as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the collateral. In conjunction with this press release, DBRS Morningstar has published a Surveillance Performance Update rating report with in-depth analysis and credit metrics for the transaction and business plan updates on select loans. For access to this report, please click on the link under Related Documents below or contact us at [email protected].

The transaction is a managed collateralized loan obligation pool with a maximum funded balance of $700.0 million. According to the April 2023 remittance report, the pool consists of 58 mortgages secured by 82 properties with an aggregate trust balance of $686.0 million. Most loans are in a period of transition with plans to stabilize and improve the asset value. The transaction is currently in its 30-month reinvestment period, which will end with the September 2023 Payment Date. As of April 2023 reporting, the Reinvestment Account had a balance of $14.0 million. Since the previous DBRS Morningstar rating action in November 2022, the collateral manager has acquired seven loans into the trust, totaling $31.4 million. Through April 2023, 46 loans with a former cumulative trust balance of $371.4 million, have been repaid from the transaction. This includes two loans, totaling $11.7 million, which the collateral manager purchased out of the transaction at par.

Sixteen of the outstanding loans, representing 22.7% of the current trust balance, have maturity dates throughout 2023; however, all loans have remaining extension options. While required performance tests may not be met across all collateral properties, borrowers and lenders may agree to terms to allow loan maturity dates to be extended. Terms may include fresh equity contributions from borrowers to pay down loan balances, fund operating and debt service reserves, and purchase new interest rate cap agreements. As of April 2023, there are no loans in special servicing, and 18 loans are on the servicer’s watchlist, representing 57.6% of the current trust balance. These loans are primarily being monitored for low debt service coverage ratios (DSCRs) as the borrowers execute their business plans. Occupancy rates and cash flow may remain depressed at select properties as the borrowers work toward property stabilization.

The transaction benefits from a significant concentration of loans backed by multifamily properties representing 64.6% of the current trust balance, followed by hotel properties (20.0% of the current trust balance), and office properties (11.0% of the current trust balance). The loans are primarily secured by properties in suburban markets with 44 loans, representing 74.7% of the current trust balance, in locations with DBRS Morningstar Market Ranks of 3, 4, and 5. An additional seven loans, representing 19.6% of the pool, are secured by properties in urban locations with DBRS Morningstar Market Ranks of 6 and 7 and seven loans, representing 5.7% of the pool, are secured by properties in tertiary markets. In terms of leverage, the pool has a current weighted-average (WA) appraised loan-to-value ratio (LTV) of 65.0% and a WA stabilized LTV ratio of 57.6%. By comparison, these figures were 69.7% and 59.3%, respectively, as of November 2021. DBRS Morningstar recognizes the current market value of the collateralized properties may have declined given the increased interest rate and widening capitalization rate environments currently facing borrowers and lenders.

Through April 2023, the collateral manager has advanced $120.5 million in loan future funding to 45 individual borrowers to aid in property stabilization efforts. The largest advance, $10.1 million, was made to the borrower of the Cedar Grove Multifamily Portfolio, which is secured by a portfolio of 15 multifamily properties across North Carolina, South Carolina, and Oklahoma. The borrower’s business plan is to implement a value-add program that includes upgrading and renovating exteriors, interiors, and amenities across the portfolio to increase rental and occupancy rates. An additional $82.6 million of loan future funding allocated to 33 individual borrowers remains available. The largest unadvanced portion is also allocated to the borrower of the aforementioned Cedar Grove Multifamily Portfolio.

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 (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology/North American CMBS Insight Model Version 1.1.0.0 (March 16, 2023), https://www.dbrsmorningstar.com/research/410913

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022), https://www.dbrsmorningstar.com/research/402646

North American Commercial Mortgage Servicer Rankings (September 8, 2022), https://www.dbrsmorningstar.com/research/402499

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022), https://www.dbrsmorningstar.com/research/402153

Legal Criteria for U.S. Structured Finance (December 7, 2022),
https://www.dbrsmorningstar.com/research/407008

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].