DBRS Morningstar Confirms Ratings on All Classes of GS Mortgage Securities Corporation Trust 2021-ARDN

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2021-ARDN issued by GS Mortgage Securities Corporation Trust 2021-ARDN as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, as evidenced by the servicer-reported YE2022 portfolio net cash flow (NCF) of $30.5 million, which remains in line with the DBRS Morningstar NCF of $29.0 million concluded at issuance. Based on the March 2023 reported occupancy of 92.8%, performance is expected to remain in line with expectations.

The floating-rate, interest-only loan is secured by the fee-simple interest in a portfolio of 140 flex, industrial buildings consisting of approximately 5.2 million square feet (sf) across 26 business parks and within the greater metro areas of eight cities: Atlanta; Indianapolis; Philadelphia; Tampa, Florida; Columbus, Ohio; Charlotte, North Carolina; Dallas; and San Antonio, Texas. The collateral benefits from institutional-quality sponsorship provided by a joint venture between Arden Group and Arcapita Group (Arcapita).

The loan proceeds of $446.0 million, along with $155.0 million of sponsor equity, were used to finance the recapitalization of the underlying portfolio through a 49% acquisition by Arcapita. The transaction is structured with pro rata paydowns associated with property releases for the first 20% of the original principal balance, proceeds applied sequentially thereafter. As a condition of the property release provisions, the borrower is required to pay a release price of 110% of the allocated loan amount (ALA) until the outstanding pool balance is reduced to 90% of the original balance, 115% of the ALA until the outstanding balance is further reduced to 80%, and 125% of the ALA thereafter. In addition, the portfolio debt yield following such release must be equal to the greater of the debt yield at closing of 8.3% and the debt yield for the trailing 12 months. As of the July 2023 remittance, there have been no property releases since issuance. The mortgage loan is also structured to comply with Sharia law, and each property is subject to a master lease.

The mortgage loan represents a 75.0% loan-to-value ratio (LTV) based on the issuance appraised value of $595.5 million. The March 2023 reported occupancy rate of 92.8% is in line with the portfolio’s issuance occupancy rate of 91.6%, but down slightly from the March 2022 portfolio occupancy rate of 96.4%. The tenant roster is relatively granular with no single tenant occupying more than 2.0% of the total net rentable area. The DBRS Morningstar net cash flow (NCF) and debt service coverage ratio (DSCR) at issuance were $29.0 million and 2.14 times (x), respectively. Based on the YE2022 reporting, the NCF was at $30.5 million, but DSCR declined to 1.45x as a result of increased debt service stemming from the floating-rate coupon.

The loan has an initial two-year term ending in November 2023, with three one-year extension options available for a fully extended maturity date in November 2026. DBRS Morningstar has reached out to the servicer to determine whether the borrower has notified of its intentions to execute its first extension option. Per the loan terms, the borrower may give notice of its intention to execute its extension option no less than 30 days prior to maturity. The borrower is also required to purchase an interest rate cap agreement with a strike rate that will result in a DSCR of no less than 1.2x. The servicer has advised that it is not aware of a replacement rate cap agreement at this time. Considering the stable performance of the underlying collateral, the loan is well positioned to be extended.

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 (July 4, 2023) https://www.dbrsmorningstar.com/research/416784

All credit ratings are subject to surveillance, which could result in credit 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 credit rating was initiated at the request of the rated entity.

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

This is a solicited credit rating.

DBRS, Inc.
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Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

North American Single-Asset/Single-Borrower Ratings Methodology (February 23, 2023;
https://www.dbrsmorningstar.com/research/410191)
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 (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)
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].