DBRS Morningstar Assigns Provisional Credit Ratings to MF1 2023-FL12 LLC

DBRS, Inc. (DBRS Morningstar) assigned provisional credit ratings to the following classes of notes (the Notes) to be issued by MF1 2023-FL12 LLC (the Issuer):

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

All trends are Stable.

The initial collateral consists of 21 floating-rate mortgage loans secured by 21 transitional multifamily properties, totaling $895.2 million (64.2% of the total fully funded balance), excluding $119.7 million (8.6% of the total fully funded balance) of future funding commitments and $380.6 million (27.3% of the total fully funded balance) of pari passu debt.

Seven loans, representing 31.1% of the total trust balance, are categorized as Delayed Collateral Interests, which are identified in the data tape and included in the DBRS Morningstar analysis. Five of the Delayed Collateral Interests (i.e., Woodside Central, Metro Edgewater, Broadstone Axis, Ilion Apartments, and Mossdale Landing) are identified as Delayed Close Collateral Interests, representing approximately 25.3% of the initial pool, and having not yet closed. The remaining two of the Delayed Collateral Interests (i.e., Elements Apartments and 1110 S Hobart) have been categorized as Delayed CO Collateral Interests, which have closed, but the borrowers have not yet obtained a certificate of occupancy for at least 51% of the units at the related Mortgaged Property.

The Issuer has 45 days postclosing to acquire the Delayed Collateral Interests into the pool (Delayed Purchase Termination Date). Delayed CO Collateral Interests will need to have obtained a temporary or final certificate of occupancy for at least 51% of the units at the respective property, in order to be brought into the pool. If a Delayed Close Collateral Interest is not expected to close or fund prior to the Delayed Purchase Termination Date, the Issuer may acquire any Delayed Collateral Interests during the reinvestment period, subject to the Eligibility Criteria and Acquisition Criteria.

The loans are secured by cash-generating assets, many of which are in a period of transition with plans to stabilize and improve the asset value. In total, 14 loans, representing 74.4% of the pool, have remaining future funding participations totaling $119.7 million, which the Issuer may acquire in the future. DBRS Morningstar’s credit rating on the Notes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are listed at the end of this press release.

The managed transaction includes an 18-month reinvestment period. Reinvestment of principal proceeds during this period is subject to eligibility criteria, which, among other criteria, includes a no-downgrade Rating Agency Confirmation (RAC) by DBRS Morningstar for all new collateral interests and funded companion participations. The eligibility criteria indicate that future collateral interests can be secured only by multifamily, manufactured housing, and student housing property types during the stated reinvestment period. Additionally, the eligibility criteria establish minimum debt service coverage ratio, loan-to-value ratio, and Herfindahl scores. Furthermore, certain events within the transaction require the Issuer to obtain RAC. DBRS Morningstar will confirm that a proposed action or failure to act or other specified event will not, in and of itself, result in the downgrade or withdrawal of the current credit rating. The Issuer is required to obtain RAC for acquisitions of all collateral interests.

DBRS Morningstar’s credit ratings on the Notes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are listed at the end of this press release.

DBRS Morningstar’s credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations (for example, Default Interest).

DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The DBRS Morningstar short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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/416784 (July 4, 2023).

Classes F-E, F-X, G-E, G-X, H-E, and H-X are MASCOT notes and reference the Exchangeable Notes, Class F, Class G, and Class E. Classes F-X, G-X and H-X reference a single rated tranche and the credit ratings mirror the reference obligation tranche, in accordance with the priority of payment. The MASCOT notes are expected to have a $0 balance at closing.

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 Multi-Borrower Rating Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410913).

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

With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the credit ratings referenced herein.

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.

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

DBRS, Inc.
22 West Washington Street
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.

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

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://www.dbrsmorningstar.com/research/420982)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)

North American CMBS Insight Model v 1.1.0.0
(https://www.dbrsmorningstar.com/research/410913)

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

Financial Obligations of the Issuer are listed as follows:
Class A Notes - Interest Distribution Amount
Class A Notes Principal Amount
Class A-S Notes - Interest Distribution Amount
Class A-S Notes Principal Amount
Class B Notes - Interest Distribution Amount
Class B Notes Principal Amount
Class C Notes - Interest Distribution Amount
Class C Notes Principal Amount
Class D Notes - Interest Distribution Amount
Class D Notes Principal Amount
Class E Notes - Interest Distribution Amount
Class E Notes Principal Amount
Class F Notes Interest Distribution Amount
Class F Deferred Interest
Class F Notes Principal Amount
Class F-E Notes Interest Distribution Amount
Class F-E Deferred Interest
Class F-E Notes Principal Amount
Class F-X Notes Interest Distribution Amount
Class G Notes Interest Distribution Amount
Class G Notes Deferred Interest
Class G Notes Principal Amount
Class G-E Notes Interest Distribution
Class G-E Notes Deferred Interest
Class G-E Notes Principal Amount
Class G-X Interest Distribution
Class H Notes Interest Distribution
Class H Notes Deferred Interest
Class H Notes Principal Amount
Class H-E Interest Distribution
Class H-E Notes Principal Amount
Class H-E Deferred Interest
Class H-X Interest Distribution