Morningstar DBRS Confirms All Credit Ratings on CRSO Trust 2023-BRND

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2023-BRND (the Certificates) issued by CRSO Trust 2023-BRND:

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class HRR at A (high) (sf)

All trends are Stable.

The credit rating confirmations and trends reflect the overall stable performance of the transaction, which has remained in line with Morningstar DBRS' expectations since issuance. The transaction continues to benefit from its high quality and position as one of the few luxury retailers in its competitive set coupled with minimal rollover concerns, history of stable occupancy and strong in-line sales, all of which support the credit ratings confirmations with this review.

The transaction is collateralized by the borrower's fee-simple and leasehold interest in The Americana at Brand, a 569,959-sf Class A, luxury lifestyle shopping mall approximately 8.8 miles north of downtown Los Angeles in Glendale, California. The collateral was constructed in 2008 as part of a larger development with 241 luxury rental apartments and 100 residential condominiums that are not part of the collateral. The retail aspect is anchored by a Nordstrom with other major tenants including AMC Theatres, Barnes & Noble, H&M, Amazon Style, and Apple. The property is well located within an affluent and established trade area in Glendale, and benefits from excellent connectivity and accessibility via a plethora of regional thoroughfares.

The fixed rate interest-only (IO) loan has five-year term with no extension options. Loan proceeds of $450.0 million were used to repay the existing debt of $396.4 million, return $35.0 million of equity to the sponsor, and covered closing costs associated with the transaction. Morgan Stanley Bank, N.A. and Goldman Sachs Bank USA co-originated the mortgage loan to The Americana at Brand, LLC, and Colorado & Orange, LLC, which are indirectly owned and controlled by Century investments, Inc., which is ultimately controlled by Rick J. Caruso.

The collateral was 99.7% occupied as of the March 2024 rent roll with negligible tenant rollover in the next 12 months, representing only 5.2% of the net rentable area. The property has maintained generally consistent occupancy rates in recent years, with an average annual occupancy rate of 98.0% achieved between 2015 and 2022. According to the YE2023 financials, the subject reported net cash flow (NCF) and debt service coverage ratio of $43.6 million and 1.35 times (x), which is slightly below the Morningstar DBRS issuance derived figures of $45.5 million and 1.41x, respectively. Morningstar DBRS however notes that these figures do not represent a full year of performance since issuance and will continue to monitor performance.

At issuance, Morningstar DBRS derived a value of $697.3 million, based on a capitalization rate of 6.5% and a Morningstar DBRS NCF of $45.5 million, resulting in a loan-to-value ratio (LTV) of 64.5%, compared with the LTV of 51.7% based on the issuance appraised value of $870.0 million. Morningstar DBRS made positive qualitative adjustments to the final LTV sizing benchmarks, totaling 9.5% to account for the cash flow volatility given history of stable occupancy and tenant sales, property quality given its appeal to high-price-point consumers, and market fundamentals for the subject's location in a high income and tourism area.

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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024) at https://dbrs.morningstar.com/research/427030.

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.

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

The credit ratings were initiated at the request of the rated entity.

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

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

These are solicited credit ratings.

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://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428799
-- DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023), https://dbrs.morningstar.com/research/420982
-- North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at [email protected].