Morningstar DBRS Assigns Provisional Credit Ratings to CONE Trust 2024-DFW1

DBRS Limited (Morningstar DBRS) assigned provisional credit ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2024-DFW1 (the Certificates) to be issued by CONE Trust 2024-DFW1:

-- Class A at AAA (sf)
-- Class X-CP at A (high) (sf)
-- Class X-EXT at A (high) (sf)
-- Class B at AAA (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (sf)
-- Class HRR at BBB (low) (sf)

All trends are Stable.

CONE Trust 2024-DFW1 is a securitization collateralized by the borrower's fee-simple interest in one colocation data center in Carrollton, Texas. Morningstar DBRS generally takes a positive view on the credit profile of the overall transaction based on the subject's favorable infrastructure qualities, experienced data center operator, affordable power rates, desirable efficiency metrics, and strong redundancy. From a management perspective, CyrusOne is an experienced data center operator with a portfolio of 58 operating data center properties accounting for approximately 1,200 megawatts (MW) of critical IT load capacity in the U.S., Europe, and Asia, inclusive of the subject collateral.

Morningstar DBRS' rating on the Certificates reflects the low leverage of the transaction, the strong and stable cash flow performance, and a firm legal structure to protect certificate holders' interests. The rating also reflects the quality of service provided by the company, the access to key fiber nodes, and technology that can maintain the data centers' relevance into the future.

Data centers, while having existed in one form or another for many years, have become a key component of the modern global technology industry. The advent of cloud computing, streaming media, file storage, and artificial intelligence applications has increased the need for these facilities over the last decade in order to manage, store, and transmit data globally. Both hyperscale and co-location data centers have a role in the existing data ecosystem. Hyperscale data centers are designed for large capacity storage and processing of information, whereas co-location centers act as an on-ramp for users to gain access to the wider network, or for information from the network to be routed back to users. CyrusOne operates a large network using third-party and proprietary fiber to provide connectivity access its large customer base.

From the standpoint of the physical plants, the subject data center is adequately powered. The subject data center is designed as "four-to-make-three", with 60 MW of uninterruptable power supply (UPS) available for 45 MW of critical IT load with data halls that support 150 to 200 watts psf, exhibiting higher critical IT loads than a typical colocation data center. Power is delivered to the site with two independent circuits, adding another layer of backup. The subject utilizes 750 kVA UPS systems, with each leg having a dedicated UPS with a battery backup that can support the IT load up to 15 minutes before the generators. Also, the data center features 2.25-MW diesel generators that are prewired for additional capacity. The generators have dedicated 6,000-gallon tanks each, which are rated for 48 hours of backup power at full 45 MW IT load. Morningstar DBRS views the data center collateral as strong assets with a strong critical infrastructure, including power and redundancy that is built to accommodate the technology needs of today and the future.

Morningstar DBRS' credit ratings on CONE Trust 2024-DFW1 address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the Principal Distribution Amounts for Class A, B, C, D, E, and HRR, and the Interest Distribution Amounts for Class A, X-CP, X-EXT, B, C, D, E, and HRR.

Morningstar DBRS' 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, Spread Maintenance Premiums.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS 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 Morningstar DBRS 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 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.

Classes X-CP and X-EXT are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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 Rating and Monitoring Data Center Transactions (January 23, 2024),
https://dbrs.morningstar.com/research/427033.

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

With regard to due diligence services, Morningstar DBRS 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 Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

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 info-DBRS@morningstar.com.

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.

Morningstar DBRS 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.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

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

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

North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592

Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293

Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.