Morningstar DBRS Confirms Credit Ratings on All Classes of OPG Trust 2021-PORT

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2021-PORT issued by OPG Trust 2021-PORT (the Issuer) as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the underlying loan, which is secured by a portfolio of industrial properties as further described below, as well as the deleveraging of the loan as a result of 39 property releases processed in accordance with the loan documents. Since Morningstar DBRS' last credit rating action in August 2023, six properties, representing 3.3% of the allocated loan amount (ALA) at issuance, have been released. Despite the transaction's collateral reduction of a little more than 35% since issuance, increases to credit support have been limited because of the pay structure that allows for pro rata paydown of the first 35% of the original principal balance accounting for the majority of the property releases processed to date. Morningstar DBRS expects continued stable performance given the transaction portfolio benefits from its composition of last-mile urban infill logistics properties, position in strong industrial markets, granular tenant roster, and elevated cash flow stability attributable to multiple property pooling.

This deal is collateralized by a single mortgage loan evidenced by four componentized promissory notes with an original aggregate principal amount of $1.4 billion. At issuance, the loan was secured by the borrower's fee-simple interest in a portfolio of 109 industrial properties across 11 markets in seven states. The interest-only (IO) mortgage loan bears interest at a floating rate and had an initial maturity date in October 2023, subject to three successive one-year extension options. The borrower exercised the first extension option and, according to the servicer, the borrower intends to exercise the second extension option to extend the maturity to October 2025. The sponsor for the transaction is OMERS Administration Corporation, a benefit pension plan for Ontario, Canada's municipal employees.

The transaction is structured with weak release premiums and a pro rata prepayment structure on the first 35.0% of the initial loan balance. The release provisions for individual properties within the portfolio, among other stipulations, are outlined in the offering documents and are subject to no event of default, a debt-yield test, payment of a spread maintenance premium, and release payment that is equal to 100% of the ALA until the original principal balance has been reduced to 90%; 105% of the ALA until the original loan amount is reduced to 65%; and 110% thereafter. As of the July 2024 remittance, there are 70 properties remaining; 39 property releases have been processed, including the previously mentioned six properties, that have been released since Morningstar DBRS' last credit rating action. The trust balance of $902.1 million reflects a reduction of 36.9% since issuance.

The servicer reported consolidated financial statement for the portfolio showed a YE2023 net cash flow (NCF) of $58.2 million; however, that figure includes revenue and expenses for the properties released throughout the year. The YE2023 NCF is in line with the Issuer's NCF of $58.9 million for the remaining pool at that time and a decline of 4.3% from the Morningstar DBRS' NCF of $55.8 million for those same properties. The resulting in-place debt service coverage ratio for YE2023 was 1.23 times (x) compared with 3.36x at issuance, in large part because of increases in interest rates for the floating-rate debt. According to the servicer, portfolio occupancy as of March 2024 was 92.9%, which is consistent with the portfolio occupancy at issuance.

In the analysis for this review, Morningstar DBRS removed the cash flows for the released properties, resulting in a Morningstar DBRS NCF of $53.1 million. Morningstar DBRS maintained the cap rate of 7.00% applied at issuance, which resulted in a Morningstar DBRS value of $758.2 million, a variance of -45.5% from the issuance appraised value of $1.4 billion for the remaining collateral. The updated Morningstar DBRS value implies a loan to value ratio (LTV) of 119.0%, compared with the LTV of 64.9% on the issuance appraised value for the remaining collateral. The Morningstar DBRS value at issuance implied an LTV of 125.9% on the closing balance. Morningstar DBRS maintained positive qualitative adjustments totaling 8.0% in the LTV Sizing Benchmark to reflect the favorable diversification of cash flow and geography, granular tenancy, and proximity to gateway markets.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

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 factors 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.

Class X-NCP is an IO certificate that references 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 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.
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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://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (July 11, 2024), https://dbrs.morningstar.com/research/436004
-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293
-- 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 info-DBRS@morningstar.com.