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

DBRS, Inc. (Morningstar DBRS) confirmed its credit 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 credit rating confirmations reflect the overall stable performance of the transaction, as evidenced by the servicer-reported YE2023 portfolio net cash flow (NCF) of $33.4 million, which is slightly improved compared the Morningstar DBRS NCF of $29.0 million concluded at issuance. As of YE2023, the portfolio was 91.7% occupied by an extremely granular tenant base. 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 2024 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 81.7% loan-to-value ratio (LTV) based on the issuance appraised value of $545.9 million. The December 2023 reported occupancy rate of 91.7% is in line with the portfolio's issuance occupancy rate of 91.6%. The tenant roster is relatively granular with no single tenant occupying more than 2.0% of the total net rentable area. The Morningstar DBRS NCF and debt service coverage ratio (DSCR) at issuance were $29.0 million and 2.14 times (x), respectively. Based on the YE2023 reporting, the NCF was at $33.4 million, but DSCR declined to 1.14x as a result of increased debt service stemming from the floating-rate coupon.

The loan's initial two-year term ended in November 2023, following which the borrower elected to extend the loan to November 2024. There are two one-year extension options remaining for a fully extended maturity date in November 2026. 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. Considering the stable performance of the underlying collateral, the loan is well positioned to be extended.

Morningstar DBRS maintained its analysis derived at issuance, which is based on the Morningstar DBRS NCF of $29.0 million and a capitalization rate of 7.5%. This results in a Morningstar DBRS value of $386.7 million, which represents a -29.2% variance from the issuance appraised value of $545.9 million. The implied LTV based on the Morningstar DBRS value is 115.3%. Positive qualitative adjustments totaling 4.5% were maintained to account for the low cash flow volatility, good property quality and stable market fundamentals.

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 at (January 23, 2024; 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 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.

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 (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)
-- 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/legal-criteria-for-us-structured-finance)

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