Morningstar DBRS Confirms All Credit Ratings on BSPRT 2022-FL8 Issuer, Ltd.

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of commercial mortgage-backed notes issued by BSPRT 2022-FL8 Issuer, Ltd. as follows:

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

All trends are Stable.

The credit rating confirmations reflect performance that remains in line with Morningstar DBRS' expectations, as borrowers are generally progressing toward the completion of the stated business plans and have generally demonstrated rental rate growth relative to issuance levels, based on the Q1 2024 collateral report provided by the collateral manager. The transaction consists solely of multifamily collateral across 43 loans. Historically, loans secured by multifamily properties have exhibited lower default rates and the ability to retain and increase asset value. In conjunction with this press release, Morningstar DBRS has published a Surveillance Performance Update report with in-depth analysis and credit metrics for the transaction and with business plan updates on select loans. For access to this report, please click on the link under Related Documents below or contact us at info-DBRS@morningstar.com.

The transaction closed in February 2022, with the initial pool consisting of 26 floating-rate mortgages secured by 34 mostly transitional multifamily properties with a cut-off date balance totaling approximately $1.03 billion (87.3% of the total fully funded balance). Most of the loans were in a period of transition with plans to stabilize performance and improve the asset value. The transaction included a 180-day ramp-up acquisition period, which allowed the issuer to contribute additional loan collateral up to the maximum principal balance of $1.2 billion. Additionally, the transaction had a Reinvestment Period that expired with the February 2024 payment date.

As of the August 2024 remittance, the pool comprises 43 loans secured by 66 properties with a cumulative trust balance of $1.17 billion. Since issuance, 14 loans with a former cumulative balance of $267.9 million have been successfully repaid from the pool, including seven loans with a former cumulative balance of $122.8 million since Morningstar DBRS' previous credit rating action in September 2023. An additional eight loans with a current cumulative trust balance of $75.8 million have been added to the trust since September 2023.

The loans are primarily secured by properties in suburban markets, which Morningstar DBRS defines as markets with a Morningstar DBRS Market Rank of 3, 4, or 5. As of August 2024, 31 loans, representing 66.6% of the current trust balance, are secured by properties in suburban markets. An additional nine loans, representing 27.0% of the current trust balance, are secured by properties in tertiary markets, defined as markets with a Morningstar DBRS Market Rank of 1 or 2. Only three loans, representing 6.3% of the current trust balance, are secured by a property in an urban market, with a Morningstar DBRS Market Rank of 7. There are no loans in the pool that are secured by properties with a Morningstar DBRS Market Rank of 6 or 8.

Leverage across the pool has decreased from issuance levels as the current weighted-average (WA) as-is appraised value loan-to-value (LTV) ratio is 70.8%, with a current WA stabilized LTV ratio of 63.8%. In comparison, these figures were 73.0% and 65.5%, respectively, at issuance. Morningstar DBRS recognizes that select property values may be inflated as the majority of the individual property appraisals were completed in 2022 and 2023 and may not reflect the current rising interest rate or widening capitalization rate environment. For a select number of loans that are exhibiting increased credit risk from issuance, including the pool's only specially serviced loan, Cedar Grove Multifamily Portfolio (Prospectus ID#42; 2.7% of the pool), which transferred to the special servicer in January 2024 for monetary default, Morningstar DBRS applied upward LTV adjustments across 17 loans, representing 31.1% of the current trust balance in the analysis for this review.

Through July 2024, the collateral manager had advanced cumulative loan future funding of $101.9 million to 31 of the outstanding individual borrowers. The largest loan with future funding advances to date is the specially serviced loan, Cedar Grove Multifamily Portfolio ($20.8 million). The current whole loan amount of $124.2 million consists of $89.8 million in pari passu senior debt, with pieces secured in several conduit transactions, including three transactions that are rated by Morningstar DBRS (BSPRT 2021-FL6, BSPRT 2021-FL7, and BSPRT 2022-FL9). The loan was originally secured by 15 properties that were predominantly concentrated in the Charlotte, North Carolina, metropolitan statistical area. The borrower used the future funding advances to complete unit interior and propertywide upgrades across the portfolio. The loan is currently deemed a matured nonperforming loan after surpassing its June 2024 maturity, and the sponsor has been working on selling off its properties according to an update provided by the collateral manager. Although the borrower still has $5.4 million of future funding available, Morningstar DBRS does not expect the lender to advance any remaining funds given the loan's status. Please see the Business Plan Updates section within the corresponding Surveillance Performance Update report for more details.

An additional $43.2 million of future loan funding allocated to 21 of the outstanding individual borrowers remains available. The largest portion of available funds ($9.1 million) is allocated to the borrower of the Copperfield Apartments loan (Prospectus ID#57; 1.7% of the pool), which was added to the trust in April 2024. The loan is secured by 10 garden-style multifamily properties in Fort Worth, Texas. The available funds are allocated toward the borrower's capital improvements project, which is expected to be completed in March 2027.

As of August 2024, there are 10 loans (representing 20.4% of the pool) on the servicer's watchlist, which are primarily flagged for low debt service coverage ratios and occupancy rates. There are only two loans, collectively representing 0.1% of the pool, that are late on their current payment. Per the August 2024 reporting, 31 loans (representing 70.5% of the pool) have been modified. Loan modification terms have included maturity extensions, rolling renovation reserves, and renewing replacement caps, among others. The collateral manager identified 33 loans (representing 75.6% of the pool) with scheduled maturity dates through May 2025, including the Cedar Grove Multifamily Portfolio loan. While the majority of the borrowers on the loans are currently evaluating their options, most of these loans are structured with extension options. For the largest loan in the pool, Rivet and Rivet 26 (Prospectus ID#1; 7.3% of the pool), which matured in June 2024, the collateral manager has confirmed that the borrower is currently working on a universal takeout.

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 Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

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 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 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 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 CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model version 1.2.0.0, https://dbrs.morningstar.com/research/428797
-- 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

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 https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.