Morningstar DBRS Confirms Credit Ratings of All Classes of BX 2021-21M Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed the following classes of BX 2021-21M Mortgage Trust Commercial Mortgage Pass-Through Certificates:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AAA (sf)
-- Class D at AA (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 ratings confirmations reflect the continued stable performance of the transaction, which remains in line with Morningstar DBRS' expectations at issuance. As of the August 2024 remittance, the current pool balance was reported at $899.9 million, representing a collateral reduction of approximately $400.1 million (30.7%) since issuance. The paydown is directly attributable to the release of nine properties since issuance, one of which was released since the last credit rating action in September 2023. The portfolio continues to post strong occupancy rates across all of the remaining properties. Morningstar DBRS revised the loan-to-value (LTV) sizing in its analysis for this review to reflect the recent releases and derived an updated Morningstar DBRS value of $636.9 million.

The $1.3 billion floating rate loan at issuance was structed with a two-year initial term and three one-year extension options for a fully extended maturity date of October 2026. The borrower exercised its first extension option, extending the loan maturity to October 2024, and, according to the servicer, is expected to exercise its second extension. Although there are no performance triggers, financial covenants, or fees required for the borrower to exercise any of its extension options, the loan must not be in default and the borrower is required to purchase an interest rate cap agreement that would result in a debt service coverage ratio (DSCR) of greater than 1.10 times (x) for each extension term.

The sponsor for the loan is the real estate fund commonly known as Blackstone Real Estate Partners IX. At issuance, the transaction was collateralized by the borrower's fee-simple interest in a portfolio of 21 Class A and Class B multifamily properties totalling 6,671 units located in seven different states. As of August 2024 remittance, nine of the properties, representing 30.7% of the allocated loan amount, have been released. Since the last credit rating action, only one additional property (Alleia Luxury, which was located in Savannah, Georgia) was released. The other eight released properties were all located in Texas within the Dallas-Fort Worth submarket. The loan has a partial pro rata/sequential-pay structure that allows for pro rata paydowns associated with property releases for the first 30% of the unpaid principal balance. The sponsor was required to pay a release premium of 105% until the original principal balance was reduced to 70% of the original loan balance. Ongoing release premiums will be 110% of the allocated loan amount for individual property releases. Morningstar DBRS applied a penalty to the transaction's capital structure to account for the partial pro rata structure and weak release premiums.

As of the trailing 12-month period ending March 31, 2024, the reported net cash flow (NCF) for the remaining properties was $43.2 million. The reported occupancy for the remaining properties as of March 2024 was 92.6%, compared with 96.0% for the original portfolio at issuance. Although cash flow has remained stable for the remaining properties, the reported DSCR has declined because of the loan's floating-rate coupon; however, as previously mentioned, there is an interest rate cap agreement in place that yields a minimum DSCR of 1.10x.

Morningstar DBRS updated the LTV sizing in its analysis for this review to reflect the impact of property releases and the subsequent paydown of the transaction. The updated Morningstar DBRS NCF adjusted for the property releases was $41.4 million. The analysis maintained a capitalization rate of 6.5%, which is on the low end/middle range for this property type and reflective of the portfolio's geographic diversity and above-average property quality. Morningstar DBRS also maintained positive qualitative adjustments totalling 6.75% to account for the historically strong performance, property quality, and market fundamentals. The resulting Morningstar DBRS value of $636.9 million implies an LTV of 141.3%, which is largely in line with Morningstar DBRS' LTV of 137.3% at issuance.

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 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 Factors in Credit Ratings (August 13, 2024; 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 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 Limited
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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 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, 2024; https://dbrs.morningstar.com/research/438283)
-- 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 (July 17, 2023).

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