Morningstar DBRS Confirms Credit Ratings on TRTX 2022-FL5 Issuer, Ltd.

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of notes issued by TRTX 2022-FL5 Issuer, Ltd. (the Issuer) as follows:

-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (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. While select loans have exhibited performance concerns with borrowers falling behind schedule in their business plan execution, Morningstar DBRS notes that the majority of the underlying collateral has demonstrated stable to improving operating performance over the last few reporting periods. As such, Morningstar DBRS expects these borrowers to successfully execute loan exit strategies upon loan maturity. 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 as well as business plan updates on select loans. To access 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 an initial collateral pool of 20 floating-rate mortgages secured by 116 mostly transitional properties with a cut-off date balance totaling $1.08 billion, excluding approximately $158.0 million of future funding participations and $916.8 million of funded companion participations. Most loans were in a period of transition with plans to stabilize performance and improve values of the underlying assets. The transaction was structured with a Reinvestment Period that expired with the February 2024 Payment Date. As of the August 2024 remittance, the pool comprised 27 loans secured by 122 properties with a cumulative trust balance of $1.06 billion. Since issuance, 11 loans, with a cumulative trust balance of $459.2 million, have been paid in full, two of which (totaling $54.3 million) were paid in full since the previous Morningstar DBRS credit rating action in October 2023. Additionally, 14 loans, totaling $302.9 million, have been added to the trust since the previous credit rating action.

The transaction is concentrated by property type as 16 loans, representing 60.6% of the current trust balance, are secured by multifamily properties, with six loans (25.6% of the current trust balance) secured by office properties and two loans (7.5% of the current trust balance) secured by hotel properties. Compared with the September 2023 reporting, multifamily properties represented 69.6% of the collateral while office properties represented 23.2% of the collateral and hotel properties represented 3.9% of the collateral.

The pool is primarily secured by properties in suburban markets, as defined by Morningstar DBRS, with 20 loans, representing 71.3% of the pool, assigned a Morningstar DBRS Market Rank of 3, 4, or 5. Six loans, representing 28.7% of the pool, are secured by properties with a Morningstar DBRS Market Rank of 6, 7, or 8, denoting urban markets. In comparison, as of September 2023, properties in urban markets represented 31.3% of the collateral while properties in suburban markets represented 68.7% of the collateral.

Leverage across the pool was generally stable to slightly elevated as of August 2024 reporting when compared with issuance metrics. The current weighted-average (WA) as-is appraised value loan-to-value ratio (LTV) is 72.7%, with a current WA stabilized LTV of 60.4%. In comparison, these figures were 66.3% and 60.0%, respectively, at issuance. Morningstar DBRS recognizes that select property values may be inflated as the majority of the individual property appraisals were completed in 2021 or 2022 and may not reflect the current rising interest rate or widening capitalization rate environments. In its analysis, Morningstar DBRS applied upward LTV adjustments across 11 loans, representing 62.2% of the current trust balance, generally reflective of higher cap rate assumptions compared with the implied cap rates based on the appraisals.

An additional $55.9 million of loan future funding allocated to nine of the outstanding individual borrowers remains available. The largest portion, $19.3 million, is allocated to the borrower of Park Central 2 loan, which is secured by an office property in Dallas. The available funds are for the borrower's capex and leasing plan at the property. As of March 2024, the property was 61.7% leased.

As of the August 2024 remittance, there were no delinquent loans or loans in special servicing, and there were three loans on the servicer's watchlist, representing 14.4% of the current trust balance, all of which are flagged for upcoming maturity dates throughout 2024. In total, seven loans, representing 35.3% of the cumulative trust loan balance, have scheduled maturity dates by YE2024; however, according to the collateral manager, the majority of the borrowers are expected to exercise loan extension options. If property performance does not qualify to exercise the related options, Morningstar DBRS expects the borrower and lender to negotiate mutually beneficial loan modifications to extend the loans, which would likely include fresh sponsor equity to fund principal curtailments, fund carry reserves, or purchase a new interest rate cap agreement.

Five loans, representing 27.0% of the current trust balance, have been modified. The terms of the individual loan modifications vary and have included the waiver of performance-based tests to exercise maturity extensions as well as the purchase of new rate agreements. In most cases, borrowers have been required to contribute additional equity to the loans in order to secure a loan modification.

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, 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.