Morningstar DBRS Confirms All Credit Ratings of BX 2022-MVRK Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2022-MVRK issued by BX 2022-MVRK Mortgage Trust (the Issuer) as follows:

-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction, which aligns with Morningstar DBRS' expectations at issuance as evidenced by the servicer reported occupancy rate and net cash flow (NCF) figures of 97% and $47.5 million, respectively, as of June 2024. At issuance, the $900.0 million trust loan, sponsored by Blackstone Real Estate Partners IX L.P., was secured by 77 industrial properties composed of approximately 7.1 million square feet (sf) across 10 states and 13 industrial markets. As of the December 2024 remittance, six properties have been released from the portfolio, reflecting a collateral reduction of 8.1% since issuance.

The floating rate, interest-only loan has a fully extended maturity date in March 2027, which includes an initial two-year term and three one-year extension options. The borrower exercised the first extension option, and according to the servicer, as of the date of this press release the borrower has not yet indicated if it will exercise the second extension option to extend the maturity to March 2026. The trust debt and a $120.0 million mezzanine loan were used to fund the recapitalization of the portfolio. The loan is structured with a partial pro rata/sequential-pay structure that allows for pro rata principal paydown for the first 30.0% of the original principal balance, subject to a release premium of 105.0% of the allocated loan amount, increasing to 110.0% for the remaining 70.0% of the unpaid principal balance subject to a post-release minimum debt yield of 4.59%.

The servicer reported trailing 12-month period ended on June 30, 2024, NCF figure of $47.5 million (reflecting a debt service coverage ratio (DSCR) of 0.50 times (x)), is relatively unchanged from the YE2023 figure but higher than the $39.9 million Morningstar DBRS figure and the Issuer's NCF figure of $44.0 million. The growth in cash flow is primarily attributed to increases in base rent; however, Morningstar DBRS notes that the reported NCF is higher than the actual in-place cash flow because of five property releases in 2024 that are likely not fully reflected with the June 2024 financial reporting. The DSCR has fallen below breakeven since issuance because of the floating rate nature of the loan, mitigated by the in-place interest rate cap agreement structured with a DSCR floor of 1.10x.

In the analysis for this review, Morningstar DBRS updated the weighted-average cap rate to 6.82% to adjust for released properties. The updated capitalization rate was applied to the Morningstar DBRS NCF for the 71 remaining properties in the pool, resulting in a Morningstar DBRS value of $541.6 million, a variance of -56.02% from the aggregate issuance appraised value of $1.23 billion for these properties. The Morningstar DBRS value implies a loan-to-value (LTV) ratio of 152.7%, compared with the 67.2% LTV based on the issuance appraised value for the remaining collateral and the Morningstar DBRS issuance LTV of 152.2%. In addition, Morningstar DBRS maintained the positive qualitative adjustments totaling 7.25% to reflect the low cash flow volatility, good property quality characteristics, and favourable market fundamentals given the location of the collateral properties within their respective markets, which serve as important supply chain links for tenants.

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

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 (December 13, 2024), https://dbrs.morningstar.com/research/444617.

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 Single-Asset/Single-Borrower Ratings Methodology (December 13, 2024), https://dbrs.morningstar.com/research/444612
-- 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 (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

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.