Morningstar DBRS Confirms Credit Ratings on All Classes of BLP Commercial Mortgage Trust 2024-IND2

DBRS, Inc. (Morningstar DBRS) confirmed the credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2024-IND2 (the Certificates) issued by BLP Commercial Mortgage Trust 2024-IND2 as follows:

--Class A at AAA (sf)
--Class B at AA (low) (sf)
--Class C at A (sf)
--Class D at BBB (low) (sf)
--Class E at BB (high) (sf)
--Class HRR at BB (low) (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction as evidenced by the steady occupancy rate across the portfolio since issuance. The portfolio is predominantly backed by industrial properties and benefits from experienced sponsorship, long-term leases, and geographical and sectoral diversity.

The transaction is collateralized by the borrower's fee-simple interests in a portfolio of 48 cross-collateralized industrial properties totaling 7.1 million square feet. The portfolio is spread across nine states, including Texas, California, Illinois, and 12 markets, including Dallas Fort-Worth; Inland Empire, California; and Chicago. The properties themselves are a mix of bulk distribution, light industrial, shallow bay, industrial service facility (truck terminal) and cold storage properties. Overall, the subject markets have solid fundamentals with positive annual growth in rents while absorbing new supply. At issuance, Morningstar DBRS noted two potential concerns with the low debt service coverage ratio (DSCR), which was 1.08 times (x) at issuance, as well as the high rollover through the loan term. As per the operating statement analysis report (OSAR) for the trailing 12-month period ended September 30, 2024, the DSCR declined very slightly to 1.05x, however, these concerns continue to be mitigated by the experienced sponsorship in Brookfield Properties, the below-market rents, strong markets, and diversification with investment-grade tenancy. In addition, the majority of tenants with lease expiries in 2024 seem to have renewed their respective leases based on the portfolio occupancy rate of 96.0% reported in the September 2024 OSAR.

As of the January 2025 remittance, two of the original 50 properties have been released, contributing to a paydown of the pool balance to $583.5 million from the issuance balance of $615.0 million. Both releases were subject to a 105.0% release premium in accordance with the issuance documents, which stipulate that a 105% release premium be paid for the first 30% of the whole loan balance, and 110% of the allocated loan amount (ALA) thereafter.

The mortgage loan has a partial pro rata/sequential-pay structure, which allows for pro rata paydowns across the Certificates for the first 30.0% of the unpaid principal balance. Morningstar DBRS considers this structure to be credit negative, particularly at the top of the capital stack. Under a partial pro rata paydown structure, deleveraging of the senior notes through the release of individual properties occurs at a slower pace compared with a sequential-pay structure. Morningstar DBRS applied a penalty to the transaction's capital structure to account for the pro rata nature of certain prepayments.

With this review, Morningstar DBRS updated its value and net cash flow (NCF) for the portfolio to account for the two property releases. Morningstar DBRS derived a value of $649.5 million based on the Morningstar DBRS NCF of $44.0 million and a capitalization rate of 6.77%, resulting in a current Morningstar DBRS loan-to-value ratio (LTV) of 89.8% compared with the LTV of 49.3% based on the appraised value at issuance. Positive qualitative adjustments totaling 8.5% were applied to the LTV sizing benchmarks to reflect the portfolio's quality, cash flow volatility, and strong 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
One Environmental factor had a relevant but not significant effect on the credit analysis. The environmental report identified five properties with recognized environmental conditions (RECs). The ALA of these five properties totals approximately 29.5%. The risks associated with the RECs are mitigated by the environmental insurance policy, which has a limit of $10,000,000 per incident, and in the aggregate, which is significantly higher than the estimated costs to remediate, as provided by the third-party environmental consultant.

There were no Social or 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) 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 (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 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.

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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

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024) https://dbrs.morningstar.com/research/439702

-- Legal Criteria for U.S. Structured Finance (December 3, 2024) https://dbrs.morningstar.com/research/444064

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024) https://dbrs.morningstar.com/research/438283

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