Morningstar DBRS Confirms Credit Ratings on All Classes of BX Commercial Mortgage Trust 2024-MF

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

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction since issuance. While the loan reported a debt service coverage ratio (DSCR) below breakeven for the trailing six months ended June 30, 2024, net cash flow (NCF) remains in line with Morningstar DBRS' expectations as the transaction continues to boast high occupancy rates across the portfolio. Since issuance, one property has been released, resulting in a whole loan reduction of 11.5%.

The collateral consists of the borrower's fee-simple interest in nine class A multifamily properties located throughout Texas, North Carolina, South Carolina, and Florida. All nine properties are highly amenitized and of recent vintage with no property in the portfolio having been built before 2020. All nine properties are in Issuer-described micro-markets that, within a one-mile radius, have seen strong median household incomes and growth in population, jobs, and wages. As of the Q2 2024 financial reporting, the portfolio reported an occupancy rate of 94.5%, in line with issuance levels.

Loan proceeds of $550.0 million along with the sponsor's cash equity of $82.8 million were used to refinance $617.7 million of debt across the portfolio and cover closing costs. The sponsor acquired the portfolio from Davis Development in several transactions between 2021 and 2022 for a total cost of $833.2 million. With an initial maturity date in February 2026, there are three extension options available with a fully extended maturity date in February 2029. The transaction features a minimum release price provision of 105% of the allocated loan amount for the first 30% of principal paydown and 110% thereafter subject to minimum debt yield requirements. One property, Cortland at Stonebriar, was released in August 2024 at a release price of $63.0 million.

The loan was added to the servicer's watchlist in December 2024 for low DSCR, which was reported at 0.80 times according to the financials for the trailing six months ended June 30, 2024. The DSCR fell below breakeven because of the floating-rate nature of the loan, which is mitigated by the in-place interest rate cap agreement. The portfolio's annualized NCF was reported at $33.2 million, which remains in line with Morningstar DBRS' expectations. To aid in leasing up the portfolio, the sponsor had offered concessions on newly signed leases. With the portfolio continuing to report a stabilized occupancy rate, the sponsor will look to grow cash flow by burning off concessions offered to first-generation leases during lease-up while also driving rent growth across the portfolio. Given the high occupancy rate and NCF in line with issuance expectations, Morningstar DBRS' credit opinion of the portfolio remains unchanged from issuance.

In the analysis for this review, Morningstar DBRS updated its NCF to account for the property released in 2024, resulting in a Morningstar DBRS NCF of $31.5 million. Morningstar DBRS maintained its capitalization rate of 6.25%, resulting in a Morningstar DBRS value of $503.5 million for the nine remaining properties in the portfolio (loan-to-value ratio of 96.7%). Morningstar DBRS also maintained positive qualitative adjustments totaling 7.0% to reflect the low cash flow volatility, good property quality, 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 
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), 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.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623

-- 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

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