Morningstar DBRS Confirms All Credit Ratings on BSPRT 2021-FL6 Issuer, Ltd.

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of notes issued by BSPRT 2021-FL6 Issuer, Ltd. (the Issuer) as follows:

-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (high) (sf)
-- Class G Notes at BB (low) (sf)
-- Class H Notes at B (low) (sf)

All trends are Stable.

The credit rating confirmations reflect the increased credit support available to the bonds as a result of successful loan repayments, with collateral reduction of 34.7% since issuance. Additionally, there are 28 loans, representing 58.2% of the current trust balance, secured by multifamily property types, which have historically proven less volatile over time as compared with other property types.

While the paydown and concentration of multifamily loans are positive features of the subject transaction, Morningstar DBRS also notes there is a relatively high concentration of loans where the borrowers are facing increased execution risk with their respective business plans because of a combination of factors, including decreased property values, slower rent growth, and increases in debt service costs stemming from the current elevated interest rate environment. As a result of lagging business plans and a related lack of available loan exit strategies at the respective maturity dates, the borrowers of 30 loans, representing 75.6% of the current trust balance, have received loan modifications. Terms for the modifications vary; however, common terms include maturity extensions and loan assumptions. While the majority of the modifications required deleveraging and/or reserve deposits, Morningstar DBRS notes there remain increased risks for those loans. As such, the analysis for this review generally considered stressed scenarios to increase the loan-level expected losses (ELs), generally reflective of stressed values for the collateral properties or upward probability of default (POD) adjustments based on the level and source of the increased stress. While this approach increased the pool EL by more than a full percentage point from the prior credit rating action's analysis, there was no downward pressure for the credit ratings as the transaction benefits from an unrated first-loss bond of $54.3 million, as well as three below-investment-grade bonds, Class F, Class G, and Class H, totaling $61.3 million, which combine for significant cushion against realized losses should the increased risks for those loans ultimately result in dispositions.

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. For access to this report, please click on the link under Related Documents below or contact us at info-DBRS@morningstar.com.

The pool's collateral initially consisted of 21 floating-rate loans secured by 25 properties with a cut-off pool balance of $446.7 million and a potential maximum pool balance of $700.0 million. The trust featured a 30-month reinvestment period that expired with the September 2023 payment date. As of the January 2025 remittance, the pool comprised 37 loans secured by 65 properties with a cumulative trust balance of $451.3 million. Since Morningstar DBRS' previous credit rating action in March 2024, 14 loans with a prior cumulative trust balance of $144.4 million have been repaid in full.

Leverage across the pool was generally stable as of the January 2025 reporting when compared with issuance metrics. The current weighted-average (WA) as-is appraised loan-to-value ratio (LTV) is 67.4%, with a current WA stabilized LTV of 59.3%. In comparison, these figures were 66.3% and 60.6%, 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 and 2022 and may not reflect the current rising interest rate or widening capitalization rate (cap rate) environment. In the analysis for this review, Morningstar DBRS applied upward LTV adjustments across 15 loans, representing 77.7% of the current trust balance.

As of the January 2025 reporting, four loans, representing 4.0% of the current trust balance, are in special servicing. The largest loan in special servicing, Parc 410, representing 1.8% of the current trust balance, is secured by a 344-unit multifamily property in San Antonio, Texas. The loan transferred to special servicing in November 2024 for maturity default. According to the collateral manager, the loan was modified, extending its maturity to November 2025 with a 12-month extension option through November 2026. The modification also included a $1.0 million principal payment. The loan is expected to return to the master servicer in February 2025. As of the September 2024 rent roll, the property was 78.0% occupied, which reflects a sharp decrease compared with the issuance occupancy of 92.7%. Additionally, the borrower appears to be well behind in its business plan, having completed only 39% of the unit renovations to date. While an updated appraisal has not been received, Morningstar DBRS considered a stressed value of $32.1 million in the analysis for this review, based on a 20% haircut to the issuance appraisal of $40.1 million. The resulting LTV of 103.7% was modeled, as was an increased POD factor to reflect the increased risks associated from a lagging business plan. The resulting EL was approximately 1.5 times (x) the overall pool EL analyzed with this review.

As of the January 2025 remittance, there are 11 loans on the servicer's watchlist, representing 25.7% of the current trust balance. The loans have generally been flagged for upcoming scheduled maturity dates, low occupancy rates, and/or debt service coverage ratios (DSCRs). The largest loan on the servicer's watchlist, Waterford Grove Apartments, is secured by 552-unit, garden-style multifamily property in Houston. The loan matured in May 2024 and was extended to November 2024, with one six-month extension option through May 2025. Additionally, the mezzanine lender foreclosed on the mezzanine loan, replacing the loan sponsor on the trust loan. While occupancy remains stable at 92.1% as of the October 2024 rent roll, the loan reported a DSCR of only 0.54x as of the T-12 financials ending September 2024 as a result of increases in operating expenses. Morningstar DBRS considered a stressed value of $54.0 million in the analysis for this review, based on a 25% haircut to the issuance appraisal of $72.0 million. The implied LTV of 101.2% was modelled, resulting in an EL that was in line with the overall pool EL analyzed with this review.

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 private rating letters 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.
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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 CMBS Multi-Borrower Rating Methodology (December 13, 2024) https://dbrs.morningstar.com/research/444616

-- North American CMBS Insight Model Version 1.2.0.0 (December 13, 2024) https://dbrs.morningstar.com/research/444616

-- 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

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

-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781

-- 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 http://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.