Morningstar DBRS Assigns Credit Rating of A (low), Stable Trend, to the Mortgage Loan Made to 521835:11 Rainbow Arroyo Commons, LLC

DBRS, Inc. (Morningstar DBRS) assigned a credit rating of A (low) with a Stable trend to the 6.39% interest rate Mortgage Loan due July 1, 2038 (the Mortgage Loan), made to 521835:11 Rainbow Arroyo Commons, LLC.

The Mortgage Loan is secured by the leasehold interest in The Arroyo Market Square, an 880,864-square-foot (sf) power center at 6780-7345 Arroyo Crossing Parkway in Las Vegas. The property is just off of Clark County Road 215 and is about four miles from I-15. The collateral has great visibility to people on their Beltway commutes, as retailers draw customers from the southwest and from the Summerlin area. According to the Nevada Department of Transportation, the property had traffic counts of 49,500 vehicles per day (VPD) from Rainbow Boulevard and 201,000 VPD from I-215.

Built in 2007, the property consists of a mix of larger, multitenant buildings and smaller pad sites throughout the almost 88-acre site. The shopping center is anchored by Walmart, Sam's Club, and Home Depot. Based on the rent roll dated March 2024, the property was 96.0% leased to 44 tenants. Morningstar DBRS elected to mark Party City as vacant as the company is winding down operations and closing all of its retail stores, which brought occupancy to 94.7%. The property also benefited from good leasing momentum, with four leases totaling 50,055 sf signed since fall 2023. There is significant rollover risk through 2028, with 26 tenants rolling (58.1% of sf; 52.3% of Morningstar DBRS gross rent). However, the property has benefited from consistent occupancy, including 20 tenants that have been at the property since 2009.

The A (low) credit rating reflects (1) the expected stability of debt payments, given the strong operating history and consistent high occupancy of both the property and submarket; (2) a moderate loan-to-value ratio; and (3) loan amortization that has reduced the loan balance to $49.8 million as of the January 2025 loan payment from the initial loan amount of $73.5 million.

Morningstar DBRS' credit rating on the Mortgage Loan addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Payment of Principal and Interest for the rated Mortgage Loan.

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, Late Payment Charge and Prepayment.

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 Single-Asset/Single-Borrower Ratings Methodology (December 13, 2024), https://dbrs.morningstar.com/research/444612.

Other methodologies referenced in this transaction are listed at the end of this press release.

With regard to due diligence services, Morningstar DBRS was not provided with the Form ABS Due Diligence-15E (Form-15E), which typically contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions.

The credit rating was not initiated at the request of the rated entity. The credit rating was initiated at the request of a third party.

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.

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.

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

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