Morningstar DBRS Assigns Credit Rating of A (high), Stable Trend, to Mortgage Loan Made to 527805:51 Regent Garden Associates, LLC

DBRS, Inc. (Morningstar DBRS) assigned a credit rating of A (high) with a Stable trend to the 3.25% interest rate Mortgage Loan due April 10, 2035 (the Mortgage Loan), made to 527805:51 Regent Garden Associates, LLC.

The Mortgage Loan is secured by a six-building apartment complex totaling 560 units in San Diego's University City neighborhood. The property is just off of I-5 with close proximity to the University of California San Diego (UC San Diego) and La Jolla. As a result of its proximity to UC San Diego, the property's tenant roster has a significant concentration of students. According to preliminary figures released by the University of California system in October 2024, UC San Diego saw fall 2024 enrollment increase by 1,900 students, increasing its total head count to a record 45,723 students.

Built in 1989, the property features 100 one-bedroom (BR)/one-bathroom (BA) units, 398 2BR/2BA units, and 62 3BR/2BA units. Common area amenities include a clubhouse, meeting rooms, a business center, a barbecue grill and picnic area, a fitness center, a playground, a racquetball court, a spa and a lap pool, and electric vehicle charging stations. Per the March 2024 rent roll, the property was 97.9% occupied with average rent of $3,474 per unit.

The A (high) credit rating reflects (1) the expected stability of debt payments, given the strong operating history and consistent high occupancy of both the subject property and the submarket; (2) a moderate loan-to-value ratio; (3) the property's convenient location adjacent to UC San Diego; and (4) loan amortization that has reduced the loan balance to $112.4 million as of the January 2025 loan payment from the initial loan amount of $125.0 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.