Morningstar DBRS Assigns Credit Rating of "A," Stable Trend, to the Mortgage Loan Made to 527372:11 Beverly Wilshire Investment Company, LLC

DBRS, Inc. (Morningstar DBRS) assigned a credit rating of "A" with a Stable trend to the 3.67% interest rate Mortgage Loan due April 1, 2031 (the Mortgage Loan), made to 527372:11 Beverly Wilshire Investment Company, LLC.

The Mortgage Loan is secured by a 12-story, 166,971-square-foot (sf) office property on Wilshire Boulevard in Beverly Hills, California. Wilshire Boulevard connects Santa Monica to the Los Angeles central business district, which is approximately nine miles from the property. The property is on the southern edge of the Golden Triangle, a popular area filled with shopping, restaurants, and hotels, and is less than three miles away from I-10 and I-405, which provide easy access to the broader Los Angeles metropolitan statistical area.

Built in 1968, the property features limited amenities but appears well maintained. As of the rent roll dated July 2024, the property was 95.7% occupied with 72 tenants. While the property benefits from a diverse rent roll, tenants representing 37.3% of square footage are on month-to-month leases. Additionally, there is significant rollover risk through 2028, with 19 tenants rolling (31.1% of net rentable area, 43.8% of Morningstar DBRS gross rent). However, the property has benefited from consistent occupancy, averaging approximately 95.0% over the past 10 years.

According to Reis, the property is in the Beverly Hills submarket, which exhibited a vacancy rate of 15.9% and asking rental rate of $60.16 per sf (psf) as of Q3 2024. Reis anticipates that the submarket's vacancy rate will drop to 10.3% by 2027, which was the submarket's vacancy rate in 2019. Because of the property's location, small floorplates, and sponsorship, the property has historically achieved occupancy rates higher than those in the submarket. While there is stress in the greater Los Angeles office market sector following the COVID-19 pandemic with companies reassessing their office footprints, recent office trades within the Beverly Hills office sector indicate that the loan is lowly leveraged relative to recent office trades on a psf basis.

The A credit rating reflects (1) the expected stability of debt payments, given the strong operating history and consistent cash flow generated by the property; (2) a moderate loan-to-value ratio; and (3) the property's convenient location in a highly trafficked area of Beverly Hills.

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 documents 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.