Morningstar DBRS Confirms Credit Ratings on All Classes of A10 Bridge Asset Financing 2021-D, LLC

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the following classes of notes issued by A10 Bridge Asset Financing 2021-D, LLC:

-- Class A-1 FL at AAA (sf)
-- Class A-1 FX at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class F at BB (sf)
-- Class G at B (sf)

Morningstar DBRS also changed the trends on Classes B and C to Positive from Stable. All other trends remain Stable.

The credit rating confirmations and trend changes reflect the increased collateral reduction to the transaction, which, as of the February 2025 reporting, totaled 58.2% since closing with an additional 24.6% in collateral reduction realized since the previous Morningstar DBRS credit rating action in April 2024. While two loans, representing 11.6% of the current trust balance, remain in special servicing and are real estate owned (REO), the cumulative liquidated losses concluded by Morningstar DBRS in its current analysis are contained to the unrated $25.2 million equity bond. Additionally, while the majority of the eight other remaining borrowers are behind in the respective business plans, the current credit ratings mitigate the increased execution and credit risk. As of February 2025, the below-investment-grade rated bonds, Class F and Class G, have balances of $18.6 million and $12.9 million, respectively.

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.

As of the February 2025 remittance, the trust reported an outstanding balance of $128.7 million across the ten loans. The transaction benefits from overcollateralization as the outstanding cumulative bond balance is $135.7 million. Since the previous Morningstar DBRS credit rating action, five loans were paid in full, totaling $79.2 million, including one former specially serviced loan ($22.9 million), which resolved with no loss to the trust. The trust is concentrated by loans secured by office (three loans representing 37.7% of the current trust balance), multifamily (three loans representing 31.4% of the current trust balance), and student housing (two loans representing 20.6% of the current trust balance) collateral. The remaining two loans are secured by a retail and mixed-use property.

The largest loan in the transaction, 333 & 350 Palm (Prospectus ID#6; 17.2% of the current trust balance), is secured by two multifamily properties in the Beverly Hills neighborhood of Los Angeles, totaling 48 units. The borrower's business plan at loan closing was to buy all existing tenants out of their respective leases and convert the properties to Class A product. The first phase of the business plan was delayed by the eviction moratorium during the coronavirus pandemic as well as the elongated permitting process with the City of Beverly Hills. According to the Q2 2024 update from the collateral manager, all tenants at both properties have been relocated. In terms of capital expenditure (capex) progress, 55.0% of the allocated funds for the 350 Palm property had been advanced while the borrower continues to finalize permits for the 333 Palm property.

At loan closing, $9.2 million in loan future funding was available to finance the majority of the tenant buy-out program and capex program. As of January 2025, $1.8 million of future funding remained available to the borrower, which is expected to be used towards property upgrades. Given the elongated business plan timeline, Morningstar DBRS expects that construction costs have risen, which will be fully paid by the borrower. As the loan does not mature until October 2026 and there are two, one-year extension options, Morningstar DBRS expects the borrower to be able to complete its business plan prior to loan maturity. The senior loan balance is $36.6 million and while the collateral value has likely fallen from the July 2021 valuation of $39.0 million given the negative cash flow, the sponsor remains committed to the property and the loan remains current. Morningstar DBRS notes the borrower may be challenged in achieving the originally projected stabilized property value of $65.3 million because of the expansion of cap rates for multifamily collateral; however, the overall credit risk of the loan remains moderate given the desirable location and projected improvement in asset quality following the planned renovations.

The larger of the two loans in special servicing, Two Vantage Way (Prospectus ID#20; 8.1% of the current trust balance), is secured by a 1975-vintage, Class B office building in the Metrocenter neighborhood of downtown Nashville, Tennessee. The loan transferred to the special servicer in December 2023 for delinquency and the asset become REO in September 2024. The borrower's business plan to use up to $8.3 million of future funding across senior and junior financing to stabilize occupancy and increase cash flow did not come to fruition. According to the most recent update from the collateral manager, the property was 18.0% occupied by three tenants and generated negative cash flow at YE2024. In terms of leverage, the entire debt exposure is $16.3 million with senior debt of $12.1 million and junior debt of $4.1 million. The property was most recently appraised in November 2024 at a value of $11.9 million, down from $13.2 million in August 2023 and $16.5 million at closing.

The collateral's highest and best value may involve a conversion to a mixed-use property; however, any property conversion would require a zoning approval change, complicating the resolution strategy and timeline. According to the collateral manager's Q3 2024 update, in July 2024, the former borrower made a discounted payoff offer in an amount slightly above the updated November 2024 appraised value of $11.9 million. While the offer never materialized, the amount suggests the trust may only realize a minor loss, if any, upon ultimate resolution. In its current liquidation analysis, Morningstar DBRS concluded the entire junior debt is eroded and the trust loan realized a loss severity of less than 10.0%.

The other specially serviced loan, Colonial Landing (Prospectus ID#26; 2.9% of the current trust balance), is secured by a Class C, 92-unit multifamily property in Hampton, Virginia. The loan transferred to the special servicer in October 2022 for delinquency and the asset became REO in December 2024. The property was under contract to be sold in Q3 2023 at a price of $5.9 million; however, the potential buyer's lender withdrew the financing after the City of Hampton deemed the collateral to be unsafe and posted notices on all buildings. The buyer continued to make deposits related to the purchase totaling $1.1 million, which is held in reserve; however, the buyer has requested the return of the deposits and, according to the collateral manager, litigation to recover all amounts remains ongoing.

The collateral is currently 100.0% vacant with an entire debt exposure of $6.0 million: $5.4 million of senior debt and $0.6 million of junior debt. The property was most recently appraised in April 2024 at a value of $5.9 million compared with $6.6 million in May 2023 and $6.3 million at closing. The April 2024 appraisal noted, however, that the prospective buyer planned to invest $1.4 million into the property to address deferred maintenance, bring 12 units back online, and upgrade the remaining 80 units. As such, in its current liquidation analysis, Morningstar DBRS applied a 25% haircut to the April 2024 property value, which resulted in a whole loan loss severity in excess of 20.0% and a trust loan loss severity of approximately 10.0%.

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 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 ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

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/ and North American CMBS Insight Model Version 1.2.0.0, https://dbrs.morningstar.com/research/428797
-- 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
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/410863.

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