Morningstar DBRS Confirms Credit Ratings on BMO 2022-C1 Mortgage Trust 360 Rosemary Loan-Specific Certificates

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on the following classes of the 360 Rosemary Loan-Specific Certificates issued by BMO 2022-C1 Mortgage Trust:

-- Class 360A at AA (low) (sf)
-- Class 360X at AA (sf)
-- Class 360B at A (low) (sf)
-- Class 360C at BBB (low) (sf)
-- Class 360D at BB (low) (sf)
-- Class 360E at B (low) (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction, which remains in line with Morningstar DBRS' expectations since issuance, evidenced by stable occupancy rates and cash flows.

The transaction is secured by the fee-simple interest in 360 Rosemary, a newly constructed, Class-A office property in downtown West Palm Beach, Florida. The property includes 291,298 square feet (sf) of office space, 21,704 sf of retail space, and a parking garage. The property`s amenities include panoramic views of Palm Beach Island, outdoor space, and an Equinox-designed fitness center; additionally, the property is near shopping and entertainment attractions. The property benefits from proximity to I-95 and U.S. Route 1, providing access to coastal cities along the east coast of Florida and Palm Beach International Airport. The sponsor, The Related Companies, L.P., a global real estate firm, built the property in 2021 and owns more than 1.4 million sf of office space in West Palm Beach.

The $210.0 million whole loan was used to acquire the property and is composed of seven promissory notes: five senior A notes totaling $85.0 million, a $100.8 million junior B note (the 360 Rosemary Subordinate Companion Loan), and a $24.2 million junior C note. The subject transaction consists of two senior A notes totaling $45.0 million, which are pari passu with the other three senior A notes securitized in two transactions not rated by Morningstar DBRS. The fixed-rate loan has a 10-year loan term with scheduled maturity in February 2032.

As of the September 2024 rent roll, the property was 100.0% occupied, compared with 95.9% at closing. The largest tenants include NewDay USA (16.7% of the net rentable area (NRA), lease expiry in December 2032), Goldman Sachs (14.4% of the NRA, lease expiry in December 2032), and Comvest (12.5% of the NRA, lease expiry in June 2033). Goldman Sachs is an investment-grade tenant, rated A (high) with Stable trend by Morningstar DBRS (confirmed on May 23, 2024). JP Morgan Chase Bank (4.1% of NRA, lease expiry in August 2034), an investment-grade tenant rated AA with Stable trend by Morningstar DBRS (confirmed on December 5, 2024) also moved in as of August 2024, furthering the credit tenant concentration at the property. Tenant rollover risk is negligible, with no leases scheduled to expire in the next 12 months. According to Reis, office properties within the West Palm Beach Downtown submarket reported vacancy and rental rates of 12.5% and $56.78 per square foot (psf) as of Q4 2024, an improvement from 16.6% and $51.32 psf in Q4 2023. The subject continues to outperform comparable properties given the high asset quality and desirable location, as evidenced by its full occupancy and above-average rental rate of $81.66 psf.

According to the most recent financials, the annualized trailing nine-month financials for the period ended September 30, 2024, reported a net cash flow (NCF) of $12.5 million, compared with $12.2 million as of year-end (YE) 2023 and the Morningstar DBRS NCF of $12.4 million derived at issuance. The September 2024 debt service coverage ratio (DSCR) was reported at 1.48 times (x), in line with the YE2023 DSCR of 1.46x.

Morningstar DBRS' previous credit rating action in April 2024 included an update to the collateral's valuation. For more information regarding the approach and analysis conducted, please refer to the press release titled "Morningstar DBRS Takes Rating Actions on North American Single-Asset/Single-Borrower Transactions Backed by Office Properties," published on April 15, 2024. For the purposes of this credit rating action, Morningstar DBRS maintained the valuation approach from the April 2024 review, which was based on a capitalization rate of 7.25% applied to the Morningstar DBRS NCF of $12.4 million. Morningstar DBRS also maintained positive qualitative adjustments to the Loan-to-Value (LTV) Sizing benchmarks totaling 6.75% to reflect the property's minimal rollover, favorable asset quality, and location in a high growth market. The Morningstar DBRS concluded value of $171.1 million represents a -38.9% variance from the issuance-appraised value of $280.0 million and implies an A-note LTV of 49.7% and a whole loan LTV of 122.7%.

The Morningstar DBRS credit rating assigned to Class 360C is higher than the results implied by the LTV sizing benchmarks. This variance is warranted considering the increased occupancy rate, in-line cash flows, and further evidence of loan performance trend sustainability.

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 press releases 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 factor(s) 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.

Class 360X is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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 (February 28, 2025): https://dbrs.morningstar.com/research/448963

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

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 Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025)
https://dbrs.morningstar.com/research/448962

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024)
https://dbrs.morningstar.com/research/439702

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

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024)
https://dbrs.morningstar.com/research/438283

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/417279 (July 17, 2023).

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