Morningstar DBRS Upgrades Credit Ratings on Four Classes of LIFE 2021-BMR Mortgage Trust

DBRS, Inc. (Morningstar DBRS) upgraded its credit ratings on four classes of Commercial Mortgage Pass-Through Certificates, Series 2021-BMR issued by LIFE 2021-BMR Mortgage Trust:

-- Class B to AAA (sf) from AA (sf)
-- Class C to AAA (sf) from A (high) (sf)
-- Class D to AA (high) (sf) from A (low) (sf)
-- Class E to A (low) (sf) from BBB (low) (sf)

Morningstar DBRS also confirmed its credit ratings on the following classes:

-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The credit rating upgrades throughout the top of the capital structure are reflective of the significant collateral reduction as seven properties were released resulting in a total paydown of $1.3 billion since Morningstar DBRS' previous credit ratings action in April 2024. Overall, the transaction has paid down by 65.5% since issuance. Additionally, occupancy has remained stable throughout the loan term as the remaining eight properties reported a consolidated figure of 92.0% per the September 2024 rent roll.

At issuance, the transaction was secured by a portfolio of 17 properties totalling approximately 2.4 million square feet (sf) of Class A office and laboratory space in the most prominent life-sciences hubs: Cambridge, Massachusetts; San Diego; and San Francisco. Since issuance, nine properties, totalling 57.1% of net rentable area (NRA; 1.35 million sf), have been released from the portfolio. The $2.0 billion underlying loan is interest only and is structured with a floating rate, with an interest rate cap of 3.5%. The loan had a partial pro rata structure that allows for paydowns on the first 30.0% of the principal balance and switched to a sequential pay structure for the remaining balance. The loan had an initial maturity in March 2023 with three one-year extension options. To date, the borrower has exercised two of the extension options extending loan maturity to March 2025.

The loan is currently being monitored on the servicer's watchlist for the March 2025 maturity; however, according to the most recent servicer commentary, the borrower submitted a request to exercise its third and final extension option, extending loan maturity to March 2026. While there are no performance tests related to the extension, the borrower is required to purchase a new interest rate cap agreement with a strike rate of 4.0%.

According to the September 2024 rent roll, the portfolio across the eight remaining properties was 92.0% occupied, which remains in line with issuance expectations. However, tenant rollover is 43.4% of NRA by YE2027. Per the September 2024 rent roll, annual base rent for the remaining eight properties is $59.0 million, which marks an increase over the Morningstar DBRS derived base rent at issuance of $48.6 million. Additionally, since the issuance of the rent roll, two tenants had lease expiration dates. The larger of the two tenants, The Broad Institute, Inc (9.8% of total NRA) appears to have vacated at its lease expiration date in January 2025 as the location is no longer listed on the company website. The tenant's departure would result in a consolidated occupancy rate of 82.2% for the portfolio. The total base rent would decrease by only 8.2% and would remain higher than the Morningstar DBRS figure derived at issuance. Therefore, Morningstar DBRS believes performance will remain strong considering the three life-sciences hubs where the collateral properties are located, particularly Cambridge, will continue to benefit from low vacancy rates and high barriers to entry.

In the analysis for this review, Morningstar DBRS updated its NCF to account for the properties released in 2024, resulting in a Morningstar DBRS net cash flow (NCF) of $48.0 million. Morningstar DBRS maintained its capitalization rate of 6.76%, resulting in a Morningstar DBRS value of $710.6 million for the eight remaining properties in the portfolio (loan-to-value ratio (LTV) of 100.3%). Morningstar DBRS also maintained positive qualitative adjustments totaling 8.5% to reflect the low cash flow volatility, good property quality, and strong market fundamentals.

The Morningstar DBRS credit ratings assigned to Classes E and F are lower than the results implied by the LTV sizing benchmarks by three or more notches. Given the upcoming tenant rollover as the loan approaches maturity and post-maturity and mitigated positive pressure from a Morningstar DBRS stressed scenario, the variances are warranted.

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 credit 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 (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 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, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

-- 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

-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024):
https://dbrs.morningstar.com/research/428623

-- 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.