Morningstar DBRS Confirms Credit Ratings on All Classes of COMM 2021-2400 Mortgage Trust

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2021-2400, issued by COMM 2021-2400 Mortgage Trust, as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction since last review, which remains in line with Morningstar DBRS' expectations since issuance. For the past three years, occupancy has remained above 98%, with cash flows correspondingly consistent since closing in 2021. The floating rate structure has resulted in lower debt service coverage ratios (DSCRs), with the servicer most recently reporting a DSCR of 0.85 times (x) as of Q3 2024, generally flat from the DSCR of 0.87x reported for YE2023. There is an interest rate cap with a strike rate of 2.0% in place, and in December 2023, the loan was paid down by approximately $14.6 million, applied to the Class A certificate balance. Morningstar DBRS does not rate the Class HRR or Class G certificates, which combine for $45.5 million of the total remaining transaction balance of $205.4 million.

The collateral for the underlying loan consists of a 592,476-square-foot (sf) Class A office and retail building in Philadelphia. In 2019, the sponsors converted the property from warehouse use at a cost of $235.0 million and secured a lease with Aramark Corporation (Aramark) to relocate its headquarters to the property. The subject loan had a balance of $220.0 million at issuance and refinanced existing debt for the sponsor, who contributed $1.8 million to close. The property consists of 502,486 sf of office space, 80,392 sf of retail space, and 9,598 sf of storage space. The two-year floating-rate loan pays interest only and had three one-year extension options at issuance, with a fully extended maturity date in December 2026. The extension options are exercisable subject to the borrower's extension of the interest rate cap agreement and a minimum debt yield of 7.25%.

Per the September 2024 financial statement, the loan reported an annualized Q3 2024 net cash flow (NCF) of $15.0 million, which remains in line with the YE2023 and YE2022 reported figures of $14.9 million and $14.4 million, respectively, and an improvement over the Morningstar DBRS NCF derived at issuance of $12.5 million. Per the January 2025 rent roll, the property is 99.0%, generally flat from 2023 and 2022. The property's two largest tenants, Aramark Services, Inc. (49.5% of net rentable area (NRA)) and Fitler Club, LLC (13.4% of NRA), are on long-term leases with expiration dates in October 2034 and July 2036, respectively. The second-largest tenant occupies the commercial space at the property and operates a private club that offers coworking space, as well as a gym and indoor pool and socializing space for members.

There are no tenants with lease expirations in the next 12 months, and scheduled rollover is minimal through the fully extended loan term. However, there are three tenants (4.2% of NRA) listed in the January 2025 rent roll that had lease expirations in 2024. These factors, along with the generally healthy submarket, should contribute to stable cash flows through the remainder of the loan term. According to Reis, the Center City Submarket had a Q4 2024 vacancy rate of 13.6%, which is a decrease from the Q4 2023 figure of 14.6%. Reis projects the submarket will continue to improve, with a vacancy rate of 11.8% forecast in 2030.

Morningstar DBRS updated the LTV Sizing to reflect the $14.6 million paydown in December 2023, maintaining the Morningstar DBRS Value derived as part of the April 2024 credit rating action of $166.2 million. A capitalization (cap) rate of 7.5%, up from the cap rate of 6.75% used at issuance, was applied to the Morningstar DBRS NCF of $12.5 million. The Morningstar DBRS Value represents a -47.6% variance from the issuance appraised value of $317.3 million and results in a Morningstar DBRS Loan-to-Value Ratio (LTV) of 123.6% on the total debt amount (96.2% on the Morningstar DBRS credit rated portion of the capital stack), compared with the LTV of 64.7% based on the issuance appraisal and the total loan balance. Morningstar DBRS maintained positive qualitative adjustments totaling 3.5% to reflect the portfolio's generally low cash flow volatility and recent renovations. The property upgrades completed in the years prior to the subject loan's closing combine with the favorable waterfront location on the Schuylkill River to draw tenants seeking robust amenity packages and higher-end finishes.

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, or 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
 
Class X-EXT 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 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

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
-- 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.