Morningstar DBRS Confirms Credit Ratings on All Classes of BX Trust 2021-SDMF

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2021-SDMF issued by BX Trust 2021-SDMF as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the subject portfolio, which remains in line with Morningstar DBRS' expectations, as exhibited by the strong collateral occupancy rate and annual rental rate growth. The underlying loan was originally secured by the borrower's fee-simple interest in 32 Class B and Class C multifamily properties in submarkets across San Diego. All but one of the properties are traditional, garden-style apartment complexes and one is an age-restricted property that consists of 130 units and accounted for 2.2% of the allocated loan amount (ALA) at issuance. Two of the original properties have been released, as further described below. The loan has experienced sponsorship in Blackstone Real Estate Partners IX L.P. and TruAmerica Multifamily LLC.

The two-year, floating rate, interest-only (IO) loan had an initial maturity date in September 2023, and three one-year extensions with a final extended maturity of September 2026. The borrower is required to purchase an interest rate cap agreement with each extension. According to the servicer, the borrower has yet to indicate plans to exercise their remaining extension.

The transaction has a partial pro rata structure allowing for pro rata paydowns for the first 30% of the principal balance. Individual property releases are subject to a release price of 105% of the ALA for the first $240 million principal balance, with the release price increasing to 110% thereafter. Two properties have been released since issuance in Vista Lane Apartments (3.0% of the ALA at issuance), and Mesa Ridge Apartments (1.7% of the ALA at issuance), resulting in a total pro rata paydown of $46.5 million and includes the release premium and spread maintenance premium amounts.

According to the servicer provided financial reporting, the YE2024 consolidated occupancy rate at the subject portfolio was 91.5%, compared to the issuance figure of 98.6%. Despite the slight decline in occupancy rate, the portfolio generated a net cash flow (NCF) of $46.0 million, which is a 23.8% increase from the Morningstar DBRS NCF at issuance after removing the released properties. The loan reported a below break-even debt service coverage ratio (DSCR) of 0.71 times (x) at YE2024 based on the floating interest rate debt service; however, there is an interest rate cap agreement in place, which results in a DSCR of 1.10x.

When removing the cash flows for the two released properties, the Morningstar DBRS NCF is $37.1 million. Based on the issuance capitalization rate of 6.0%, the updated Morningstar DBRS Value for the portfolio is $618.8 million, resulting in an implied loan-to-value (LTV) ratio of 121.8%. Morningstar DBRS utilized the updated value in the LTV Sizing for this review, maintaining the issuance qualitative adjustments totaling 7.5%, with the resulting LTV sizing benchmarks supporting the credit rating confirmations. The qualitative adjustments reflect the portfolio's location in the San Diego multifamily market, which benefits from relatively limited supply that has resulted in historically low vacancy rates.

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 at https://dbrs.morningstar.com/research/454196 (May 16, 2025).

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 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.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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 600
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
-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025),
https://dbrs.morningstar.com/research/450750

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.