Morningstar DBRS Places All Classes of Thunder Logistics 2024-1 DAC Under Review With Negative Implications

DBRS Ratings GmbH (Morningstar DBRS) placed its credit ratings on the following classes of commercial mortgage-backed floating-rate notes due in November 2036 issued by Thunder Logistics 2024-1 DAC (the Issuer) Under Review with Negative Implications (UR-Neg.):

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

CREDIT RATING RATIONALE
The UR-Neg. credit rating actions follow Morningstar DBRS' review of the loan performance as well as the impact of the disposals over the first two quarters of this transaction since its origination in October 2024. The increase in the physical and economic vacancy rates of the portfolio due to tenants terminating their leases raises questions about cash flow stability. This is coupled with the consideration that 29% of the original underlying collateral has been sold as fully occupied magnifying further the decrease in the gross rental income and the increase in the vacancy rate of the remaining pool of properties. Morningstar DBRS expects to receive additional information regarding the sponsor's sales plan and letting strategy before taking any further credit rating actions.

The transaction is a securitization of a EUR 250 million floating-rate commercial real estate loan backed by a pan-European portfolio of 22 big-box logistics properties spread across Spain, France, Germany, and the Netherlands, which are collectively managed by Logicor operating as the asset manager.

The loan is regulated by a common terms agreement (CTA) and is divided into four term facilities, term A to term D. Term A is advanced to the French borrowers, while the remaining three facilities are respectively advanced to the Spanish borrowers, the German and Luxembourg borrowers collectively, and the Dutch borrower (each a borrower and, together, the borrowers). The borrowers are limited-purpose entities established for the purposes of owning and managing the properties and acting as holding companies. They are all ultimately owned and controlled by the sponsor. On 20 August 2024, Goldman Sachs Bank Europe SE and Société Générale, S.A. (the loan sellers) advanced the loan to the borrowers.

On 1 June 2024, CBRE conducted valuations on the 22 properties and appraised their aggregate MV at EUR 381.9 million. CBRE also valued the property portfolio at EUR 398.13 million (the portfolio MV) on the assumption that the assets transact as part of a corporate sale and, as such, incur lower transaction costs. The aggregate MV of the 16 properties remaining in the portfolio was estimated at EUR 271.7 million and at EUR 286.2 million including the premium under the assumption of corporate sale.

As of May 2025 interest payment date (IPD), the loan balance decreased to EUR 178 million from EUR 250 million at issuance, due to disposal proceeds applied as partial prepayment of the loan. Funds came from the disposal of six properties sold in 2025 so far. Up to the May 2025 IPD, the borrowers prepaid a total of EUR 71.3 million disposal proceeds, equivalent to 28.9% of the initial whole loan amount, towards the loan. The loan proceeds were applied on a pro rata basis towards the Notes. A prepayment fee/make whole was also collected in the amount of EUR 23,433 for the January 2025 disposal and EUR 118,328 for the May 2025 disposal and distributed pro rata towards the Notes. Consequently, as of the May 2025 IPD, the number of properties remaining in the portfolio decreased to 16 from 22 at origination. Of the 16 properties, eight assets are in France (50.7% of the MV), five in Spain (22.1% of the MV), two in Germany (14.9% of the MV), and one in the Netherlands (12.3% of the MV).

The annual rental income of the portfolio was EUR 13.9 million as of May 2025 IPD, down from EUR 19.47 million at issuance. This decrease was mainly driven by property disposals. Additionally, the debt yield (DY) declined to 6.56% in May 2025 from 7.40% at issuance. The weighted-average (WA) unexpired lease term slightly decreased to 4.0 years from 4.4 years. Subsequently, the loan-to-value ratio (LTV) stood at 62.4% in May 2025, slightly down from 62.8% at issuance.

The servicer reported a vacancy rate of 23.7% as of the May 2025 IPD, up from 20.0% at the first IPD in February 2025 and from 19.2% at the cut-off date. Morningstar DBRS notes that the inclusion of expired leases reported by the servicer as of the May 2025 IPD would trigger a further increase in the vacancy level and drop in the projected rental contributions.

The loan is interest only and is structured with a five-year fixed loan term. The loan margin reflects the margin payable on the Notes at each IPD (excluding the Class A liquidity reserve portion of the Class A notes). On the closing date, the loan margin was set at 2.42% per annum (p.a.). However, this margin is subject to a contractual cap (the loan margin cap), which is set at 3.25% p.a. or 4.25% p.a. during a servicer extension period.

HSBC Bank plc provided hedging on the notional amount of not less than 95.0% of the outstanding principal amount of the loan with a strike rate at 4.0% p.a. The level of hedging required is to ensure a hedged interest cover ratio (ICR) of not less than 1.25 times. Per the CTA, failure to comply with any of the required hedging conditions outlined above constitutes a loan event of default.

The loan features cash trap covenants based on the DY and LTV. A cash trap event will occur if (1) the loan's LTV is greater than 72.79% and/or (2) the loan's DY is less than 6.20%. The loan does not feature any financial default covenants prior to the occurrence of a permitted change of control (COC). After the occurrence of a permitted COC, at each IPD, the borrowers must ensure that the loan's LTV does not exceed the lower of the LTV at the date of the permitted COC + 15% (on an absolute basis) or 80%. The DY, instead, must not fall below 85% of the DY on the date of occurrence of the permitted COC.

The sponsor can dispose of any assets securing the loan by repaying a release price of 100% of the allocated loan amount (ALA) up to the first-release price threshold (i.e., no release premium), which is 10% of the initial portfolio valuation. Once the first-release price threshold is met, the release price will be 105% of the ALA up to the second-release price threshold, which is 20% of the initial portfolio valuation. The release price will be 110% of the ALA thereafter. On or after the occurrence of a permitted COC, the release price applicable on the disposal of a property will be 115% of the ALA of that property. The WA release premium applied in prepayment of the loan so far was 105%.

The Class E notes are subject to an available funds cap where the shortfall is attributable to an increase on the WA margin payable on the Notes (however arising) or to a final recovery determination of the loan.

Morningstar DBRS will review its underwriting assumptions focusing on the cash flow assumptions and the timing of the business plan execution and its assessment of the long term stabilised capitalization rate.

On the closing date, the Issuer acquired the whole interest in the loan pursuant to the loan sale documents. For the purpose of satisfying the applicable risk retention requirements, the Issuer lenders advanced a EUR 13.1 million loan (the Issuer loan) to the Issuer. As of May 2025, the issuer loan balance stood at EUR 9.4 million. The proceeds of the issuance of the notes were used by the Issuer, together with the amount borrowed under the Issuer loan, to acquire the loan from the loan sellers. At origination, a portion of the proceeds of the issuance of the class A notes in an amount equal to EUR 11.4 million together with EUR 0.6 million of the amount drawn under the Issuer loan were used to fund a EUR 12.0 million liquidity reserve to provide liquidity support to the interest payments to the Class A and Class B notes.

As of the May 2025 IPD, the liquidity reserve amounts to EUR 9.5 million, down from EUR 12.0 million at issuance. Morningstar DBRS estimates that the issuer liquidity reserve covers approximately 20 months of interest payments on the covered notes, based on a cap strike rate of 4.0% and a Euribor cap of 4.0% after the Notes' expected maturity date.

The loan matures on 15 November 2029, which is approximately five years after the utilization date. There are no extension options. The final legal maturity of the Notes is 17 November 2036, seven years after the loan maturity date. Morningstar DBRS believes that, if necessary, this would provide sufficient time to enforce on the loan collateral and ultimately repay the noteholders, given the security structure and the relevant jurisdictions involved in this transaction.

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.

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 at https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit ratings is: European CMBS Rating and Surveillance Methodology (24 June 2025), https://dbrs.morningstar.com/research/456815.

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

Morningstar DBRS is undertaking a review and will remove the credit rating from this status as soon as it is appropriate.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to "Appendix C: The Impact of Sovereign Credit Ratings on Other Morningstar DBRS Credit Ratings" of the "Global Methodology for Rating Sovereign Governments" at: https://dbrs.morningstar.com/research/457952

The sources of data and information used for these credit ratings include quarterly reports prepared by CBRE and U.S. Bank in May 2025.

Morningstar DBRS did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit rating, Morningstar DBRS was not supplied with third-party assessments. However, this did not affect the credit rating analysis.

Morningstar DBRS considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

Morningstar DBRS does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 28 October 2024 when Morningstar DBRS finalised its provisional credit ratings on the following classes of notes: (1) Class A at AAA (sf), (2) Class B at AA (sf), (3) Class C at A (low) (sf), (4) Class D at BBB (low) (sf), and (5) Class E at BB (low) (sf). All trends were Stable.

The lead analyst responsibilities for this transaction have been transferred to Patrizia Catanese.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com.

These credit ratings are Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Patrizia Catanese, Assistant Vice President
Rating Committee Chair: David Lautier, Senior Vice President
Initial Rating Date: 27 September 2024

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

-- European CMBS Rating and Surveillance Methodology (24 June 2025), https://dbrs.morningstar.com/research/456815
-- Interest Rate Stresses for European Structured Finance Transactions (24 September 2024), https://dbrs.morningstar.com/research/439913
-- Legal and Derivative Criteria for European Structured Finance Transactions (19 November 2024), https://dbrs.morningstar.com/research/443196
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (16 May 2025), https://dbrs.morningstar.com/research/454196

A description of how Morningstar DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/439604

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