Morningstar DBRS Confirms Credit Ratings on All Classes of MF1 2021-FL5, Ltd.

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of notes issued by MF1 2021-FL5, Ltd. as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the underlying loans. The pool benefits from its 100% concentration in multifamily property types. At the prior credit rating action in May 2025, Morningstar DBRS upgraded the credit ratings for Classes C through G, largely as a result of the significant collateral reduction of 54.3% since issuance. Although most individual borrowers are progressing in their stated business plans as expected, some efforts have lagged for a variety of factors, including increased construction costs, slowed rent growth, and increased debt service costs. While these exposures are noteworthy, Morningstar DBRS notes the transaction continues to benefit from a large first-loss piece balance of $86.3 million that remains above the Morningstar DBRS expected loss figure for the transaction. Furthermore, there is an additional $89.4 million in below-investment-grade rated bonds, Classes F and G. As of June 2025, four loans, representing 19.5% of the current pool balance, have transferred to the special servicer for maturity default. Morningstar DBRS analyzed all four loans with liquidation scenarios that considered haircuts ranging from 20% to 40% to the latest appraised values. The resulting implied liquidated losses totaled $15.7 million. 

In conjunction with this press release, Morningstar DBRS published a Surveillance Performance Update report with in-depth analysis and credit metrics for the transaction and with business plan updates on select loans. For access to this report, please click on the link under Related Documents below or contact us at info-DBRS@morningstar.com.

The transaction closed in March 2021 with an initial collateral pool of 35 floating-rate mortgage loans secured by 49 multifamily properties and five senior housing properties totaling $1.2 billion, excluding $298.0 million of future funding commitments and $599.1 million of pari passu debt. The transaction was also structured with a Replenishment Period that expired with the March 2024 Payment Date. Since issuance, 24 loans with cumulative trust balance of $793.5 million have repaid in full. As of the June 2025 remittance, the pool comprised 11 loans secured by 25 properties with a cumulative trust balance of $496.0 million. Most of the loans are in a period of transition with plans to stabilize operations and performance and ultimately improve asset value.

The loans are primarily secured by properties in suburban markets with five loans, representing 35.8% of the current trust balance, in locations with Morningstar DBRS Market Ranks of 3, 4, and 5. An additional five loans, representing 51.4% of the pool, are secured by properties in urban markets, with a Morningstar DBRS Market Rank of 6, 7, and 8; and one loan, representing 12.8% of the pool, is secured by properties in tertiary markets, as defined by Morningstar DBRS, with a Morningstar DBRS Market Rank of 2. Morningstar DBRS recognizes that select property values may be inflated as the majority of the individual property appraisals were completed in 2021 and may not reflect the current environment of rising interest rates or widening capitalization rates faced by borrowers and lenders. In the analysis for this review, Morningstar DBRS applied upward loan-to-value ratio (LTV) adjustments across all remaining loans with the resting adjusting LTV above 100.0%, suggesting the borrowers may need to contribute fresh equity to refinance the existing debt or execute a loan modification.

Through June 2025, the lender advanced a cumulative $27.5 million in loan future funding allocated to seven individual borrowers to aid in property stabilization efforts. The largest advance, $9.4 million, was made to the borrower of the LA Multifamily Portfolio II loan, which is secured by nine properties in the West Los Angeles area. The funds were advanced to complete unit interior and property exterior upgrades across the portfolio. To date, the borrower has completed renovations across 91 units while an additional eight units are under renovation. As per the collateral report for Q1 2025, the consolidated occupancy rate across the portfolio was 86.8% as of March 2025. The average rental rate across the portfolio is 27.1% higher than the average rental rate at the time of closing. An additional $67.0 million of loan future funding allocated to eight individual borrowers remains available. The largest unadvanced portion of $32.6 million is allocated to the borrower of the aforementioned LA Multifamily Portfolio II loan. In addition to this loan, Morningstar DBRS identified a number of loans that are lagging in their original business plans; Morningstar DBRS applied upward cap rate adjustments to these loans, resulting in elevated LTVs; however, the analyzed property value shortfall is contained to below-investment-grade classes and the unrated first loss piece.

All of the outstanding loans are scheduled to mature by January 2027; however, almost all of the loans have remaining extension options. As the terms for those modifications may not be achievable, Morningstar DBRS expects the collateral manager will continue to work with those affected sponsors to negotiate loan modifications to address those issues, with borrowers typically being required to inject additional capital as part of the terms. As of June 2025, six loans, representing 68.4% of the current trust balance, are being monitored on the servicer's watchlist; these loans are primarily flagged for performance-related concerns as the borrowers execute their business plans. Occupancy rates and cash flow may remain depressed at select properties as the borrowers work toward property stabilization. Of the watchlisted loans, Morningstar DBRS is most concerned about the CA Ventures loan (Prospectus ID#7, 11.7% of the current pool balance), which is secured by a portfolio of three assisted-living and memory-care properties. The loan is discussed in detail within the Surveillance Performance Update report.

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

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.

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 17g-7 disclosure report and the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS Limited
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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 CMBS Multi-Borrower Rating Methodology (April 9, 2025)/North American CMBS Insight Model v 1.3.0.0: https://dbrs.morningstar.com/research/451739

-- 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.