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

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-LGCY issued by BX Trust 2021-LGCY:

-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (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 continued stable performance of the underlying collateral since the previous credit rating action in August 2024. The transaction reported a healthy YE2024 net cash flow (NCF) figure of $36.9 million, which is relatively in line with the YE2023 figure and represents an increase of more than 25.0% from the Morningstar DBRS NCF figure of $28.8 million at issuance.

The collateral consists of the borrower's fee-simple interest in 12 Class A/B multifamily properties consisting of 3,030 units across six states, with the largest concentrations in Texas, Florida, and North Carolina. The majority of the underlying properties, built between 1999 and 2014, are in highly desirable markets with strong growth potential based on historical occupancy and rental rate trends. No individual property accounts for more than 15.0% of the portfolio net operating income, and no properties have been released to date. The portfolio continues to benefit from its strong sponsorship in Blackstone Real Estate Income Trust, Inc., stable occupancy, and geographic diversity.

The subject transaction totals $575.0 million and consists of three componentized, floating-rate promissory notes. Loan proceeds and sponsor equity were used to acquire the portfolio and fund closing costs. Individual properties can be released, subject to customary debt yield and loan-to-value (LTV) tests. Prepayment premiums for the release of individual assets are 105.0% of the allocated loan amount (ALA) for the first 30.0% of the original principal balance and 110.0% of the ALA thereafter. The transaction has a partial pro rata structure that allows for pro rata pay downs for the first 30.0% of the original principal balance.

The floating-rate loan had an initial maturity date of October 9, 2023, with three 12-month extension options and is interest only throughout its five-year fully extended loan term. After exercising two of the extension options since issuance, the loan's current maturity date is October 9, 2025, with a final maturity date in October 2026. As a condition to exercising its extension options, the borrower is required to enter into an interest rate cap agreement with a strike rate equal to the greater of 3.5% or a rate that results in a debt service coverage ratio (DSCR) of at least 1.10 times (x).

The collateral portfolio reported a consolidated Q1 2025 occupancy rate of 93.0%, which remains in line with the YE2024 and YE2023 figures of 93.0% and 94.0%, which combined with rental rate growth since issuance, has driven the sustained year-over-year growth in NCF. Per the March 2024 rent rolls, occupancy rates by property range from 90.6% to 96.6%. The DSCR, however, has decreased as a result of the floating rate nature of the loan with the loan reporting a Q1 2025 annualized DSCR of 0.99x, compared with the YE2024 and YE2023 DSCR of 1.02x and 0.96x, respectively, and the Morningstar DBRS DSCR of 2.78x at issuance. The increase in debt service is mitigated by the interest rate cap agreement that remains in place. Notably, the loan is currently on the watchlist as a result of damage incurred by major flooding in January 2025 with repairs scheduled to be completed by January 2026. As a result, Morningstar DBRS expects that occupancy may decline slightly in the near term, but given the strong historical performance of the portfolio, Morningstar DBRS remains optimistic that performance will quickly rebound.

At issuance, Morningstar DBRS derived a value of $443.6 million, based on the Morningstar DBRS NCF of $28.8 million and a capitalization rate of 6.50%, which represents a loan-to-value ratio of 129.6%. In addition, Morningstar DBRS applied qualitative adjustments totaling 6.50% to reflect the portfolio's strong historical occupancy, stable cash flow expectations, property quality, and favorable locations. Although cash flow has improved, Morningstar DBRS has elected to not update its valuation approach given the loan's upcoming maturity.

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, 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 (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 (28 February 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.

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/or 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 (March 27, 2025)
https://dbrs.morningstar.com/research/450750
-- 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.