Morningstar DBRS Upgrades Credit Rating on One Class of BSPDF 2021-FL1 Issuer, Ltd.

DBRS, Inc. (Morningstar DBRS) upgraded its credit rating on one class of notes issued by BSPDF 2021-FL1 Issuer, Ltd. as follows:

-- Class B to AAA (sf) from AA (sf)

Morningstar DBRS also confirmed its credit ratings on all remaining classes of notes as follows:

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

All trends are Stable.

The credit rating upgrade reflects the increased credit support to the bonds as a result of successful loan repayment. Morningstar DBRS previously reviewed the transaction in May 2025, which resulted in upgrades to the Class B through Class H Notes, stemming from increased collateral reduction totaling 50.5% since issuance. Since then, six additional loans totaling $99.1 million have repaid in full, resulting in overall collateral reduction of 63.8% as of the July 2025 reporting.

In its previous review, Morningstar DBRS noted its concern of increased credit risk to the transaction related to the concentration of loans secured by office properties, which have largely been unable to materially increase property occupancy rates and cash flows, with loans exhibiting increased credit risk from closing. While select borrowers remain behind in their respective business plans, the credit ratings reflect the outstanding credit risks, and the increased subordination to the notes supports the credit rating confirmations. As of July 2025, the unrated, first-loss piece has a balance of $68.8 million and the below investment-grade rated bonds, Class G and Class H, have balances of $13.6 million and $28.1 million, respectively.

In conjunction with this press release, Morningstar DBRS has 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.

As of the July 2025 remittance, the trust reported an outstanding balance of $280.9 million with eight loans remaining in the trust. Of the original 21 loans in the transaction at closing in October 2021, six loans, representing 80.5% of the current pool balance, remain in the trust. The trust is concentrated by loans secured by office properties (three loans representing 54.7% of the current trust balance) and multifamily properties (four loans representing 37.7% of the current trust balance) collateral. The remaining loan is secured by an industrial property.

As of the July 2025 reporting, there are no loans in special servicing; however, three loans, representing 47.2% of the current trust balance, are on the servicer's watchlist and have been flagged for low occupancy rates and low property cash flow. The largest loan on the servicer's watchlist, 345 Seventh Avenue (Prospectus ID#1, 24.9% of the current trust balance), is secured by an office property in Midtown Manhattan. In January 2025, the property was purchased and the loan was assumed by Kohan Retail Investment Group. As part of the assumption, the senior loan was modified and the new sponsor paid the loan down by $5.0 million at closing along with a subsequent principal payment of $2.0 million in February 2025. The senior loan has a balance of $71.4 million and matures in January 2026, followed by a four-year extension option, subject to an additional $8.8 million principal curtailment.

The former borrower's business plan was to complete upgrades across the lobby and tenant amenities and to stabilize occupancy. While the upgrades have been completed, occupancy remains low at 42.0% as of the March 2025 rent roll with the trailing 12 months (T-12) ended March 31, 2025, net cash flow (NCF) at $1.5 million, equating to a debt service coverage ratio (DSCR) of 0.93 times (x) of the current 5.0% fixed interest rate. Performance is worse when including the 4.0% of interest due that is being deferred until loan maturity. While the term default risk has been mitigated, given the increased credit risk associated with the business plan execution and property stabilization, Morningstar DBRS applied a stressed haircut to the updated $71.0 million appraised property value, resulting in a loan-to-value ratio (LTV) above 100.0%; however, the analyzed property value shortfall is contained to the unrated first-loss piece.

While not on the servicer's watchlist, Morningstar DBRS remains concerned with the transaction's second-largest loan, 5 Post Oak Park (Prospectus ID#2, 21.2% of the current trust balance), which is secured by a 28-story, 566,618-square-foot (sf) office tower in Houston. According to the March 2025 rent roll provided by the collateral manager, the property was 73.1% occupied at an average rental rate of $25.85 per sf. While occupancy remains unchanged year over year, it will likely decrease to 66.7% in August 2025 after four tenants totaling 37,181 sf are set to vacate upon their respective lease expirations. While the loan is equipped with a healthy amount of reserves, including $10.6 million of unadvanced future funding dollars that was force-funded into a business plan reserve, backfilling the space will be challenging given the soft market fundamentals; according to Reis, the Galleria submarket vacancy rate remains elevated above 25%. The loan matures in August 2025; however, according to the collateral manager, the borrower will likely exercise its final 12-month extension option through August 2026. While the extension options are not tied to any performance tests, the loan began amortizing in conjunction with the second extension option. According to the T-12 ended March 31, 2025, financials provided by the collateral manager, the property reported NCF of $4.4 million, equating to a DSCR and debt yield of 0.72x and 5.2%, respectively. Morningstar DBRS applied a stressed haircut to the original appraised property value to reflect the increased credit risk of the loan. While the adjustment resulted in an LTV above 100.0%, the shortfall is contained to the unrated first-loss piece.

Across the eight loans remaining in the trust, the lender has advanced cumulative future funding of $27.4 million to six individual borrowers, with most allocated to the 5 Post Oak Park loan ($18.5 million). An additional $6.9 million of loan future funding remains available to be advanced to two outstanding borrowers, mostly for the Highwoods Preserve V loan, which is secured by an office building in Tampa. The funds are available to finance accretive leasing and capital expenditure costs. As of March 2025, the property was 44.9% leased but only 10.1% occupied as the former largest tenant, MetLife, vacated its space ahead of the October 2031 expiry date. The loan exhibits increased credit risk as the borrower did not execute any leases in 2024 and the loan matures in December 2025. Morningstar DBRS expects the loan to be modified a second time to allow the borrower to exercise the final maturity extension, which will likely require an additional equity commitment from the borrower.

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 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 (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 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.
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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 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

-- 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.