Morningstar DBRS Assigns Provisional Credit Ratings to BANK5 2025-5YR16

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2025-5YR16 (the Certificates) to be issued by BANK5 2025-5YR16 (the Trust):

-- Class A-1 at (P) AAA (sf)
-- Class A-2 at (P) AAA (sf)
-- Class A-2-1 at (P) AAA (sf)
-- Class A-2-2 at (P) AAA (sf)
-- Class A-2-X1 at (P) AAA (sf)
-- Class A-2-X2 at (P) AAA (sf)
-- Class A-3 at (P) AAA (sf)
-- Class A-3-1 at (P) AAA (sf)
-- Class A-3-2 at (P) AAA (sf)
-- Class A-3-X1 at (P) AAA (sf)
-- Class A-3-X2 at (P) AAA (sf)
-- Class X-A at (P) AAA (sf)
-- Class X-B at (P) AA (sf)
-- Class A-S at (P) AAA (sf)
-- Class A-S-1 at (P) AAA (sf)
-- Class A-S-2 at (P) AAA (sf)
-- Class A-S-X1 at (P) AAA (sf)
-- Class A-S-X2 at (P) AAA (sf)
-- Class B at (P) AA (high) (sf)
-- Class B-1 at (P) AA (high) (sf)
-- Class B-2 at (P) AA (high) (sf)
-- Class B-X1 at (P) AA (high) (sf)
-- Class B-X2 at (P) AA (high) (sf)
-- Class C at (P) AA (low) (sf)
-- Class C-1 at (P) AA (low) (sf)
-- Class C-2 at (P) AA (low) (sf)
-- Class C-X1 at (P) AA (low) (sf)
-- Class C-X2 at (P) AA (low) (sf)
-- Class X-D at (P) BBB (high) (sf)
-- Class X-F at (P) BBB (low) (sf)
-- Class D at (P) BBB (high) (sf)
-- Class F at (P) BBB (low) (sf)
-- Class G-RR at (P) BB (sf)

All trends are Stable.

Classes X-D, X-F, D, F, G-RR, and H-RR will be privately placed.

The Class A-2-1, Class A-2-2, Class A-2-X1, Class A-2-X2, Class A-3-1, Class A-3-2, Class A-3-X1, Class A-3-X2, Class A S-1, Class A-S-2, Class A-S-X1, Class A-S-X2, Class B 1, Class B-2, Class B-X1, Class B-X2, Class C-1, Class C-2, Class C-X1 and Class C-X2 certificates are also offered certificates. Such classes of certificates, together with the Class A-2, Class A-3, Class A-S, Class B and Class C certificates, constitute the Exchangeable Certificates. The Class A-1, Class D, Class F, Class G-RR and Class H-RR certificates, together with the Exchangeable Certificates with a certificate balance, are referred to as the principal balance certificates.

The collateral for the BANK5 2025-5YR16 transaction consists of 40 fixed-rate loans secured by 180 commercial and multifamily properties with an aggregate cut-off date balance of $656.0 million. Five of the loans, representing 31.5% of the pool, are shadow-rated as investment grade by Morningstar DBRS. Morningstar DBRS analyzed the remainder of the conduit pool to determine the provisional credit ratings, reflecting the long-term probability of default within the term and its liquidity at maturity. When the cut-off balances were measured against the Morningstar DBRS Net Cash Flow (NCF) and their respective constants, the issuance Morningstar DBRS weighted-average (WA) Debt Service Coverage Ratio (DSCR) of the pool was 1.83 times (x) when including the shadow-rated loans and 1.40x when excluding the shadow-rated loans. The Morningstar DBRS WA Issuance Loan-to-Value Ratio (LTV) of the pool was 55.3%, and the pool is scheduled to amortize to a Morningstar DBRS WA Balloon LTV of 55.0% at maturity based on the A note balances. When excluding the shadow-rated loans, the deal exhibits a reasonable Morningstar DBRS WA Issuance LTV of 63.4% and a Morningstar DBRS WA Balloon LTV of 63.2%. Nine loans, making up about 20.4% of the total pool, exhibit a Morningstar DBRS Issuance LTV of higher than 67.6%. This threshold typically correlates to an above-average default frequency. A total of three loans, 4.9% of the pool, exhibited a Morningstar DBRS Issuance DSCR below 1.15x. Ten loans, 13.6% of the pool, exhibited a Morningstar DBRS Issuance DSCR at or below 1.25x, which is typically the threshold that indicates higher likelihood of midterm default. The transaction has a sequential-pay pass-through structure.

Morningstar DBRS completed reviews of cash flow underwriting and cash flow stability along with a structural review for 30 of the 40 loans, representing 87.0% of the pool. For the loans not subject to underwriting review, Morningstar DBRS applied the average NCF variance of the respective loan seller. Morningstar DBRS generally adjusted cash flow to current in-place rent and, in some instances, applied an additional vacancy or concession adjustment to account for deteriorating market conditions or tenants above market rent. Generally, Morningstar DBRS recognized most expenses based on the higher of historical figures and the borrower's budgeted figures. Morningstar DBRS inflated real estate taxes and insurance premiums if a current bill was not provided. Morningstar DBRS based capex on the greater of the engineer's inflated estimates and the Morningstar DBRS standard estimate, according to the property type. Finally, Morningstar DBRS deducted leasing costs to arrive at the Morningstar DBRS NCF. If a significant upfront leasing reserve was established at closing, Morningstar DBRS reduced its recognized leasing costs. Morningstar DBRS gave credit to tenants not yet in occupancy if a lease had been signed and the loan was adequately structured with a reserve, LOC, or a holdback earn-out. The Morningstar DBRS sample has an average NCF variance of -10.1% and ranges from 1.2% to -19.1%.

Five loans, representing 31.5% of the total pool, exhibit credit characteristics consistent with investment-grade shadow credit ratings. These loans' credit characteristics were as follows: ILPT 2025 Portfolio was consistent with a shadow credit rating of A (low) (sf); The Campus at Lawson Lane was consistent with a shadow credit rating of AAA (sf); The Wharf was consistent with a shadow credit rating of A (high) (sf); The Lafayette Hotel was consistent with a shadow credit rating of AAA (sf); and the Aman Hotel New York was consistent with a shadow credit rating of AA (low) (sf).

Three loans, representing 13.6% of the pool, are backed by properties in a Morningstar DBRS Market Rank of 7, which is indicative of a dense urban area that experiences increased liquidity driven by strong investor demand, even during times of market stress. Additionally, 13 loans, or 41.3% of the pool, are backed by properties in Morningstar DBRS Market Ranks of 5 or 6, which benefit from lower default frequencies than less-dense suburban, tertiary, and rural markets. Nine loans, or 28.6% of the pool, are backed by properties in a Morningstar DBRS MSA Group of 3, which represents the best-performing metropolitan statistical area (MSA) group out of the top 25 MSAs in terms of historical commercial mortgage-backed securities (CMBS) default rates.

Sixteen loans, making up 45.8% of the pool, have Morningstar DBRS Issuance LTVs lower than 60.7%; this threshold historically represents relatively low-leverage financing and generally is associated with below-average default frequency. When excluding the shadow-rated loans, the transaction exhibits a reasonable Morningstar DBRS WA LTV of 63.2%. Only three loans in the pool, making up 7.0% of the total, have a Morningstar DBRS LTV equal to or higher than 70.0%; one of these loans, Briar Cove and Summerwind, representing 3.6% of the pool, has a Morningstar DBRS LTV of 73.6%.

The Morningstar DBRS WA DSCR of 1.83x, or 1.40x when excluding the shadow-rated loans, is healthy, especially when compared with the current interest rate environment in which DSCRs have been severely constrained after debt service payments have nearly doubled since mid-2022.

Seven loans, 42.0% of the Morningstar DBRS sample and 36.5% of the pool, received a property quality assessment of Average + or above. One loan, 3.0% of the pool, received a property quality assessment of Excellent. Only five loans, 15.0% of the pool, received a property quality assessment of Average ¿. No properties received a property quality assessment of Below Average or Poor. The higher-quality properties are more likely to exhibit stable performance by way of attracting new tenants/guests or by retaining their current tenants/guests.

Three loans, equaling 12.0% of the pool, were classified as having Weak sponsorship, which increases the probability of default in the Morningstar DBRS model. This designation was generally applied to sponsors who had lower net worth and liquidity, a history of prior defaults, or a lack of experience in commercial real estate. Furthermore, only two of the loans, 6.6% of the pool, were classified as having Strong sponsorship.

All loans, aside from two, are refinancing existing debt and may not have third-party acquisition prices to support the appraised value conclusion. Acquisition financing also typically includes a meaningful cash investment from the sponsor on an agreed-upon price and aligns the interests more closely with those of the lender; refinance transactions may be cash-neutral or cash-out transactions, the latter of which may reduce the borrower's commitment to a property.

Thirty-six loans, representing 89.0% of the total pool, have IO payment structures and do not benefit from any amortization. Three of the remaining loans amortize over their full loan terms with no periods of IO payments. The remaining loan is partially amortizing.

The pool contains 40 loans and is concentrated with a relatively low Herfindahl score of 21.6, with the top 10 loans representing 56.8% of the total pool. These metrics are just slightly lower than the Morningstar DBRS-rated BBCMS Mortgage Trust 2025-5C34 transaction, which had a Herfindahl score of 22.5, and the BANK5 2024-5YR10 transaction, which had a Herfindahl score of 30.7.

Twenty-four loans, representing 51.7% of the pool, exhibit negative leverage, defined as the Issuer's implied cap rate (Issuer's NCF divided by the appraised value) less the current interest rate. Among the loans that exhibit negative leverage, the average was -0.7%. While cap rates have been increasing over the past few years, they have not surpassed the current interest rates. In the short term, this suggests that borrowers are willing to have lower equity returns to secure financing. In the longer term, if interest rates hold steady, the loans in this transaction could be subject to negative value adjustments that may affect their borrowers' ability to refinance their loans.

Morningstar DBRS' credit ratings on the Certificates address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Distribution Amounts and/or Interest Distribution Amounts for the rated classes.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, Yield Maintenance Charges and Prepayment Premiums.

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

Classes X-A, X-B, X-D, and X-F are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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 Multi-Borrower Rating Methodology (April 9, 2025) https://dbrs.morningstar.com/research/451739.

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

With regard to due diligence services, Morningstar DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

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

A provisional credit rating is not a final credit rating with respect to the above-mentioned certificates and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned certificates is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit 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 Commercial Mortgage Servicer Rankings (August 23, 2024)
https://dbrs.morningstar.com/research/438283

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 Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025)
https://dbrs.morningstar.com/research/448962

North American CMBS Insight Model v 1.3.0.0
https://dbrs.morningstar.com/research/451739

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