DBRS Morningstar Assigns Provisional Ratings to BX Trust 2021-BXMF

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-BXMF (the Certificates) to be issued by BX Trust 2021-BXMF (BX 2021-BXMF or the Trust), as follows:

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

All trends are Stable.

The collateral for BX 2021-BXMF includes the borrower’s fee-simple interest in 13 Class A multifamily properties totaling 5,449 units across seven states. BREIT Operating Partnership L.P. (the Loan Sponsor) is using mortgage loan proceeds of $1.075 billion ($197,284 per unit) in addition to a borrower equity contribution of nearly $347.7 million ($63,809 per unit) to recapitalize the Sponsor’s interest in the Project Solar Portfolio. The properties comprising the portfolio generally exhibit favorable finish qualities and comprehensive amenity offerings with a weighted-average (WA) year built of 2010, with only two of the assets constructed prior to 2002.

In addition to the generally favorable asset quality of the underlying collateral, DBRS Morningstar generally views the markets to which the portfolio is exposed as highly desirable for multifamily development with strong growth potential. Five properties within the portfolio are located in submarkets that have observed a higher inventory growth rate relative to each property’s respective market. According to Reis, the current WA vacancy for the submarket is only 6.2% in Q2 2021, and it is projected to decrease to 5.4% over the next five years. While nine of the 13 properties (representing 76.5% of the portfolio by allocated loan amount) are located in areas characterized as having a DBRS Morningstar market rank between 2 and 4 (ranks generally associated with more suburban locations that exhibit higher historical probabilities of default within conduit securitizations), the cross-collateralized and geographically diversified nature of the portfolio generally mitigates some of the market risk.

The portfolio is currently 95.8% occupied per the September 2021 rent roll, with favorably increasing portfolio occupancy and rent trends demonstrated from YE2018 through September 2021. Additionally, despite the noise surrounding lease defaults and nonpayment of rent in the U.S. through the recent and ongoing Coronavirus Disease (COVID-19) pandemic, the sponsor was successful in ramping up toward full stabilization, with the WA portfolio occupancy increasing steadily to 95.8% as of the September 2021 rent roll from 89.1% in December 2018. The portfolio’s net operating income increased 28.6% between 2018 and the trailing 12-month period ended August 31, 2021.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Class X-CP and Class X-NCP 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 ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

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Notes:
All figures are in U.S. dollars unless otherwise noted.

With regard to due diligence services, DBRS Morningstar 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 DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is North American Single-Asset/Single-Borrower Ratings Methodology (March 2, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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