DBRS Morningstar Confirms Ratings on BX Trust 2021-LBA

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

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

All trends remain Stable.

The rating confirmations reflect a deal that is very early in its life cycle with limited reporting and no changes to the underlying performance since issuance.

There are no changes to either leverage or credit support as the underlying loans are not amortizing, and no change to DBRS Morningstar's expectations for performance since issuance. The transaction consists of two separate, uncrossed portfolios of assets, Pool 1 (Fund V; 17 assets) and Pool 2 (Fund JV; 35 assets), each of which supports the payments on its respective series of certificates. Generally, each of the portfolios exhibits strong functionality metrics and both are well-located in major industrial markets. Each of the loans has a two-year initial term, with five one-year extension options.

The deal closed in February 2021 and there has been little updated financial reporting since then. DBRS Morningstar noted at issuance that there was concentrated scheduled tenant rollover in 2021 (17.9% of net rentable area (NRA)) and 2022 (18.0% of NRA). As of June 2021, the combined pool occupancy rate remained high at 99.4%. The underlying properties consist mainly of warehouse and distribution facilities with comparatively low proportions of office square footage. This property type has continued to perform well during the pandemic, given the continued dominance of e-commerce and demand for industrial space. The pool is located across several well-performing west coast markets, with a geographic concentration in Southern California.

Both mortgage loans have a partial pro rata/sequential-pay structure, which allows for pro rata paydowns for the first 30.0% of the unpaid principal balance. DBRS Morningstar considers this structure to be credit negative, particularly at the top of the capital stack. Under a partial pro rata paydown structure, deleveraging of the senior notes through the release of individual properties occurs at a slower pace compared with a sequential-pay structure. The borrower can also release individual properties across both portfolios with customary requirements. However, in both cases, the prepayment premium for the release of individual assets is 105% of the allocated loan amount for the first 30% of the original principal balance of the mortgage loan and 110% thereafter. As of the January 2022 remittance, no properties have been released and there has been no paydown to the trust certificates.

The DBRS Morningstar loan-to-value ratios on the trust loans are substantial: 105.45% and 113.88%, respectively, for the Fund V and Fund JV portfolios. The high leverage nature of the transactions, combined with the lack of amortization, could result in elevated refinance risk and/or loss severities in an event of default.

The sponsors under the mortgage loans are joint venture (JV) partnerships between BREIT and LBA Logistics. BREIT is an affiliate of The Blackstone Group, Inc. (Blackstone), whose real estate group was founded in 1991 and has nearly $175 billion in investor capital under management. Blackstone is also one of the world's largest industrial landlords. LBA Logistics is the industrial arm of LBA Realty LLC, a full-service real estate investment and management company with portfolio of logistics properties that totals over 61 million sf throughout the United States.

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.

Classes X-V-CP, X-V-NCP, X-JV-CP, and X-JV-NCP are interest-only (IO) certificates that reference 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.

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

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 26, 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.

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.

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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