DBRS Morningstar Confirms Ratings on All Classes of Sutherland Commercial Mortgage Trust 2021-SBC10

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2021-SBC10 issued by Sutherland Commercial Mortgage Trust 2021-SBC10 as follows:

-- Class A at AAA (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 transaction is composed of individual fixed- and floating-rate small-balance loans secured by commercial and multifamily properties with an average loan balance of approximately $667,000. As of the April 2022 remittance, 259 of the original 300 loans remain in the pool with an aggregate principal balance of $172.2 million, representing a collateral reduction of 26.0% since issuance. Most of the loans that have been repaid were paid in advance of their respective maturity dates. During the April 2022 reporting period, 10 loans were prepaid, totaling $5.9 million in principal curtailments. This figure reflects a voluntary constant prepayment rate (CPR) of 33.3%, well above the life CPR of 11.3%.

According to the April 2022 remittance, one loan (0.1% of the pool) is in special servicing and three loans (1.3% of the pool) are 30 days delinquent. Also, 17 loans (5.4% of the pool) are on the servicer’s watchlist. The majority of these loans were flagged for deferred maintenance (3.5% of the pool) and upcoming loan maturity (0.6% of the pool). Through the remainder of 2022, seven loans (1.6% of the pool) have scheduled maturity dates and 26 loans (8.1% of the pool) have scheduled maturity dates during 2023. Approximately 95.6% of the current pool is amortizing, with 46.4% of the pool fully amortizing.

The pool is granular and well diversified given the small-balance nature of the securitized loans. By loan balance, the top 15 loans represent 27.7% of the pool, with the largest loan representing just 3.0% of the pool. The collateral properties are located across 33 states, with the largest concentrations in New York (27.2% of the pool), California (12.6% of the pool), and Texas (9.8% of the pool). By property type, the pool has concentrations of loans secured by retail properties (36.0%), multifamily properties (27.2% of the pool), mixed-use properties (12.6% of the pool), and office properties (12.4% of the pool).

DBRS Morningstar received limited borrower and property-level information at issuance and considered the overall property quality to be Average based on those properties sampled; this sample comprised 27.0% of the issuance pool balance.

The transaction is configured with a modified pro rata pay pass-through structure.

ESG CONSIDERATIONS
DBRS Morningstar concluded that the environmental factor was applicable to the credit analysis. At issuance, limited to no property-level information was available for review, including property condition reports and Phase I/II environmental site assessment reports. As a result, DBRS Morningstar applied a loss given default penalty that resulted in a significant effect on the credit analysis.

There were no social or governance factors that had a significant or relevant effect on the credit analysis.

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.

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 notes that this press release was amended on November 30, 2022, to update the ESG factors.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 4, 2022), 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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

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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