DBRS Morningstar Confirms Ratings on All Classes of Citigroup Commercial Mortgage Trust 2021-KEYS

DBRS Limited (DBRS Morningstar) confirmed the following ratings on the Commercial Mortgage Pass-Through Certificates issued by Citigroup Commercial Mortgage Trust 2021-KEYS:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations since issuance. The loan is secured by the borrower’s fee-simple interest in a 199-key full-service hotel, Isla Bella Beach Resort (Isla Bella), spanning more than 24 acres on Knights Key, with more than a mile of oceanfront exposure. Isla Bella is approximately two hours south of Miami, halfway between Islamorada and Key West. Amenities include five swimming pools, a 5,000-square-foot (sf) fitness and spa centre, a 5,000-sf retail market place, and a 24-slip marina. The property also features three food and beverage outlets and offers banquets/catering services in conjunction with its 20,000 sf of meeting space. The sponsor, EOS Investors LLC, is an investment firm primarily operating in the hospitality sector. Its portfolio consists of a number of luxury hotels, including two other hotels in the Florida Keys and Key West. At issuance, the sponsor was planning to invest an additional $3.1 million in upgrades to the property.

Loan proceeds of $225.0 million refinanced existing debt of $231.3 million and returned $8.7 million of equity to the sponsor. The loan is interest only throughout its initial two-year term and is structured with three one-year extension options. Only the third extension option includes a performance trigger, subject to a minimum debt yield of 10.0%.

The loan benefits from its location and quality. Given the historically high barriers to entry within the submarket, the property is the only luxury hotel that has been developed in the Middle Keys in the past 20 years. Development of the property began in 2017, and the hotel was delivered in March 2019; however, the property was closed temporarily in 2020 because of the Coronavirus Disease (COVID-19) pandemic but reopened in June 2020. According to the March 2022 STR, Inc. report, the property reported trailing 12-month ended March 31, 2022, occupancy rate, average daily rate, and revenue per available room (RevPAR) figures of 76.2%, $678, and $516, respectively, representing a RevPAR penetration rate of 123.1%. This is a significant improvement from the issuance RevPAR of $359, although this figure incorporates a period of time when the subject was closed. The loan reported a YE2021 net cash flow (NCF) of $21.3 million (a debt yield of 9.5%), compared with the DBRS Morningstar NCF of $16.8 million (a debt yield of 7.5%).

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

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

The principal methodology is 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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