DBRS Morningstar Confirms All Ratings of BX Trust 2021-SDMF

DBRS Limited (DBRS Morningstar) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2021-SDMF as follows:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class D at A (low) (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 stable performance of the underlying collateral, which has remained in line with DBRS Morningstar expectations at issuance. The interest-only $800.0 million floating-rate loan is secured by the borrower’s fee-simple interest in 32 multifamily properties, totalling 4,202 units throughout various submarkets of the greater San Diego area. The properties are predominantly traditional, garden-style apartment communities with the exception of one age-restricted property, which consists of 130 units and at issuance accounted for 2.2% of the allocated loan amount (ALA). No major renovations have occurred at the subject properties in recent years; however, approximately $9.7 million ($2,300 per unit) of capital expenditures was invested in the properties between 2018 and 2020. At issuance, it was noted that the sponsor planned to renovate a number of the properties after closing, but the cost will be funded out of pocket as there were no reserves in the loan structure. The loan is sponsored by Blackstone Real Estate Partners IX L.P. and TruAmerica Multifamily LLC (TruAmerica).

The subject loan along with $90.0 million mezzanine debt held outside of the trust and $230.8 million of borrower equity facilitated the acquisition of the portfolio at a purchase price of $1.1 billion. The transaction has a partial pro rata structure allowing for pro rata paydowns for the first 30.0% of the principal balance. Individual property releases are subject to a release price of 105.0% of the ALA for the first $240 million principal balance, with the release price increasing to 110.0% thereafter.

According to the December 2021 rent roll, the portfolio reported an occupancy rate of 97.5%, in line with the issuance occupancy rate of 98.1%. Based on the most recent financials, the loan reported a YE2021 net cash flow (NCF) of $48.6 million, compared with the DBRS Morningstar NCF of $39.4 million. As of the Q2 2022 Reis report, the multifamily properties in the San Diego submarket reported an average vacancy rate of 6.3%, compared with the Q2 2021 vacancy rate of 11.8%.

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.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577