DBRS Morningstar Confirms All Ratings of BX Trust 2021-LGCY

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-LGCY issued by BX Trust 2021-LGCY:

-- Class A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (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 transaction’s overall stable performance, which remains in line with DBRS Morningstar’s expectations. The collateral consists of the borrower’s fee-simple interest in 12 Class A/B multifamily properties totalling more than 3,000 units across six states, with the largest concentrations in Texas, Florida, and North Carolina. The portfolio is exposed to highly desirable markets with strong growth potential; eight properties are in areas with appraisal-projected population growth rates more than quadruple the U.S. 2020 national average of 0.3%, and all properties are in areas with projected population growth rates in excess of the U.S. 2020 national average. The loan is sponsored by an affiliate of Blackstone Group, Inc., a global real estate investment platform with a global portfolio value totalling more than $400.0 billion.

Whole loan proceeds of $822.3 million include a mortgage loan of $575.0 million and $247.3 million in sponsor equity. The subject transaction totals $575.0 million and consists of three componentized, floating-rate promissory notes. Loan proceeds are being used to acquire the portfolio and fund closing costs. The loan is interest only throughout its five-year fully extended loan term.

As of March 2022, the loan reported a portfolio occupancy of 94.3%, remaining in line with issuance. The portfolio reported a Q1 2022 debt service coverage ratio of 2.91 times and an annualized net cash flow of $30.3 million, with both figures remaining in line with issuance figures. Additionally, a temporary cash flow decline would likely not result in a debt service shortfall considering that no single property accounts for more than 13.7% of the allocated loan amount. According to Reis, the Q2 2022 weighted-average market vacancy rate for the portfolio was 4.9%, a decrease from 6.9% the prior year, which is projected to continue declining through the fully extended loan term. Although more than 65.0% of the portfolio is in suburban markets, which have historically higher probabilities of default, the relatively low market vacancy rates and geographical diversity of the portfolio help to mitigate some of the market risk.

Overall, given the relatively low market vacancy rates, asset quality, strong sponsorship, and geographical diversity, the portfolio is well positioned to maintain stable performance throughout the loan term.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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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