DBRS Morningstar Assigns Provisional Ratings to SREIT Commercial Mortgage Trust 2021-MFP2

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-MFP2 (the Certificates) to be issued by SREIT Commercial Mortgage Trust 2021-MFP2 (SREIT 2021-MFP2 or the Trust), as follows:

-- 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 collateral for SREIT 2021-MFP2 includes the borrower’s fee-simple interest in nine garden-style multifamily properties totaling 3,441 units across Florida and North Carolina. Starwood Real Estate Income Trust (the Sponsor) is using mortgage loan proceeds of $633.8 million ($184,191 per unit) in addition to a borrower equity contribution of nearly $381.2 million ($110,786 per unit) to recapitalize the Sponsor’s interest in the Starwood Portfolio. The properties comprising the portfolio generally exhibit favorable finish qualities and comprehensive amenity offerings with a weighted-average (WA) year built of 1991.

In addition to the generally favorable asset quality of the underlying collateral, DBRS Morningstar generally views the markets to which the portfolio is exposed as desirable for multifamily development with above-average growth potential. According to Reis, the WA vacancy for the submarket was only 4.4% in Q3 2021 and has been steadily decreasing for the past five years. While all of the properties in the portfolio are in areas with a DBRS Morningstar Market Rank between 2 and 4 (ranks generally associated with more suburban locations that exhibit higher historical probabilities of default within conduit securitizations), the cross-collateralized and geographically diversified nature of the portfolio generally mitigates some of the market risk.

The portfolio is 95.4% occupied per the November 2021 rent roll, with favorably increasing portfolio occupancy and rent trends demonstrated from 2019 through November 2021. Additionally, despite the noise surrounding lease defaults and nonpayment of rent in the U.S. through the recent and ongoing Coronavirus Disease (COVID-19) pandemic, the sponsor has been successful in maintaining high occupancy levels at the subject properties.

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.

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

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

With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is North American Single-Asset/Single-Borrower Ratings Methodology (March 2, 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/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

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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