DBRS Morningstar Confirms Ratings on SREIT Commercial Mortgage Trust 2021-MFP2

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-MFP2 issued by SREIT Commercial Mortgage Trust 2021-MFP2 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 rating confirmations and Stable trends reflect the overall stable performance of the underlying collateral since issuance, as well as the generally desirable markets where the collateral is located. The transaction is secured by the borrower’s fee-simple interest in nine garden-style multifamily properties totaling 3,441 units across North Carolina (58.0% of the allocated loan amount (ALA)) and Florida (42% of the ALA). The loan is floating rate interest only with an initial two-year term and three one-year extension options. The sponsors for the loan include Starwood Real Estate Income Trust (95%) and Carroll Organization (5%). Loan proceeds of $633.8 million coupled with a borrower equity contribution of nearly $381.2 million went toward acquiring the portfolio for $975 million, covering closing costs, and funding an upfront capital improvement reserve of $6.9 million. The loan has a partial pro rata/sequential-pay structure that allows for pro rata paydowns for the first 20% of the original unpaid principal balance. Additionally, the prepayment premium to release individual assets is 105% of the ALA for the first 20% of the original unpaid balance and 110% of the ALA to release individual assets thereafter.

According to the June 2022 rent rolls, the portfolio reported a occupancy rate of 94.2%, which remains in line with the issuance occupancy rate of 95.4%. The portfolio reported a debt service coverage ratio (DSCR) of 2.21 times (x) as of the trailing six months ended June 30, 2022, compared with the DBRS Morningstar DSCR of 2.14x from issuance.

Of the two largest submarkets in North Carolina, Southwest Raleigh (21.3% of the ALA) and Cary (20.4% of the ALA), reported a Q3 2022 vacancy rate of 4.3% and 5.0%, respectively.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no environmental, social, and 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 (May 17, 2022).

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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

The principal methodology is North American CMBS Surveillance Methodology (October 3, 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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