DBRS Morningstar Confirms Ratings on BX Commercial Mortgage Trust 2022-AHP

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2022-AHP issued by BX Commercial Mortgage Trust 2022-AHP:

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

All trends are Stable.

The rating confirmations reflect the consistent credit view of this transaction given its stable performance since issuance in 2022. The underlying loan is secured by the borrower’s fee-simple interest in 43 affordable housing multifamily properties totaling 10,965 units in eight Florida markets, including Miami, Fort Lauderdale, Tampa, and Palm Beach. The floating-rate loan is interest-only with an initial two-year term and three one-year extension options. The sponsor is BREIT Operating Partnership L.P., an affiliate of The Blackstone Group. Inc. Loan proceeds of $1.5 billion along with $1.2 billion of sponsor equity facilitated the acquisition of the portfolio at a price of $2.7 billion. The loan is structured with a partial pro rata/sequential-pay structure that allows for pro rata paydowns for the first 30.0% of the original unpaid principal balance where individual properties can be released at a prepayment premium of 105.0% of the allocated loan amount (ALA). The prepayment premium increases to 110.0% of the ALA thereafter. DBRS Morningstar penalizes this structure, given the reduced paydown to senior bonds as properties are released.

According to the financials for the trailing nine months (T-9) ended September 30, 2022, the portfolio reported a weighted-average (WA) occupancy rate of 96.6%, which remains relatively in line with the issuance occupancy rate of 98.5%. The portfolio reported a net cash flow (NCF) of $64.1 million and a debt service coverage ratio (DSCR) of 3.18 times (x) for the T-9 compared with the DBRS Morningstar NCF of $89.3 million and DSCR of 3.44x at issuance. The cash flow variance is notable but not worrisome, given the transaction’s recent vintage and partial year reporting period. DBRS Morningstar expects cash flows will stabilize when the full year-end is analyzed by the servicer.

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 (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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