Morningstar DBRS Confirms Credit Ratings on LBA Trust 2024-BOLT

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the following classes of the Commercial Mortgage Pass-Through Certificates, Series 2024-BOLT (the Certificates) issued by LBA Commercial Mortgage Trust 2024-BOLT (the Trust):

-- Class A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class D at BBB (sf)

All trends are Stable.

The credit rating confirmations reflect the limited seasoning of the transaction, which closed in June 2024. The transaction is collateralized by the borrower's fee-simple interests in a portfolio of 18 cross-collateralized industrial properties totaling 9.87 million square feet (sf) across nine different states including Illinois, South Carolina, Maryland and 11 markets, including Baltimore, Chicago, and Orange County. The properties are primarily composed of bulk distribution space, with a small percentage of office space that totals 4.1% of the total net rentable area (NRA). The markets, in which these properties are located, have solid fundamentals with annual growth in rents. The sponsor, LBA Logistics Value Fund VII, LP, has a logistics and office portfolio of over 102 million sf spread across all major markets in the United States.

The loan proceeds of $600 million are being used to refinance existing debt of $471 million, return $116 million of sponsor equity and cover closing costs. The interest-only loan has an initial two-year loan term and three one-year extension options. There are no performance triggers, financial covenants, or fees required for the borrower to exercise any of the extension options; however, the execution of each option is conditional upon the borrower's purchase of an interest rate cap. The mortgage loan has a partial pro rata/sequential-pay structure, which allows for pro rata paydowns across the certificates for the first 30.0% of the unpaid principal balance. Additionally, the borrower may release properties so long as the prepayment of the loan is in an amount equal to 105% of the allocated loan amount for the initial 30% of the whole loan balance and 110% of the allocated loan thereafter.

According to the most recent servicer provided financials, the portfolio reported a YE2024 net cash flow (NCF) of $44.0 million, which resulted in a debt service coverage ratio (DSCR) of 0.96 times (x) compared with the issuers underwritten figure of $41.9 million (DSCR of 0.90x) and Morningstar DBRS' figure of $38.8 million (DSCR of 0.85x). The increase in NCF is primarily because of a marginal increase in the effective gross income (EGI) in 2024. The rent roll is granular with nearly 70.0% of leased NRA occupied by investment-grade tenants at issuance. Tenant rollover is relatively minimal with three tenants in Sephora USA, Lennox Industries, and Shaw Industries accounting for approximately 700,000 sf, equating to approximately 7.2% of NRA having leases that have or will expire by YE2025. According to the servicer, Sephora USA (3.2% of total NRA) is expected to renew its lease by the end of June 2025, while Lennox Industries and Shaw Industries vacated at their lease expirations in February and January, respectively. Overall, Morningstar DBRS continues to take a favorable view on the long-term growth and stability of the warehouse and logistics sector.

For this review, Morningstar DBRS maintained the value of $578.2 million derived at issuance based on a capitalization rate of 6.71% and the Morningstar DBRS NCF of $38.8 million, a -38.9% variance from the issuance appraised value of $962.1 million. The Morningstar DBRS loan-to-value ratio (LTV) is 102.1% compared with the LTV of 62.4% based on the appraised value at issuance. In addition, Morningstar DBRS maintained positive qualitative adjustments totaling 8.25% to reflect the low cash flow volatility, property quality, and strong market fundamentals coupled with geographic diversity. Overall, Morningstar DBRS has a favorable outlook on the portfolio throughout the duration of the loan term.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS  
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024): https://dbrs.morningstar.com/research/437781

Class X is an interest-only (IO) certificate that references a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

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

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448963

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448962
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024): https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024): https://dbrs.morningstar.com/research/444064
-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025): https://dbrs.morningstar.com/research/450750
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024): https://dbrs.morningstar.com/research/438283

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.