Morningstar DBRS Confirms Credit Ratings on All Classes of DBSG 2024-ALTA Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2024-ALTA issued by DBSG 2024-ALTA Mortgage Trust as follows:

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

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction since issuance. While the transaction is early in its life cycle, having closed in May 2024, the underlying collateral continues to perform well, as evidenced by the most recently reported occupancy rate of 95.8% as of the March 2025 rent roll.

The transaction is collateralized by the borrower's fee-simple interest in a 43-story, Class A high-rise apartment building totaling 467 units with 42,878 square feet of retail space in Long Island City, New York. The sponsor of the loan is Affinius Capital, an institutional real estate investment firm with more than $32.0 billion in assets under management spanning a diverse portfolio of life science, multifamily, industrial, data center, and office properties across North America and Europe.

The three-year fixed-rate interest-only loan matures in June 2027 and does not include any extension options. The transaction proceeds of $217.0 million, along with sponsor equity of $4.8 million, refinanced $216.5 million of debt and funded various reserves including a $0.3 million capital expenditure reserve and a $1.6 million free rent reserve. The sponsor had approximately $114.5 million of equity remaining in the transaction at closing.

In 2023, the sponsor terminated a management lease for 169 units with Common, which operated a co-living program at the asset since 2021, to save on expenses, better manage the asset, and push rents. The sponsor is in the process of repositioning the remaining 115 co-living units to traditional leases at market rents per regulations. At the time of loan securitization, 54 units were transitioned to conventional units and, of those, 37 had been re-leased, achieving rent premiums of approximately 6.9%. Morningstar DBRS requested a status update from the servicer regarding the repositioning of the remaining 115 co-living units; however, a response remains pending as of the date of this press release. As the sponsor's business plan is to convert 169 previously master-leased co-living units to traditional apartments is minor in scope, Morningstar DBRS believes there is minimal execution risk. Morningstar DBRS did not assume a stabilization credit in its net cash flow (NCF).

As of the March 2025 rent roll, the property's residential occupancy rate was 95.8% with the commercial component 100.0% occupied. The property is in the Reis-defined Queens County submarket, which has displayed positive trends in both vacancy rates and rent growth since Q4 2020. According to Reis, the vacancy rate in this submarket was 3.2% as of Q4 2024, with an average vacancy rate consistently below 3.5% since 2020. Furthermore, between Q4 2020 and Q4 2024, the submarket experienced a substantial increase in effective rents, rising nearly 35%, to $3,190 a month from $2,372 a month. As of Q4 2024, Reis reported that the average asking rent for properties of comparable age (constructed between 2010 and 2019) is $4,379 a month, which exceeds the subject's average rent of $4,184 a month. However, the property benefits from a 421-a tax abatement through June 2034, well past the loan term. The abatement exempts the property from 100% of its taxes on improvements for the first 11 years, with the exemption percentage declining in 20% increments every other year until 2034, when the exemption expires. Given the tax exemption, the borrower is required to maintain 161 affordable housing units at the property. In return, those units have a cap on rent growth, which is the primary reason the property's current average rent is below market rent.

For this review, Morningstar DBRS maintained the value of $269.6 million derived at issuance for the underlying property. The Morningstar DBRS Value considered an NCF of $16.9 million and a capitalization rate of 6.25%, which resulted in a Morningstar DBRS Loan-to-Value Ratio (LTV) of 80.5% on the $217.0 million senior mortgage loan. The collateral was appraised at $326.9 million, representing an LTV of 66.4% on the $217.0 million senior mortgage loan. Morningstar DBRS' concluded value estimate represents a ¿17.5% variance to the appraiser's stabilized value estimate. Morningstar DBRS made total qualitative adjustments of 5.25% to reflect the strong submarket fundamentals, high property quality, and low cash flow volatility.

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/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 at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

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.

Other methodologies referenced in this transaction are listed at the end of this press release.

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-DBRS@morningstar.com.

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 Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

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
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024),
https://dbrs.morningstar.com/research/438283

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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