Morningstar DBRS Assigns Provisional Credit Ratings to IP 2025-IP Mortgage Trust

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2025-IP (the Certificates) to be issued by IP 2025-IP Mortgage Trust (IP 2025-IP):

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

All trends are Stable.

The IP 2025-IP single-asset/single-borrower transaction is collateralized by the borrower's fee-simple interest in a 1,328-unit Class A apartment complex spanning three 39-story towers with 539 parking spaces and 51,419 square feet (sf) of retail space in Tribeca, New York City. Transaction proceeds of $675.0 million along with $15.0 million of sponsor equity will be used to refinance $675.0 million worth of debt and to cover closing costs. Initially developed in 1975, the property has a current occupancy rate of 93.3% based on the April 17, 2025, rent roll.

Originally built in 1975 as part of an affordable housing initiative for lower- and middle-income residents, the property received tax breaks and subsidized mortgages until it exited the program in 2004. Upon exiting the program, the sponsor began renovating the units as they become available; the current tenants that were part of the Landlord Assistance Program (LAP) and those that are receiving Section 8 vouchers are allowed to stay in their units as long as they maintain occupancy and the sponsor has the ability to turn those units to free market-rate units once the residents vacate. Currently, the collateral has a mix of market-rate units, Section 8 voucher tenant units (Section 8), and LAP units. The fair-market units account for 805 units and about 60.6% of the total rentable units, the Section 8 units account for 252 units and about 19.0% of the total units, and the LAP units account for about 267 units and approximately 20.1% of the total units. The remaining four units, or 0.3% of the total rentable units, are nonrevenue employee units. Both the Section 8 voucher units and the LAP units are 100% occupied as of the April 2025 rent roll. The Section 8 tenants are responsible for paying rent up to 30% of their adjusted income with the U.S. Department of Housing and Urban Development paying the difference between the contractual tenant rent and the market rent for the units. Once a tenant vacates a Section 8 unit, it is no longer subject to the Section 8 program and may become a fair-market unit that can be leased at the current market rent. The LAP units are former Mitchell-Lama Housing Program tenants that are enrolled in LAP and are subject to annual rent increases, which track the New York City Rent Guidelines Board index +1%. If a tenant vacates one of the LAP units, the unit is no longer subject to LAP and becomes a fair-market unit. The sponsor's business plan is to renovate all Section 8, LAP, and unrenovated fair-market units upon turnover.

In addition to the residential portion of the collateral, there is approximately 51,419 sf of street-facing retail space and 539 parking spaces spread across five separate garages. The largest retail tenant is The Cocoon, which is a family-centered members club that focuses on child growth and development programming and camps; they have two New York City locations, with the other one being on the Upper West Side.

The collateral is located in the Tribeca neighborhood of New York City, which is part of the Reis-designated West Village/Downtown submarket. This submarket has historically benefited from low vacancy rates and stable rent trends. As of Q1 2025, the submarket vacancy rate was 3.7%, which shows a slight 0.3% increase since 2024. Since 2020, the submarket has seen a 30.0% rent increase in asking rent per unit to $5,638 from $4,306. In this same period, the vacancy rate has decreased to 3.7% from 5.4%. Furthermore, there is little new construction within the submarket and the vacancy rate is therefore expected to remain somewhat stable. The asking rent seen for properties of a similar vintage (1970-79) of $6,288 per unit is higher than the subject average rent of $5,005 per unit. As the Section 8 and LAP units turn, the sponsor hopes to raise rents to be in line with the market rate.

Morningstar DBRS' credit ratings on the Certificates address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related Principal Distribution Amounts and Interest Distribution Amounts for the rated classes.

Morningstar DBRS' credit ratings do not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, the credit ratings do not address Yield Maintenance Premiums.

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. 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 (May 16, 2025): https://dbrs.morningstar.com/research/454196.

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 Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025): https://dbrs.morningstar.com/research/448962

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

With regard to due diligence services, Morningstar DBRS 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 Morningstar DBRS' methodology, Morningstar DBRS used the data file outlined in the independent accountant's report in its analysis to determine the credit ratings referenced herein.

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

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned securities is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit 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 Commercial Mortgage Servicer Rankings (August 23, 2024): https://dbrs.morningstar.com/research/438283
-- 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

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