Rating Action: Moody's assigns a provisional rating to one class of notes to be issued by STWD 2021-FL2, Ltd.Global Credit Research - 15 Apr 2021Approximately $669 million of structured securities affectedNew York, April 15, 2021 -- Moody's Investors Service, ("Moody's") has assigned a provisional rating to one class of notes to be issued by STWD 2021-FL2, Ltd. (the "Issuer").Issuer: STWD 2021-FL2, Ltd.Cl. A, Assigned (P)Aaa (sf)The Cl. A notes are referred to herein as the "Rated Notes."RATINGS RATIONALEThe rationale for the rating is based on our methodology and considers all relevant risks, particularly those associated with the CRE CLO's portfolio and structure.STWD 2021-FL2, Ltd. is a cash flow commercial real estate CLO ("CRE CLO"). The transaction has a two-year reinvestment period ending in May 2023; followed by a six-month replenishment period with reinvestments limited to existing companion participations of up to $127,500,000 in aggregate (i.e. 10.0% of the estimated effective date balance). At the closing date, the transaction is expected to have 100.0% of the assets fully identified and closed. The closing pool is expected to be collateralized by 24 commercial real estate collateral interests in the forms of mortgage loans, combined loans and senior and pari passu participation interests in a mortgage loan or combined loan, secured by 97 properties. The total par amount at closing/effective date is expected to be $1,275,000,000. The initial portfolio consists of 93% floating rate obligations with a 3.4% weighted average spread (WAS) and 7% fixed rate obligations with a 7.37% weighted average coupon. Additionally, 100% of the initial floating rate assets have LIBOR floors with a weighted average floor of 0.91% for an effective note rate of 3.05%. The transaction is subject to a series of tests and eligibility criteria during the reinvestment, replenishment and amortization period that includes a weighted average spread (WAS) covenant of 2.25% and weighted average coupon (WAC) covenant of 5.0% and no LIBOR floors.The transaction is expected to close on or about May 5, 2021.The initial loan pool has a Moody's weighted average loan-to-value (LTV) ratio of 116.7%. Approximately 28.8% of the pool were acquisition financing loans and 67.7% were refinancing loans (including recapitalization), and 3.5% of the pool were both refinance and acquisition. The top three property type exposures are office at 45.0%, multifamily at 38.8%, and self-storage at 3.9%. The top five assets (38.2% of the initial loan pool) and their respective property type and Moody's LTV are as follows: Hope & Flower -- Multifamily -- 119.3%; 2) Life Time Coral Gables -- Multifamily -- 125.1%; 3) Tysons Metro Center -- Office -- 128.2%; 4) Mansell Overlook -- Office -- 121.4%; 5) 1213 Walnut -- Multifamily -- 137.9%.STWD Investment Management, LLC (the "Manager") will act as the collateral manager of the CRE CLO. This is their second Moody's rated CRE CLO transaction. The Manager will direct the selection, acquisition and disposition of collateral on behalf of the Issuer during the transaction's two-year reinvestment period and replenishment period. Thereafter, unscheduled principal payments and sale proceeds of impaired assets will be used to pay down the notes per the transaction waterfall. Wells Fargo Bank, N.A. will act as the servicer and backup advancing agent, and LNR Partners, LLC will act as the special servicer on the underlying collateral for this transaction. They will provide servicing to the collateral interest during the life cycle of the transaction. Wilmington Trust, National Association will act as trustee.In addition to the Rated Notes, the Issuer will issue seven classes of subordinated notes; and one class of preferred shares.The transaction incorporates interest and par coverage tests: (i) interest and distribution par coverage tests, if triggered, divert interest proceeds to pay down the notes in order of seniority, (ii) interest and reinvestment par value test, if not satisfied, limit reinvestment and replenishment.Moody's has identified the following parameters as key indicators of the expected loss within CRE CLO transactions: weighted average rating factor (WARF), a primary measure of credit quality with credit assessments completed for all of the collateral, weighted average life (WAL), weighted average recovery rate (WARR), number of asset obligors; and pair-wise asset correlation. These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals.For modeling purposes, Moody's used the following base-case assumptions:Par amount: $1,275,000,000Number of obligors: 10.0% max. single obligor; 14 min. HerfWeighted Average Rating Factor (WARF): 5000Weighted Average Recovery Rate (WARR): 54.1%Weighted Average Life (WAL): 5.5 yearsWeighted Average Spread (WAS): 2.25%Weighted Average Coupon (WAC): 5.00%Pair-wise asset correlation: 35.0%Methodology Underlying the Rating Action:The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1231934. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.Factors That Would Lead to an Upgrade or Downgrade of the Rating:The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Managers investment decisions and management of the transaction will also affect the performance of the Rated Notes.Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was a component in determining the rating assigned to the Rated Notes. This sensitivity analysis includes increased default probability relative to the base-case.Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment.The coronavirus pandemic has had a significant impact on economic activity. Although global economies have shown a remarkable degree of resilience to date and are returning to growth, the uneven effects on individual businesses, sectors and regions will continue throughout 2021 and will endure as a challenge to the world's economies well beyond the end of the year. While persistent virus fears remain the main risk for a recovery in demand, the economy will recover faster if vaccines and further fiscal and monetary policy responses bring forward a normalization of activity. As a result, there is a heightened degree of uncertainty around our forecasts. Our analysis has considered the effect on the performance of commercial real estate, especially stemming from declines in hotel occupancies (particularly conference and other group attendance) and declines in foot traffic and sales for non-essential retail, from a gradual and unbalanced recovery in US economic activity.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Further details regarding Moody's analysis of this transaction may be found in a related pre-sale report, soon to be available on Moodys.com.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1278059.The analysis relies on a Monte Carlo simulation that generates a large number of collateral loss or cash flow scenarios, which on average meet key metrics Moody's determines based on its assessment of the collateral characteristics. Moody's then evaluates each simulated scenario using model that replicates the relevant structural features and payment allocation rules of the transaction, to derive losses or payments for each rated instrument. The average loss a rated instrument incurs in all of the simulated collateral loss or cash flow scenarios, which Moody's weights based on its assumptions about the likelihood of events in such scenarios actually occurring, results in the expected loss of the rated instrument.Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. David Kim Associate Lead Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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