Morningstar DBRS assigns BBB (high) rating to Arrow Business Center mortgage loan in California

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Arrow Business Center loan rating

Highlights

Morningstar DBRS assigns BBB (high) rating to 2.75% Mortgage Loan due Jan. 1, 2032, for Arrow Business Center, LLC in Rancho Cucamonga.
Property is 98% leased as of May 20, 2025, but lease rollover risk is elevated with almost all leases expiring by the end of 2029.
Loan features a 69.5% loan-to-value ratio on a $15.1 million value, 3.8 times debt service coverage, $10.5 million balance, and 10.4% debt yield.

Loan profile and property fundamentals

As reported by Morningstar DBRS, the rating applies to the 2.75% Mortgage Loan due Jan. 1, 2032, made to Arrow Business Center, LLC. The loan is secured by a fee-simple interest in Arrow Business Center, an 11-building industrial business park at multiple addresses along White Oak Avenue, Maple Place, and Arrow Route in Rancho Cucamonga.

The property sits on about 9.15 acres in an established industrial area roughly two miles west of the Foothill Boulevard interchange of I-15. Morningstar DBRS says the site benefits from regional access to I-15, I-10, and I-210, supporting tenant demand and distribution-focused uses.

Built in 1989, the asset includes nine single-story light industrial buildings and two two-story office buildings. It has office build-out of about 27%, clear heights of 14 to 18 feet, 84 ground-level loading doors, and surface parking at about 2.74 spaces per 1,000 square feet, with the improvements described as in average overall condition.

Cash flow strength and lease rollover risk

As of the most recent rent roll dated May 20, 2025, the property is 98% leased, indicating strong current occupancy. At the same time, lease rollover risk is elevated because almost all leased net rentable area is scheduled to expire by the end of 2029.

Morningstar DBRS says it concluded $232,862 in tenant improvement and leasing commission reserves to address expected near-term re-leasing costs. The rating also reflects a 69.5% loan-to-value ratio based on a $15.1 million value, a debt service coverage ratio of 3.8 times, an interest-only structure with a current balance of $10.5 million as of April 2026, and a debt yield of 10.4%.

The agency says supportive qualitative adjustments related to property quality, cash flow volatility, and market fundamentals also contribute to the rating outcome. It adds that no environmental, social, or governance factors have a significant or relevant effect on the credit analysis.

Morningstar DBRS’s provisional ratings for Small Business Origination Loan Trust 2026-1 DAC outlined how a static securitisation of largely unsecured UK SME and sole-trader loans is structured and supported. Our publication noted the key credit features behind the ratings, including reserve funds, pro rata amortisation triggers that can switch to sequential pay, and an interest rate swap designed to manage fixed-to-floating exposure.

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