Morningstar DBRS assigns BBB (high) rating to Shadowbrook Properties mortgage loan

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Shadowbrook BBB (high) rating

Highlights

Morningstar DBRS assigned a BBB (high) rating with Stable trend to the 4.52% interest-only mortgage loan for Shadowbrook Properties, LLC, balance $30.5 million as of May 2026.
The $30.5 million loan is secured by a 296-unit garden-style multifamily property in Modesto, featuring ongoing capital improvements and 44.5% of units upgraded since 2016.
Key credit metrics include a 71.3% loan-to-value ratio, $42.8 million property value, debt service coverage ratio of 2.4x, and debt yield of 10.9%.

Loan structure and property backing

As reported by Morningstar DBRS, the agency assigned a BBB (high) credit rating with a Stable trend to the 4.52% mortgage loan made to Shadowbrook Properties, LLC. The interest-only loan is split into two notes and has a current balance of $30.5 million as of May 2026.

The loan is secured by the fee simple interest in a garden-style multifamily property at 3001 Hahn Drive in Modesto, around 70 miles south of Sacramento and 88 miles east of San Francisco. Built in 1986, the asset includes 29 two-story apartment buildings on a 14.70-acre site and contains 296 units, made up of 168 one-bedroom, 64 two-bedroom one-bathroom, and 64 two-bedroom two-bathroom apartments.

The property has seen ongoing capital improvements, with upgrades completed on about 44.5% of units since 2016. Amenities include two swimming pools, a fitness center, clubhouse, spa/sauna, racquetball and tennis courts, common laundry facilities, and 604 parking spaces.

Credit metrics support stable outlook

Morningstar DBRS says the rating reflects a 71.3% loan-to-value ratio based on its concluded property value of $42.8 million, along with stable and predictable cash flows from the asset. The agency also cites a debt service coverage ratio of 2.4 times and a debt yield of 10.9%, metrics it views as supportive of credit quality.

The rating rationale also includes qualitative adjustments related to cash flow volatility, market fundamentals, and property quality, although the agency notes a negative qualitative adjustment to property quality. Morningstar DBRS says no environmental, social, or governance factors had a significant or relevant effect on the credit analysis, and adds that the rating remains subject to ongoing surveillance.

Our earlier report on Fitch’s downgrade of Whitbread to BBB with a Stable Outlook explained how weaker consumer demand and inflation pressure in 2023 weighed on profitability and pushed leverage higher. We also noted Fitch’s view that Premier Inn’s strong market position, ongoing investment, and solid liquidity should help the group stay resilient despite a tougher UK trading environment.

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