DBRS Assigns Provisional Ratings to CSAIL 2019-C15 Commercial Mortgage Trust

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-C15 to be issued by CSAIL 2019-C15 Commercial Mortgage Trust:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class X-D at A (low) (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E-RR at BBB (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at B (high) (sf)

All trends are Stable.

The collateral consists of 36 fixed-rate loans secured by 83 commercial and multifamily properties. The transaction is a sequential-pay pass-through structure. Three loans, representing 15.6% of the pool, are shadow rated investment grade by DBRS. Proceeds for the shadow-rated loans are floored at their respective ratings within the pool. When 15.6% of the pool have no proceeds assigned below the rated floor, the resulting subordination is diluted or reduced below the rated floor. The conduit pool was analyzed to determine the ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized net cash flow and their respective actual constants, nine loans, representing 26.3% of the pool balance have DBRS Term debt service coverage ratios (DSCRs) below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default. Additionally, to assess refinance risk given the current low interest rate environment, DBRS applied its refinance constants to the balloon amounts. This action resulted in 22 loans, representing 69.7% of the pool, having refinance DSCRs below 1.00x and 19 loans, representing 57.8% of the pool, having refinance DSCRs below 0.90x.

Six loans, representing 18.5% of the pool, have collateral in super-dense urban and urban markets with increased liquidity that benefits from consistent investor demand, even in times of stress. Urban markets represented in the deal include New York City, Brooklyn, Beverly Hills, Culver City, Seattle and San Antonio. Only two loans, totaling 10.2% of the transaction balance, are secured by properties that are primarily leased to a single tenant. The largest of these loans is the headquarters of Darden Restaurants, Inc., a multi-brand restaurant operator headquartered in Orlando, Florida, representing 9.7% of the pool balance and 95.7% of the single-tenant concentration. Loans secured by properties occupied by single-tenants have been found to suffer higher loss severities in an event of default.

Fifteen loans, representing 47.4% of the pool, including eight of the largest 15 loans, are structured with interest-only (IO) payments for the full term. An additional 15 loans, representing 46.6% of the pool, have partial-IO periods ranging from 23 months to 60 months. The full-term IO concentration includes 2 North 6th Place, SITE JV Portfolio and 787 Eleventh Avenue, the three shadow-rated loans, which collectively represent 15.6% of the pool and 33.0% of the full-term IO concentration. Of these 15 loans, six loans, representing 18.5% of the transaction’s full-IO concentration, have excellent locations in super-dense urban and urban markets that benefit from steep investor demand. The DBRS Term DSCR is calculated using the amortizing debt-service obligation and the DBRS Refinance (Refi) DSCR is calculated considering the balloon balance and lack of amortization when determining refinance risk. DBRS determines the probability of default (POD) based on the lower of the DBRS Term DSCR or DBRS Refi DSCR; therefore, loans that lack amortization will be treated more punitively.

The DBRS Refi DSCR is 0.92x, indicating a higher refinance risk on an overall pool level. In addition, 22 loans, representing 69.7% of the pool, have DBRS Refi DSCRs below 1.00x. Nineteen of these loans, comprising 57.8% of the pool, have DBRS Refi DSCRs less than 0.90x, including five of the top ten loans. These metrics are based on whole-loan balances. Two of the pool’s loans with a DBRS Refi DSCR below 0.90x, 787 Eleventh Avenue and 2 North 6th Street, which represent 9.6% of the transaction balance, are shadow-rated investment grade by DBRS and have a large piece of subordinate mortgage debt outside the trust. Based on A-note balances only, the deal’s weighted-average (WA) DBRS Refi DSCR improves substantially to 1.02x and the concentration of loans with DBRS Refi DSCRs below 1.00x and 0.90x reduces to 59.8% and 48.0%, respectively. The pool’s DBRS Refi DSCRs for these loans are based on a WA stressed refinance constant of 9.91%, which implies an interest rate of 9.4% amortizing on a 30-year schedule. This represents a significant stress of 4.2% over the WA contractual interest rate of the loans in the pool. DBRS models the POD based on the more constraining of the DBRS Term DSCR and DBRS Refi DSCR.

Classes X-A, X-B and X-D are IO certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrs.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

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

The principal methodology is North American CMBS Multi-borrower Rating Methodology, which can be found on dbrs.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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