DBRS Finalizes Provisional Ratings on BANK 2019-BNK16

DBRS, Inc. (DBRS) finalized the provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-BNK16 to be issued by BANK 2019-BNK16:

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

All trends are Stable. Classes X-D, X-F, X-G, X-H, D, E, F, G and H have been privately placed. The Class X-A, X-B, X-D, X-F, X-G and X-H balances are notional.

The collateral consists of 69 fixed-rate loans secured by 115 commercial and multifamily properties. The transaction is a sequential-pay pass-through structure. Two loans, representing 9.2% 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 9.2% of the pool has 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 provisional 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, two loans, representing 4.8% of the pool, have a DBRS Term debt service coverage ratio (DSCR) 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 resulted in 24 loans, representing 50.3% of the pool, having refinance DSCRs below 1.00x, and 14 loans, representing 28.3% of the pool, having refinance DSCRs below 0.90x. These credit metrics are based on whole-loan balances.

Fourteen loans, representing 26.4% of the pool, are located in super-dense urban and urban markets with increased liquidity that benefit from consistent investor demand, even in times of stress. Urban markets with exposure in the pool include New York, Los Angeles, Dallas, Cleveland and Indianapolis. Five loans, which include four of the top ten loans and represent 21.7% of the pool, exhibit Average (+) property quality. Additionally, only three loans, representing 5.4% of the pool, were assigned Average (-) property quality, while no properties were deemed Below Average.

Two loans within the top 15 largest loans exhibit credit characteristics consistent with investment-grade shadow ratings. Millennium Partners Portfolio exhibits credit characteristics consistent with an A (high) shadow rating, while Willowbend Apartments exhibits credit characteristics consistent with a AAA shadow rating. These loans combine to represent 9.2% of the pool. The pool has low term default risk as indicated by the DBRS Term DSCR of 1.81x. When shadow-rated loans, representing 9.2% of the pool, and loans secured by cooperative properties, representing 4.0% of the pool, are both excluded, the pool still exhibits a strong DBRS Term DSCR of 1.65x.

Twenty-four loans, representing 45.8% of the pool, including six of the largest 15 loans, are structured with interest-only (IO) payments for the full term. An additional 20 loans, representing 29.1% of the pool, have partial-IO periods ranging from 12 months to 60 months. This concentration includes Millennium Partners Portfolio, an investment-grade shadow-rated loan that represents 6.7% of the pool and 14.6% of the full-term IO concentration. Of the full-IO and partial-IO loans, five are located in either urban or super-dense urban markets with strong investor demand. These loans account for 30.6% of all IO loans and 22.9% of the pool as a whole. Expected amortization for the pool is 8.3%, which is in line with recent conduit securitizations, and 25 loans, representing 25.9% of the pool, are expected to amortize by 15.0% or more. The DBRS Refi DSCR of 1.16x indicates moderate refinance risk at the overall pool level, but when loans backed by cooperative properties and shadow-rated loans are excluded, the figure drops substantially to 1.02x. Fourteen loans, representing 28.3% of the pool, also have DBRS Refi DSCRs below 0.90x. These metrics are based on whole-loan balances. One of the pool’s loans with a DBRS Refi DSCR below 0.90x – Millennium Partners Portfolio – is shadow-rated investment grade by DBRS and has a large piece of subordinate mortgage debt outside the trust. This loan accounts for approximately 6.7% of the pool. Based on A-note balances only, the deal’s weighted-average DBRS Refi DSCR excluding cooperative loans improves to 1.09x.

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

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

For more information on this transaction and supporting data, please log into www.viewpoint.dbrs.com. DBRS will continue to monitor this transaction with periodic updates provided in the DBRS Viewpoint platform.

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 the description of the information that the third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While DBRS did not require due diligence services outlined in Form-15E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.

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.

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