DBRS Assigns Provisional Ratings to Citigroup Commercial Mortgage Trust 2019-GC41

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-GC41 to be issued by Citigroup Commercial Mortgage Trust 2019-GC41:

-- 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-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class AS at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B as AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class F at BB (high) (sf)
-- Class X-F at BBB (low) (sf)
-- Class G-RR at B (high) (sf)

All trends are Stable.

Classes X-B, X-D, D, E, X-F, F and G-RR will be privately placed.

The collateral consists of 43 fixed-rate loans secured by 64 commercial and multifamily properties. The transaction is of a sequential-pay pass-through structure. 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. Four loans, representing a combined 18.0% of the pool, are shadow-rated investment grade by DBRS. When the cut-off loan balances were measured against the DBRS Stabilized Net Cash Flow and their respective actual constants, two loans, representing a combined 1.7% of the pool, had a DBRS Term Debt Service Coverage Ratio below 1.15 times, a threshold indicative of a higher likelihood of mid-term default. The pool additionally includes seven loans, representing a combined 10.2% of the pool by allocated loan balance, with issuance loan-to-values (LTVs) in excess of 67.1%, a threshold historically indicative of above-average default frequency. The weighted-average (WA) LTV of the pool at issuance was 58.4%, and the pool is scheduled to amortize down to a WA LTV of 56.5% at maturity.

The collateral features four loans, representing a combined 18.0% of the pool, that are shadow-rated investment grade by DBRS: 30 Hudson Yards, Grand Canal Shoppes, Moffett Towers II Buildings 3 & 4 and The Centre. 30 Hudson Yards exhibits credit characteristics consistent with an A (high) shadow rating, Grand Canal Shoppes exhibits credit characteristics consistent with a BBB (high) shadow rating, Moffett Towers II Buildings 3 & 4 exhibits credit characteristics consistent with a AA shadow rating and The Centre exhibits credit characteristics consistent with a BBB (high) shadow rating.

Only one loan, representing 0.9% of the pool by allocated loan balance, was assigned Average (-) property quality, while no properties were deemed Below Average or Poor quality. Additionally, 11 loans representing 46.6% of the pool by allocated loan balance, exhibited either Average (+), Above Average or Excellent property quality. The pool’s largest loan, 30 Hudson Yards, is secured by collateral that DBRS deems to be of Excellent property quality. Additionally, ten loans, representing a combined 35.3% of the pool, are located in areas with a DBRS Market Rank of 6, 7 or 8, which are characterized as urbanized locations. These markets benefit from increased liquidity that is driven by consistently strong investor demand. Such markets, therefore, tend to benefit from lower default frequencies than less dense suburban, tertiary and rural markets. Areas with a DBRS Market Rank of 7 or 8 are especially densely urbanized and benefit from significantly elevated liquidity. Nine loans, representing 30.6% of the pool by allocated loan balance, are located in areas with a DBRS Market Rank of 7 or 8.

Seven loans, representing 30.1% of the aggregate pool balance, are secured by properties that are either fully or partially leased to a single tenant. The largest single-tenant property by proportion of pool balance (30 Hudson Yards) represents 7.8% of the aggregate pool balance, and five of the top ten loans by proportion of pool balance are either fully or partially leased to a single tenant. DBRS sampled six of the seven loans secured by single-tenant properties. Additionally, two of the seven loans leased to a single tenant are shadow-rated investment grade by DBRS (30 Hudson Yards and Moffett Towers II Buildings 3 & 4). Six of the seven identified properties are leased to single tenants that DBRS considers to be investment-grade rated: 30 Hudson Yards, USAA Office Portfolio, Moffett Towers II Buildings 3 & 4, Powered Shell Portfolio – Manassas, Powered Shell Portfolio – Ashburn and Comcast Building Tucson. The Zappettini Portfolio is secured by ten individual real estate properties that, while individually may be either fully or partially leased to a single tenant, are occupied by 13 tenants across eight separate leases at the time of loan closing.

The pool has a relatively high concentration of loans secured by office properties, as evidenced by 11 loans, representing 33.3% of the pool by allocated loan balance, being secured by such properties. DBRS considers office properties to be a riskier property type with a generally above-average default frequency. Of the 11 loans secured by office properties, two loans, representing 9.5% of the pool by allocated loan balance, are shadow-rated investment grade by DBRS: 30 Hudson Yards and Moffett Towers II Buildings 3 & 4. Two of the 11 identified loans, representing 8.5% of the pool by allocated loan balance, are secured by office properties located in areas with a DBRS Market Rank of 8, which is characterized as a highly dense, urbanized area such as New York or San Francisco. These markets benefit from increased liquidity that is driven by consistently strong investor demand. Such markets, therefore, tend to benefit from lower default frequencies than less dense suburban, tertiary and rural markets. The WA expected loss of the nine loans secured by office properties that are not located in DBRS Market Rank 8 or are shadow-rated investment grade is more than two times the WA expected loss of the overall pool. As a result, the risk of these loans is reflected in the credit enhancement levels of the pool.

Twenty-seven loans, representing a combined 80.5% of the pool by allocated loan balance, are structured with full-term interest-only (IO) periods. Expected amortization for the pool is only 2.7%, which is substantially less than recent conduit securitizations. Of the 27 loans structured with full-term IO periods, eight loans, representing 29.1% of the pool by allocated loan balance, are located in areas with a DBRS Market Rank of 7 or 8. These markets benefit from increased liquidity that is driven by consistently strong investor demand. Such markets, therefore, tend to benefit from lower default frequencies than less dense suburban, tertiary and rural markets. Four of the 27 identified loans, representing 18.0% of the pool by allocated loan balance, are shadow-rated investment grade by DBRS: 30 Hudson Yards, Grand Canal Shoppes, Moffett Towers II Buildings 3 & 4 and The Centre. The full-term loans are for the most part pre-amortized, as the WA issuance LTV for these loans is low at 55.7%.

Classes X-A, X-B, X-D and X-F 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.

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID #1 – 30 Hudson Yards (7.8% of the pool)
-- Prospectus ID #2 – Millennium Park Plaza (5.5% of the pool)
-- Prospectus ID #3 – USAA Office Portfolio (4.9% of the pool)
-- Prospectus ID #4 – The Lincoln Apartments (4.7% of the pool)
-- Prospectus ID #5 – Post Ranch Inn (4.7% of the pool)
-- Prospectus ID #6 – Grand Canal Shoppes (4.7% of the pool)
-- Prospectus ID #7 – Moffett Towers II Buildings 3 & 4 (4.3% of the pool)
-- Prospectus ID #8 – The Zappettini Portfolio (4.3% of the pool)
-- Prospectus ID #8 – Delong Self Storage (4.3% of the pool)
-- Prospectus ID #10 – Powered Shell Portfolio – Manassas (4.0% of the pool)
-- Prospectus ID #11 – Summit Technology Center (4.0% of the pool)
-- Prospectus ID #12 – U.S. Industrial Portfolio (3.9% of the pool
-- Prospectus ID #13 – City Center Plaza (3.7% of the pool)
-- Prospectus ID #14 – 505 Fulton Street (3.5% of the pool)
-- Prospectus ID #15 – Wind Creek Casino and Resort Bethlehem (3.5% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for most outstanding commercial mortgage-backed securities transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

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 the North American CMBS Multi-borrower Rating Methodology, which can be found on www.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 not 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.

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.

DBRS, Inc.
333 West Wacker Drive, Suite 1800
Chicago, IL 60606 USA