DBRS Morningstar Finalizes Provisional Ratings on BANK 2019-BNK21

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-BNK21 (the Certificates) issued by BANK 2019-BNK21 (the Issuer):

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

All trends are Stable.

The collateral consists of 49 fixed-rate loans secured by 87 commercial and multifamily properties. The transaction is 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. Three loans, representing a combined 22.4% of the pool, are shadow-rated investment grade by DBRS Morningstar. When the cut-off loan balances were measured against the DBRS Morningstar Stabilized net cash flow and their respective actual constants, none of the loans had a DBRS Morningstar Term debt service coverage ratio below 1.15 times, a threshold indicative of a higher likelihood of mid-term default. However, the pool includes 15 loans, representing a combined 21.7% of the pool by allocated loan balance, with issuance loan-to-value (LTV) ratios equal to or 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 is 60.9%, and the pool is scheduled to amortize down to a WA LTV of 57.8% at maturity.

The transaction includes three loans, representing a combined 22.4% of the total pool balance, that are shadow-rated investment grade by DBRS Morningstar, including Park Tower at Transbay, 230 Park Avenue South and Grand Canal Shoppes. Park Tower at Transbay exhibits credit characteristics consistent with a AAA shadow rating, 230 Park Avenue South exhibits credit characteristics consistent with a BBB (low) shadow rating and Grand Canal Shoppes exhibits credit characteristics consistent with a BBB (high) shadow rating.

Eight loans, including six of the top ten loans, representing 39.9% of the pool, have Strong sponsorship according to DBRS Morningstar. Furthermore, DBRS Morningstar identified only two loans (which, combined, represent just 4.3% of the pool) that have sponsorship and/or loan collateral associated with a voluntary bankruptcy filing, a prior discounted payoff, a loan default, limited net worth and/or liquidity, a historical negative credit event and/or an inadequate commercial real estate experience.

Thirteen loans, representing a combined 35.5% of the pool by allocated loan balance, exhibit issuance LTVs of less than 59.3%, a threshold historically indicative of relatively low-leverage financing and generally associated with below-average default frequency.

No loans were deemed Average (-), Below Average or Poor property quality. Additionally, ten loans, representing 40.1% of the pool balance, exhibited Average (+), Above Average or Excellent property quality. The pool’s largest loan, Park Tower at Transbay, is secured by collateral that DBRS Morningstar deemed to be of Excellent property quality.

Eight loans, representing 34.3% of the aggregate pool balance, are secured by properties that are either fully or partially leased to a single tenant. Four of the top ten loans, including Park Tower at Transbay, 230 Park Avenue South, Domain Tower and 105 East 17th Street, are either fully or partially leased to a single tenant. DBRS Morningstar sampled six of the eight loans secured by single-tenant properties. Additionally, two of the eight loans leased to a single tenant (Park Tower at Transbay and 230 Park Avenue South) are shadow-rated investment grade by DBRS Morningstar. Five of the eight identified properties are leased to single tenants that DBRS Morningstar considers to be investment-grade rated: Park Tower at Transbay, 230 Park Avenue South, Domain Tower, 105 East 17th Street and Chase – Franklin Park, IL.

The pool has a relatively high concentration of loans secured by office properties, as evidenced by nine loans, representing 44.5% of the pool by allocated loan balance, that are secured by such properties. DBRS Morningstar considers office properties to be a riskier property type with a generally above-average historical default frequency. Of the nine loans secured by office properties, two loans, comprising 19.1% of the pool balance, are shadow-rated investment grade by DBRS Morningstar: Park Tower at Transbay and 230 Park Avenue South. Four of the nine identified loans, representing 24.9% of the pool balance, are secured by office properties located in areas with a DBRS Morningstar 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. Therefore, such markets tend to benefit from lower default frequencies than less dense suburban, tertiary and rural markets.

Twenty-five loans, representing a combined 71.7% of the pool by allocated loan balance, are structured with full-term IO periods. Expected amortization for the pool is only 4.7%, which is less than recent conduit securitizations. Of the 25 loans structured with full-term IO periods, five loans, representing 28.3% of the pool by allocated loan balance, are located in areas with a DBRS Morningstar Market Rank of 6 or 8. These markets benefit from increased liquidity even during times of economic stress. Three of the 25 identified loans, representing 22.4% of the total pool balance, are shadow-rated investment grade by DBRS Morningstar: Park Tower at Transbay, 230 Park Avenue South and Grand Canal Shoppes.

The pool features a relatively high concentration of loans secured by properties located in less-favorable suburban market areas, as evidenced by 23 loans, representing 31.3% of the pool balance, being secured by properties located in areas with a DBRS Morningstar Market Rank of either 3 or 4. An additional nine loans, totaling 9.8% of the pool balance, are secured by properties located in areas with a DBRS Morningstar Market Rank of either 1 or 2, which are typically considered more rural or tertiary in nature. Ten of the identified loans (which represent 9.2% of the pool balance and are secured by properties located in areas with a DBRS Morningstar Market Rank of 1, 2, 3 or 4) will amortize over the loan term, which can reduce risk over time. The average expected amortization of these loans is 18.9%, which is notably higher than the pool’s total WA expected amortization of 4.7%.

Four loans, representing 24.9% of the total pool balance, are secured by properties located in areas with a DBRS Morningstar Market Rank of 8, which are characterized as urbanized locations.

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

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

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

-- Park Tower at Transbay
-- 230 Park Avenue South
-- Domain Tower
-- Storage Post Portfolio
-- The Tower at Burbank
-- 105 East 17th Street
-- Tysons Tower
-- National Anchored Retail Portfolio
-- Embassy Suites Riverfront
-- Grand Canal Shoppes
-- NKX Multifamily Portfolio
-- U-Haul AREC Portfolio 35
-- 2621 Van Buren
-- El Paseo Simi
-- Westport Village
-- Greenway Park Plaza
-- Landing at Fancher Creek
-- DoubleTree Palm Beach Gardens
-- Monrovia Landing
-- Holiday Inn / Crowne Plaza Shenandoah
-- Springhill Suites Moab
-- Hilton Garden Inn San Antonio Rim
-- Global Data Center
-- Ashley Plaza
-- 420 South Beverly Drive
-- Chase - Franklin Park, IL

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 CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

With regard to due diligence services, DBRS Morningstar 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 Morningstar’s methodology, DBRS Morningstar 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 participate in the rating process for this rating action. DBRS Morningstar 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 [email protected].

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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