DBRS Morningstar Assigns Provisional Ratings to BANK 2019-BNK24

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-BNK24 to be issued by BANK 2019-BNK24 as follows:

-- Class A-1 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 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 (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class X-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. Classes X-D, X-F, X-G, X-H, D, E, F, G, H, and RR will be privately placed.

The collateral consists of 71 fixed-rate loans secured by 104 commercial and multifamily properties. The transaction is a sequential-pay pass-through structure. DBRS Morningstar analyzed the conduit pool to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. Four loans, representing 22.4% of the pool, are shadow-rated investment grade by DBRS Morningstar. When DBRS Morningstar measured the cut-off loan balances against the DBRS Morningstar Stabilized Net Cash Flow (NCF) and their respective actual constants, the initial DBRS Morningstar weighted-average (WA) debt service coverage ratio (DSCR) for the pool was 2.94 times (x). The WA DSCR is elevated because 22.4% of the pool is shadow-rated investment grade and low-leverage residential co-operative loans represent 8.9% of the pool. Residential co-operative loans have very low loan-level credit enhancement at the AAA level and near-zero loan-level credit enhancement at the BBB (low) level. Only one loan, Totowa Shoppes, had a DBRS Morningstar Term DSCR below 1.30x, a threshold indicative of a higher likelihood of mid-term default. The WA loan-to-value (LTV) ratio of the pool at issuance was 53.1%, and the pool is scheduled to amortize down to a WA LTV of 51.2% at maturity. The pool includes 17 loans, representing 24.6% of the pool by allocated loan balance, with issuance LTVs equal to or higher than 65.0%, a threshold historically indicative of above-average default frequency.

The transaction includes four loans, representing 22.4% of the total pool balance, that are shadow-rated investment grade by DBRS Morningstar, including 55 Hudson Yards, Jackson Park, Park Tower at Transbay, and ILPT Industrial Portfolio. Park Tower at Transbay exhibits credit characteristics consistent with a AAA shadow rating, Jackson Park exhibits credit characteristics consistent with a AA (high) shadow rating, ILPT Industrial Portfolio exhibits credit characteristics consistent with a AA (low) shadow rating, and 55 Hudson Yards exhibits credit characteristics consistent with a BBB shadow rating.

Thirty-two loans in the pool, representing 8.9% of the transaction, are backed by residential co-operative loans. Residential co-operatives tend to have minimal risk, given their low leverage and low risk to residents if the co-operative associations default on their mortgages. The WA LTV for these loans is 12.5%.

Fifty loans, representing 69.7% of the pool, have collateral located in Metropolitan Statistical Area (MSA) Group 3, which represents the best-performing group in terms of historical commercial mortgage-backed security (CMBS) default rates among the top 25 MSAs. The MSA Group 3 has a historical default rate of 17.25%, which is 50.00% lower than the overall CMBS historical default rate of approximately 28.00%.

Forty-seven loans, representing 67.8% of the pool by allocated loan balance, exhibit issuance LTVs of equal to or less than 60.0%, a threshold historically indicative of relatively low-leverage financing and generally associated with below-average default frequency.

Only one loan had property quality deemed to be Average (-) while none had property quality deemed Below Average or Poor. Additionally, nine loans, representing 46.6% of the pool balance, exhibited Average (+), Above Average or Excellent property quality. One of the top ten loans, Park Tower at Transbay, is secured by collateral with Excellent property quality.

The pool has a relatively high concentration of loans secured by office properties as ten loans, representing 33.7% of the pool by allocated loan balance, are secured by this property type. DBRS Morningstar considers office properties to be a riskier property type with a generally above-average historical default frequency. Two of the ten office loans (55 Hudson Yards and Park Tower at Transbay), comprising 12.2% of the pool balance, are shadow-rated investment grade by DBRS Morningstar. Five office properties, totaling 18.9% of the pool balance, have DBRS Morningstar DSCRs higher than 2.00x while the remaining five office loans, totaling 14.8% of the pool balance, have DBRS Morningstar DSCRs higher than 1.45x. Four office loans, representing 73.1% of the office concentration, are secured by office properties in areas characterized as extremely dense and desirable urban markets, which have a DBRS Morningstar Market Rank of 8.

Thirty loans, representing 75.2% of the pool by allocated loan balance, are structured with full-term interest-only (IO) periods. Of these 30 loans, 12 loans, representing 42.5% of the pool by allocated loan balance, are in areas with a DBRS Morningstar Market Rank of 6, 7, or 8. These markets benefit from increased liquidity even during times of economic stress. Four of the 30 identified loans, representing 22.4% of the total pool balance, are shadow-rated investment grade by DBRS Morningstar: Park Tower at Transbay, Jackson Park, ILPT Industrial Portfolio, and 55 Hudson Yards.
DBRS Morningstar completed a cash flow review and a cash flow stability and structural review on 26 of the 71 loans, representing 83.5% of the pool by loan balance. For loans not subject to an NCF review, DBRS Morningstar applied the average NCF variance of its respective loan seller. DBRS Morningstar uses recent leasing to determine leasing cost assumptions in loan-level NCF analysis, which was the main driver for the sampled commercial properties in the transaction. The sampled variance in the transaction reflects an increasing leasing cost environment, particularly for suburban office properties. The DBRS Morningstar sample had an average NCF variance of -10.2% and ranged from -21.5% (Galleria 57) to +0.2% (Park Tower at Transbay).

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

-- Prospectus ID#1 – 55 Hudson Yards (8.2% of the pool)
-- Prospectus ID#2 – Jackson Park (8.2% of the pool)
-- Prospectus ID#3 – 1412 Broadway (8.2% of the pool)
-- Prospectus ID#4 – Bronx Multifamily Portfolio II (6.3% of the pool)
-- Prospectus ID#5 – DoubleTree New Orleans (6.0% of the pool)
-- Prospectus ID#6 – The Parklawn Building (5.3% of the pool)
-- Prospectus ID#7 – Austin Marriott Portfolio (5.1% of the pool)
-- Prospectus ID#8 – Galleria 57 (4.2% of the pool)
-- Prospectus ID#9 – Park Tower at Transbay (4.1% of the pool)
-- Prospectus ID#10 – West LA Multifamily Portfolio (3.7% of the pool)
-- Prospectus ID#11 – Hampton Inn & Suites - John Wayne Airport (2.7% of the pool)
-- Prospectus ID#12 – Giant Anchored Portfolio (2.4% of the pool)
-- Prospectus ID#13 – Baytown Multifamily Portfolio (2.4% of the pool)
-- Prospectus ID#14 – Hualapai Commons (2.1% of the pool)
-- Prospectus ID#15 – ILPT Industrial Portfolio (2.0% 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 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 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 Morningstar 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].

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