Press Release

DBRS Morningstar Confirms All Classes, Assigns Negative Trends to Three Classes of A10 Bridge Asset Financing 2019-B, LLC

CMBS
August 07, 2020

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of the Commercial Mortgage Pass-Through Certificates, Series 2019-B issued by A10 Bridge Asset Financing 2019-B, LLC (the Issuer):

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

DBRS Morningstar assigned Negative trends to Classes D, E, and F, given the heighted risk profile of multiple loans in the transaction, which are either delinquent or currently under a forbearance period. These loans are likely to need corrective action from the servicer and will face headwinds in the execution of stated business plans at issuance due to the effects of the Coronavirus Disease (COVID-19) pandemic. The remaining classes in the transaction have Stable trends.

The initial collateral consisted of 36 fixed-rate and eight floating-rate mortgages secured by mostly transitional properties with a cut-off balance of $281.1 million, excluding approximately $83.3 million of future funding commitments. The pool has a maximum balance of $320.0 million, inclusive of $38.9 million of future funding companion participations. According to the July 2020 remittance report, there are 45 loans in the pool with a current principal balance of $310.9 million. Since issuance, 10 loans, which have a current trust balance of $72.1 million, have been funded into the transaction while nine loans that had a combined principal balance at origination of $67.9 million have been repaid. Most loans are secured by transitional properties with plans to stabilize and improve the asset value. During the Reinvestment Period, the Issuer may acquire Pre-Approved Future Funding Companion Participations and additional eligible loans, subject to the Reinvestment Conditions. The outstanding balance of unfunded future funding obligations is currently $56.8 million, which includes unfunded amounts for capital expenditures as well as tenant improvement and leasing commission (TI/LC) costs of $43.2 and $6.6 million, respectively.

Twelve loans, representing 33.4% of the principal balance, are secured by properties that have a DBRS Morningstar Market Rank of 6 or greater while 15 loans, representing 25.4% of the principal balance, are secured by multifamily, industrial, or self-storage assets. Additionally, 24 loans, approximately 54.6% of the principal balance, are secured by retail and office assets. According to the July 2020 reporting, five loans, representing 22.1% of the principal balance, are on the servicer’s watchlist, including four loans within the Top 10. The largest loan on the watchlist, Janss Marketplace (6.7% of the current principal balance), is secured by a 449,829 square foot (sf) anchored retail property in Thousand Oaks, California. The loan recently entered into a 180-day forbearance agreement where the deferred debt service payments accrued between May 2020 and October 2020 will be repaid in 22 equal monthly installments from January 2021 through October 2022. Additionally, the borrower deposited $1.1 million as a tax and insurance escrow payment with the lender because monthly tax and insurance escrow deposits will be waived during the forbearance period. The sponsor’s business plan focuses on stabilizing the property through a $9.6 million capex and TI/LC program that was partially allocated for Aldi, set to take occupancy of 22,630 sf later this year, and for Gold’s Gym, which currently leases 31,526 sf on a lease through August 2023. At issuance, Gold’s Gym planned to lease an additional 15,800 sf on the second floor above its existing space; however the company filed for Chapter 11 bankruptcy protection in May 2020, which could prove to be problematic for their already existing space. A recent update from July 2020 indicated that construction for the Aldi space was delayed due to the coronavirus pandemic and that the tenant is expected to begin paying rent in October 2020. The collateral manager also noted that there was no indication that the Gold’s Gym’s expansion will be delayed or terminated. Additionally, multiple tenants requested rent relief including two of the three largest tenants—Dojo Boom (8.4% of net rentable area (NRA), expiring June 2027) and Regal Cinemas (7.8% of NRA, expiring April 2028). DBRS Morningstar increased the probability of default to reflect the increased risk associated with this loan.

The next three largest loans on the servicer’s watchlist, cumulatively representing 14.6% of the principal balance, are secured by assets in either Brooklyn or Manhattan, New York, and each loan has had a history of delinquency with individual loans currently 60 to 90 days delinquent. The Gowanus Assemblage loan (5.3% of the principal balance) is secured by a 57,418 sf mixed use property in Brooklyn, the 500 Dekalb Avenue loan (4.9% of the principal balance) is secured by a 64,548 sf office property in Brooklyn, and the 46-48 Lispenard (4.5% of the principal balance) loan is secured by five units of an 11-unit luxury residential condominium building in the Tribeca neighborhood of Manhattan. The servicer is currently evaluating resolution strategies for each loan; however, given the heightened risk with business plan execution and recent delinquency, DBRS Morningstar applied stressed scenarios in its analysis of these loans.

ESG CONSIDERATIONS

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.

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

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

-- Prospectus ID#1 – Janss Marketplace (6.7% of the principal balance)
-- Prospectus ID#2 – Stamford Landing (7.4% of the principal balance)
-- Prospectus ID#3 – Posner Commons (5.4% of the principal balance)
-- Prospectus ID#4 – Gowanus Assemblage (5.3% of the principal balance)
-- Prospectus ID#5 – 46-48 Lispenard (4.5% of the principal balance)
-- Prospectus ID#6 – 500 Dekalb (4.9% of the principal balance)
-- Prospectus ID#10 – 20 Waterview Boulevard (3.6% of the principal balance)
-- Prospectus ID#11 – New Utrecht (3.3% of the principal balance)
-- Prospectus ID#12 – The Hub 640 (2.6% of the principal balance)
-- Prospectus ID#15 – 129 Glover Avenue (2.2% of the principal balance)
-- Prospectus ID#47 – Holleman Crossing (5.6% of the principal balance)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.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.

The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.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 dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

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