DBRS Morningstar Confirms Ratings of BANK 2019-BNK21

DBRS Morningstar (DBRS Limited) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-BNK21 (the Certificates) issued by BANK 2019-BNK21 as follows:

-- 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 A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (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.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since issuance. At issuance, the transaction consisted of 87 loans secured by commercial and multifamily properties, with an original trust balance of $1.18 billion. As of the September 2020 remittance, there has been a collateral reduction of 0.2% since issuance and all loans remain in the pool.

The pool has a moderate concentration of loans secured by retail and lodging properties, which represent 22.4% and 14.0% of the pool, respectively. Although these concentrations present challenges in the current environment amid the Coronavirus Disease (COVID-19) pandemic, which has brought significant stress to the hotel and retail sectors in the United States, the performance of the bulk of these loans remains stable to date. There are 11 loans backed by full and limited service hotel properties; of those 11 loans, only one smaller loan, representing less than 1.0% of the pool, is on the servicer’s watchlist for a coronavirus relief request by the borrower. Similarly, for the 16 loans backed by anchored and unanchored retail properties in the pool, there is just one loan on the servicer’s watchlist for a coronavirus relief request, but in this case the loan is a top-10 loan in Prospectus ID#8, National Retail Portfolio (4.2% of the pool). That loan is secured by a portfolio of five properties located in three states. The servicer’s October 2020 commentary noted the requested relief had been granted, with the loan brought current through the use of rollover reserve funds for the October 2020 remittance.

There are three loans, representing a combined 22.5% of the pool, that are shadow-rated investment grade by DBRS Morningstar, including Park Tower at Transbay (Prospectus ID#1, 9.7% of the pool), 230 Park Avenue South (Prospectus ID#2, 9.3% of the pool), and Grand Canal Shoppes (Prospectus ID#10, 3.4% of the pool). With this review, DBRS Morningstar confirmed the loans continue to perform in line with the investment-grade shadow ratings. However, the Grand Canal Shoppes loan is being closely monitored as the coronavirus pandemic has been particularly hard on the Las Vegas economy and sales at the property are expected to slump through the near to medium term. Although local and international tourism is down, DBRS Morningstar believes the collateral property’s prime location, historically strong performance, relatively low leverage, and tenant mix are significant mitigating factors for the near- to medium-term risks introduced by the pandemic.

As of the September 2020 remitttance, there is one loan in special servicing and five loans on the servicer’s watchlist, representing 0.7% and 8.6% of the pool, respectively. Four of the five loans on the servicer’s watchlist are being monitored for coronavirus relief requests. The Grand Canal Shoppes loan has several pari passu pieces secured in a number of transactions and appears to be on the watchlist for majority of those deals linked to a loan modification as a result of the pandemic. It is unclear as to why the reporting for the subject transaction does not reflect the watchlist status; as such, DBRS Morningstar has reached out to the servicer for clarification.

The 4440 East Tropicana Avenue (Prospectus ID#33, 0.7% of the pool) loan is secured by a two-tenant retail building located in Las Vegas, Nevada, and was recently transferred to special servicing in September 2020 for monetary default as a result of the coronavirus pandemic. At issuance, the collateral property was 100.0% occupied by two tenants, 24 Hour Fitness (79.8% of net rentable area (NRA), expires November 2038) and Tire Mart (20.2% of NRA, expires July 2029); however, according to a June 2020 article from Business Insider, the 24 Hour Fitness was closed as part of the company’s bankruptcy filing. Given the grim prospects for backfiling the space amid the ongoing pandemic, the loan was liquidated in the DBRS Morningstar analysis, with a loss severity in excess of 90.0% assumed.

This transaction was subject to DBRS Morningstar’s stress analysis as outlined in its June 29, 2020, commentary entitled “CMBS Conduit Exposure to Coronavirus Disease (COVID-19) Implications.” As further described in that commentary, DBRS Morningstar developed a ratings baseline scenario and sensitivity analyses for its rated conduit and agency multiborrower transactions to account for the impact of the coronavirus pandemic on projected losses for those transactions. The results of that analysis showed no ratings impact for the subject transaction.

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#33 – 4440 East Tropicana Avenue (0.7% of the pool)
-- Prospectus ID#10 – Grand Canal Shoppes (3.4% of the pool)
-- Prospectus ID#8 – National Anchored Retail Portfolio (4.2% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com The platform includes loan-level 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 [email protected].

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 [email protected].

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