DBRS Morningstar Confirms All Classes of FREMF 2019-K101 Mortgage Trust, Series 2019-K101

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Multifamily Mortgage Pass-Through Certificates, Series 2019-K101 issued by FREMF 2019-K101 Mortgage Trust, Series 2019-K101 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-M at AA (high) (sf)
-- Class X1 at AAA (sf)
-- Class XAM at AAA (sf)
-- Class X2-A at AAA (sf)
-- Class X2-B at A (low) (sf)
-- Class B at A (low) (sf)
-- Class C at BBB (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the November 2020 remittance, all of the original 58 fixed-rate loans secured by 58 multifamily properties remain in the pool with a collateral reduction of 0.1% since issuance as a result of scheduled amortization. The DBRS Morningstar weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield at issuance were 1.47x and 7.4%, respectively. The top 15 loans represent approximately 55.2% of the current pool balance, with 11 of those 15 loans reporting YE2019 financials, which showed a WA DSCR and WA debt yield for those 11 loans of 1.43x and 7.15%, respectively.

There are two loans on the servicer’s watchlist, representing 3.4% of the current pool balance, as of the November 2020 remittance. Both are current and have been flagged for declines in occupancy, primarily because of the impacts of the Coronavirus Disease (COVID-19) pandemic. The largest loan on the servicer’s watchlist, Alvista Long Beach (Prospectus ID#6, 3.2% of the pool), is secured by a garden-style multifamily complex in Long Beach, California. According to the servicer, 84.0% of the units have received various levels of renovations ranging from converted coworking spaces, modernized pool areas, and interior upgrades. Additionally, there is a dominant student population at the property, with several nearby college campuses. As of October 2020, the property reported an occupancy rate of 71.1%, a sharp decline from the YE2019 occupancy rate of 89.0%. Similarly, as of June 2020, the property reported a DSCR of 1.76x, significantly below the YE2019 DSCR of 2.30x. Although the performance declines indicate increased risks for this loan from issuance, the coverage remains relatively healthy and occupancy should recover as the coronavirus vaccines are distributed and on-campus learning at California colleges and universities returns to prepandemic protocols.

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.

Classes X1, XAM, X2-A, and X2-B 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.

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.

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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