DBRS Morningstar Confirms Ratings on All Classes of Sutherland Commercial Mortgage Trust 2019-SBC8, Removes Ratings from Under Review with Negative Implications
CMBSDBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-SBC8 issued by Sutherland Commercial Mortgage Trust 2019-SBC8 as follows:
-- Class A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (high) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
All trends are Stable. DBRS Morningstar also removed the classes from Under Review with Negative Implications, where they were placed on June 19, 2020. At that time, there was rising cumulative delinquency that spiked to 26.0% in May 2020 following the outbreak of the Coronavirus Disease (COVID-19) pandemic. The Under Review with Negative Implications status reflected the uncertainty regarding the coronavirus’ potential impact on loan performance and the resultant effect on future credit support. As of the November 2020 remittance, the delinquency rate had decreased markedly, leading DBRS Morningstar to remove the Under Review with Negative Implications status on all classes.
The transaction is composed of individual fixed- and floating-rate small-balance loans secured by commercial and multifamily properties with an average loan balance of approximately $234,000. As of the November 2020 remittance, 988 of the original 1,223 loans remain in the pool with an aggregate principal balance of $230.9 million, representing a collateral reduction of 24.1% since issuance. There are currently 104 loans, representing 8.9% of the current pool balance, that are 30+ days delinquent. DBRS Morningstar elevated the probability of default levels for these loans to recognize the increased credit risk to the trust.
The pool had a high concentration of properties in the states of New York (42.8% of the current pool balance), California (19.1% of the current pool balance), and Massachusetts (8.4% of the current pool balance); however, the pool is otherwise geographically diverse with an average DBRS Morningstar Market Rank of 4.9. By property type, the pool has concentrations of loans secured by mixed use (40.6% of the current pool balance), multifamily (29.9% of the current pool balance), and unanchored retail (16.8% of the current pool balance) properties. The pool benefits from a high percentage of well-located properties as well as loans that initially had low leverage and were fully amortizing; however, DBRS Morningstar received limited borrower and property-level information at issuance and considered the property qualities to be Average (-)/Below Average based on the sampled properties, which comprised 35.0% of the current pool balance.
The transaction is configured with a modified pro rata pay pass-through structure.
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.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is the 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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