DBRS Morningstar Confirms All Classes of Benchmark 2019-B9 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-B9 issued by Benchmark 2019-B9 Mortgage Trust:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class X-B at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class X-D at BBB (sf)
-- Class F at BB (sf)
-- Class X-F at BB (high) (sf)
-- Class G at B (high) (sf)
-- Class X-G at BB (low) (sf)
-- Class H at B (low) (sf)
-- Class X-H at B (sf)

All trends are Stable. DBRS Morningstar also removed Classes X-D, E, X-F, F, X-G, G, X-H, and H from Under Review with Negative Implications, where they were placed on August 6, 2020.

The rating confirmations reflect the overall stable performance of the transaction, which has generally been in line with DBRS Morningstar’s expectations at issuance. As of the January 2021 remittance, all 50 original loans remain in the pool, with no defeasance to date. As of the January 2021 remittance, two loans, representing 1.9% of the current pool balance, are in special servicing.

Additionally, 17 loans, representing 36.7% of the current pool balance, are on the servicer’s watchlist. These loans include five top 15 loans, with the largest loan in the pool, 3 Park Avenue (Prospectus ID#1; 10.0% of the pool), on the watchlist for periods of delinquency between May and October 2020 and the borrower’s submitted Coronavirus Disease (COVID-19) relief request. Many of the loans on the watchlist are secured by hospitality properties (five loans, 6.2% of the pool) and retail properties (four loans, 7.7% of the pool), both of which have been among the most immediately affected by the coronavirus pandemic. All five of the watchlist loans backed by hospitality properties have been flagged for considerable cash flow declines that have been driven by the impacts of the pandemic. Three of the four retail loans on the watchlist are there for tenant-related issues including rent deferrals that reduced income for the property, dark space, and bankruptcy. Although the performance declines by those and other properties that back loans in this pool indicate increased risks from issuance, DBRS Morningstar notes that the strong performance of the underlying hotels and the lack of delinquency before the pandemic are mitigating factors it considered when reviewing the transaction.

At issuance, DBRS Morningstar assigned an investment-grade shadow rating to one loan: Aventura Mall (Prospectus ID#22; 7.2% of the current pool). With this review, DBRS Morningstar confirmed that the loan’s performance remains in line with the characteristics of an investment-grade loan.

Both of the loans in special servicing transferred for payment default and, as of the January 2021 remittance, are more than 90 days delinquent. The largest of these loans is the La Quinta Inn Berkeley (Prospectus ID#33; 1.2% of pool), which is secured by a 133-key limited-service hotel in Berkeley, California. The loan transferred to special servicing in December 2020 and, at the time of the transfer, was past due for the September 2020 payment and all payments due thereafter. According to the servicer, an executed prenegotiation letter is pending from the borrower as of January 2021. According to the most recent reporting available, the YE2019 debt service coverage ratio (DSCR) was 1.29 times (x) with an occupancy rate of 68%, compared with the Issuer’s DSCR of 1.86x and occupancy rate of 70% at issuance. The cash flow declines in 2019 were driven by a combination of relatively minor declines in revenue and similarly minor spikes in expenses; historically, the property showed steady revenue growth over the life of the previous commercial mortgage-backed securities (CMBS) loan, which was securitized in the MSBAM 2013-C13 transaction, not rated by DBRS Morningstar. The stable historical performance as well as the issuance value of $21.8 million that implies a relatively low loan-to-value ratio of 48.2% are mitigating factors to the extended delinquency for this loan and should incentivize the sponsor and the servicer to reach an agreement to resolve the outstanding defaults.

The smaller specially serviced loan, Best Western State College (Prospectus ID#40; 0.8% of pool), is secured by a 79-key limited-service hotel in State College, Pennsylvania. The loan transferred to special servicing in July 2020 and has remained at least 90 days delinquent since August 2020. According to the servicer, discussions on potential workouts are ongoing with the borrower as of January 2021. The Q3 2020 financials reported a DSCR of 0.98x with an occupancy rate of 61%, compared with the YE2019 DSCR of 1.16x with an occupancy rate of 65%. According to the September 2020 appraisal, the property value was $6.5 million, a 37.5% decline compared with the issuance value of $10.4 million and slightly under the loan balance of approximately $6.6 million. However, the loan has remained current before the pandemic and, given the relatively small size of the loan, the rated bonds are generally well insulated if the loan is resolved with a loss.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, X-D, X-F, X-G, and X-H are interest-only (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.

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

-- Prospectus ID#1 – 3 Park Avenue (10.0% of the pool)

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.

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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