DBRS Morningstar Confirms Ratings on CORE 2019-CORE Mortgage Trust

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

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

All trends are Stable.

The ratings confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations at issuance. The underlying collateral for the transaction consists of the borrower’s fee-simple and leasehold interests in six office properties and one mixed-use property, totalling 2.6 million square feet (sf), in New York, Pennsylvania, Maryland, and Virginia. The loan is structured with an initial term of two years and three one-year extension options. The transaction is also structured with a $92.2 million senior mezzanine loan held outside the trust and a $55.0 million junior mezzanine loan. The properties are cross defaulted.

At issuance the portfolio was 84.4% occupied by 194 tenants, only two of which accounted for more than 5.0% of DBRS Morningstar’s rent figure. Roughly 50.0% of the DBRS Morningstar rent came from investment-grade-rated tenants, including universities and government entities. DBRS Morningstar notes the relatively low lease rollover exposure as leases representing a relatively minor 34.0% of the DBRS Morningstar rent are scheduled to roll during the fully extended loan term, suggesting healthy cash flow stability for the overall portfolio.

In March 2021, the Edgewater property was released from the portfolio, resulting in a paydown of $14.2 million, representing 110.0% of the allocated loan balance of $12.9 million. Additionally, with the April 2021 remittance, UPenn Life Sciences and Johns Hopkins Life Sciences were both released from the pool (at a release price at 110.0% of the respective allocated loan balance, as required by the loan documents), resulting in a paydown of $54.8 million and $95.0 million, respectively. Following these property releases, four of the original seven properties remain in the portfolio, representing a collateral reduction of approximately 40.7% since issuance. The largest properties remaining by allocated loan balance are One Pierrepont Plaza and Station Square, which represent 44.4% and 27.3% of the current loan balance, respectively.

According to the YE2020 rent roll, the original seven-property portfolio was 87.6% occupied compared with the June 2019 occupancy rate of 84.7%. Excluding the released properties as of April 2021, the combined occupancy rate was 84.7% at YE2020. The loan reported a YE2020 debt service coverage ratio (DSCR) of 1.63 times (x) compared with the YE2019 DSCR of 1.65x. According to the appraisal, the base ground-lease payment on One Pierrepont Plaza is scheduled to increase substantially to $2.3 million in May 2021 from $138,813 in 2019, which will positively affect in-place cash flows for the overall portfolio.

The loan sponsor is Brookfield Strategic Real Estate Partners III GP L.P. Brookfield Property Partners L.P. (BPY; rated BBB (low) with a Stable trend by DBRS Morningstar) is an owner, operator, and investor in commercial real estate with a diversified portfolio of office and retail assets as well as interests in multifamily, triple-net lease, industrial, hospitality, self-storage, student housing, and manufactured housing assets. BPY’s core office portfolio includes interests in 150 office properties in Tier 1 cities around the world, totalling 99 million sf.

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.

Class X-NCP is an interest-only (IO) certificate that references 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.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

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 26, 2021), 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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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