DBRS Morningstar Confirms All Ratings of LoanCore 2019-CRE3 Issuer Ltd.

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of floating-rate notes issued by LoanCore 2019-CRE3 Issuer Ltd. (the Issuer):

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction.

At issuance, the pool consisted of 22 floating rate mortgages secured by 38 mostly transitional properties with a cumulative balance of $415.9 million, excluding $60.7 million of future funding commitments and $52.2 million of funded companion participations held outside the Trust. The transaction is structured with a Funded Companion Acquisition Period, where the Issuer may acquire funded Future Funding Participations and Funded Companion Participations with principal repayment proceeds. This period is scheduled to end with the May 2021 Payment Date. As of the April 2021 remittance, the trust consists of 15 loans with an aggregate principal balance of $364.3 million, representing a collateral reduction of 12.4% since issuance, with approximately $25.3 million in unfunded future funding commitments outstanding. All loans in the pool represent pari passu notes securitized in the LoanCore 2019-CRE2 transaction, also rated by DBRS Morningstar.

According to the April 2021 remittance, there are no loans in special servicing and one loan (2.9% of the pool) on the servicer’s watchlist. The loan on the servicer’s watchlist, The Cigar Factory (Prospectus ID#17, 2.9% of the pool) was flagged for upcoming maturity in June 2021; however, the loan contains two additional 12-month extension options available to the borrower. Five loans, representing 30.5% of the pool, were modified in 2020 due to complications arising from the Coronavirus Disease (COVID-19) pandemic. The largest modified loan, Florida Retail Portfolio (Prospectus ID#3, 13.0% of the pool), secured by seven cross-collateralized and cross-defaulted shopping centers throughout Orlando and South Florida, was modified in August 2020. The loan modification permitted the borrower to provide rent relief to small and medium-sized tenants without lender consent, reallocated $683,000 from a tax reserve into a cash collateral account, and extended the borrower’s obligation to fund approved renovation expenses totaling $525,000 from April 2020 to September 2020. The loan continues to perform well despite the impact from the pandemic and all tenants at each collateral property are open with collections stabilizing to prepandemic levels. As of November 2020, the loan reported a trailing-11-month (T-11) debt service coverage ratio (DSCR) of 1.72 times (x) with an occupancy rate of 78%.

The 183 Madison Avenue loan (Prospectus ID#2, 16.5% of the pool) is secured by a 265,367 square foot (sf) office property in Midtown Manhattan. The borrower initially requested a three-month forbearance at the onset of the pandemic in May 2020; however, the year-end (YE) 2020 business plan update provided by the collateral manager noted that no loan modification, forbearance, or other debt service relief was ultimately provided. The property has exposure to WeWork, Inc. (11.7% of the net rentable area (NRA); lease expires May 2035) and its ground-floor retail tenant, DomUS Design Center (Domus; 7.9% of NRA), vacated at lease expiry in June 2020. Domus had been paying well-below market rent and the sponsor’s business plan contemplated repurposing the retail space into smaller units to achieve higher rents. The office portion of the collateral was 90% occupied as of YE2020; however, the pandemic has delayed the lease-up of the vacant retail space and has impacted cash flow. As of November 2020, the loan reported a T-11 DSCR of 0.93x with an occupancy rate of 80.3%. DBRS Morningstar analyzed this loan with an elevated probability of default to reflect the loan’s current risk profile.

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.

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 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 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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