DBRS Morningstar Confirms All Classes of LoanCore 2019-CRE2 Issuer Ltd.

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the following classes of floating-rate notes issued by LoanCore 2019-CRE2 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 (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G 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 33 floating-rate mortgages secured by 49 transitional properties totaling approximately $1.06 million, excluding approximately $120.2 million of future funding commitments. The transaction is structured with an initial 24-month Reinvestment Period whereby the Issuer may acquire additional loans or include additional future funding participations and funded companion participations, with principal repayment proceeds. As of the May 2021 remittance, the trust consists of 26 loans with an aggregate principal balance of $1.06 billion and approximately $63.9 million in unfunded future funding commitments remain. There are 13 loans, representing 54.4% of the aggregate principal balance, that are pari passu structures with companion notes placed in the LoanCore 2019-CRE3 transaction, also rated by DBRS Morningstar.

According to the May 2021 remittance, there are no loans in special servicing and three loans (5.3% of the pool) on the servicer’s watchlist for maturity risk concerns. Two loans, The Cigar Factory (Prospectus ID#27, 1.3% of the pool) and The Volt Campus (Prospectus ID#35, 2.8% of the pool), were flagged for upcoming maturity in June 2021; however, both loans have extension options remaining. The servicer has advised that the third watchlisted loan, Lakeside Office (Prospectus ID#34, 1.2% of the pool), which was flagged in the May 2021 maturity, is expected to repay in the near term.

Eight loans, representing 27.0% of the pool, were modified in 2020 due to performance issues related to the Coronavirus Disease (COVID-19) pandemic. The largest modified loan, Exhibit on Superior (Prospectus ID#1, 7.8% of the pool), is secured by a 298-unit Class A apartment complex in Chicago. The loan was modified in October 2020 to allow for a waiver of the debt service coverage ratio (DSCR) requirement for the loan extension option in exchange for a $3.0 million principal paydown. In connection with the extension of the loan term, the sponsor executed a lease with Eggy’s restaurant to backfill the vacated Left Coast space. The property had an overall occupancy rate of 90.5% as of November 2020.

The 183 Madison Avenue loan (Prospectus ID#2, 9.8% of the pool) is secured by a 265,367-square foot office property in Midtown Manhattan. The borrower initially requested a three-month forbearance at the onset of the pandemic in May 2020; however, the YE2020 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 90.0% occupied as of YE2020; however, the pandemic has delayed the lease-up of the vacant retail space and has affected cash flow. The loan reported a trailing 11 months ended November 2020 DSCR of 0.93 times 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.

DBRS Morningstar materially deviated from its North American CMBS Insight Model when determining the ratings assigned to Class G as the quantitative results suggested higher ratings on the class. The material deviation is warranted given the sustainability of loan performance trends not demonstrated.

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 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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