DBRS Morningstar Confirms All Classes of Citigroup Commercial Mortgage Trust 2019-GC41

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-GC41 issued by Citigroup Commercial Mortgage Trust 2019-GC41 as follows:

-- 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 AS at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G-RR at B (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since issuance. This transaction closed in August 2019 with an original trust balance of $1.28 billion. At issuance, the collateral consisted of 43 loans secured by 100 commercial and multifamily properties. As of the June 2021 remittance, all loans remain in the pool with an aggregate principal balance of $1.27 billion, representing a collateral reduction of 0.3% since issuance.

Loans secured by office properties represent the greatest property type concentration, accounting for 33.4% of the current pool balance. Meanwhile, the pool has a smaller concentration of loans secured by retail and lodging properties, which represent 14.3% and 10.1% of the current pool, respectively. Additionally, the pool features four loans, representing a combined 18.1% of the pool, that DBRS Morningstar shadow-rates as investment grade: 30 Hudson Yards, Grand Canal Shoppes, Moffett Towers II Buildings 3 & 4, and The Centre. With this review, DBRS Morningstar confirmed the loans continue to perform in line with the investment-grade shadow ratings.

DBRS Morningstar continues to monitor the Grand Canal Shoppes loan as the Coronavirus Disease (COVID-19) pandemic has been particularly hard on the Las Vegas economy, and sales at the property and its financial performance have declined since issuance. The loan was previously on the servicer’s watchlist for a relief request submitted by the borrower because of the pandemic, but the request was ultimately retracted and the loan was removed from the watchlist. The loan was returned to the servicer’s watchlist in June 2021 for failing a debt-yield trigger that required the debt yield to be above 6.5%, with the servicer calculating a debt yield of 5.9% at December 2020. The cash flow declines appear to be related to occupancy drops in the last year, but the in-place debt service coverage ratio (DSCR) remained generally healthy at 1.74 times (x) at YE2020.

A May 27, 2021, article in the Las Vegas Review-Journal reported that tourist traffic to Las Vegas in April 2021 was the highest since February 2020 but still down just over 27.0% from April 2019. The article also noted hotel room rates and occupancy rates had rebounded significantly in recent months, with the lag in traffic to the city attributed to the reduction in trade shows and conventions compared with pre-pandemic levels. DBRS Morningstar believes the Grand Canal Shoppes’ prime location, historically strong performance, relatively low leverage, and tenant mix are significant mitigating factors for the near- to medium-term risks introduced by the pandemic and suggest the property will be well positioned to capture visitor traffic as tourism levels continue to rise over the lows of 2020.

As of the July 2020 remittance, one loan was in special servicing and nine loans were on the servicer’s watchlist, representing 0.6% and 21.2% of the pool, respectively. The loans on the servicer’s watchlist are being monitored for a variety of reasons, including coronavirus relief requests, trigger events, and low DSCRs. The Burbank Collection loan (Prospectus ID#21; 1.6% of the pool) is secured by 39,035 square feet (sf) of weakly anchored retail space that makes up the ground floor retail space beneath a multifamily property in Burbank, California. This loan is on the servicer’s watchlist following the loan’s return from special servicing, where it was transferred in July 2020. The property’s tenant base includes several restaurants that catered to patrons of an AMC Theatres location across the street. When the movie theatre was closed because of the pandemic, the tenants at the subject property suffered as a result and the loan went delinquent with the sponsor requesting relief from the servicer, which prompted the loan’s transfer to special servicing. The loan was ultimately brought current and transferred back to the master servicer in June 2021.

The Floridian Hotel & Suites loan (Prospectus ID#39; 0.6% of the pool) transferred to special servicing in June 2020 and remains delinquent for the October 2020 debt service payment. The loan is secured by a 130-key, independently branded, limited-service hotel in Orlando. The servicer obtained an appraisal in January 2021 that valued the property on an as-is basis at $7.9 million compared with the issuance appraised value of $13.5 million. The January 2021 appraisal also estimated an as-stabilized value of $11.5 million. Given the small loan size, the rated Certificates are generally well insulated against any loss with this loan at resolution.

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, and X-F 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.

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 the March 21, 2021 North American CMBS Surveillance Methodology, 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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