DBRS Morningstar Confirms All Classes of STWD 2019-FL1, Ltd.

DBRS Limited (DBRS Morningstar) confirmed its ratings on the notes issued by STWD 2019-FL1, Ltd. (the Issuer) as follows:

-- Class A Senior Secured Floating Rate Notes at AAA (sf)
-- Class A-S Second Priority Secured Floating Rate Notes at AAA (sf)
-- Class B Third Priority Secured Floating Rate Notes at AA (low) (sf)
-- Class C Fourth Priority Secured Floating Rate Notes at A (low) (sf)
-- Class D Fifth Priority Secured Floating Rate Notes at BBB (sf)
-- Class E Sixth Priority Secured Floating Rate Notes at BBB (low) (sf)
-- Class F Non Offered Floating Rate Notes at BB (low) (sf)
-- Class G Non Offered Floating Rate Notes at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. At issuance, the collateral for the transaction consisted of 20 floating-rate mortgages and one fixed-rate mortgage secured by 38 mostly transitional commercial real estate properties, with a total balance of $1.01 billion, excluding approximately $116.0 million of future funding commitments. The transaction is structured with an initial 24-month Reinvestment Period (ending with the August 2021 Payment Date), whereby the Issuer may acquire new loan collateral as well as additional future funding participations and funded companion participations for existing loans with principal repayment proceeds.

As of the June 2021 remittance, the trust consists of 27 loans with an aggregate principal balance of approximately $1.1 billion. Of these 27 loans, 20 were structured with future funding components totaling $256.8 million. Based on an update from the collateral manager, $164.5 million of cumulative future funding commitments were outstanding for individual borrowers to aid in property stabilization as of June 2021. Future funding for three loans, which were in the transaction at issuance totaling $2.4 million, has expired and will no longer be available to the individual borrowers. To date, 14 of the original 21 loans, representing 72.7% of the current transaction balance, remain in the pool. Two of these loans, Dune Vegas II (Prospectus ID#13, 1.3% of the current pool) and Winrock II (Prospectus ID#19, 2.2% of the current pool), have had collateral releases since issuance as a result of property sales, resulting in a principal paydown. There have been 11 newly acquired loans that have been added to the trust since issuance. One of these loans, Woodbury Portfolio (Prospectus ID#22, 4.7% of the current pool), has sold nine of the Class A and B office properties, reducing the portfolio’s size to 13 properties, resulting in a principal paydown.

According to the June 2021 remittance, there are no loans in special servicing, but there are 13 loans (50.6% of the current pool) on the servicer’s watchlist. Certain loans were added to the servicer’s watchlist with multiple triggers listed; however, only five loans (17.1% of the current pool) were primarily added because of performance related disruptions, three loans (16.1% of the current pool) for increased vacancy or near-term tenant lease expirations, and three loans (10.3% of the current pool) for upcoming maturity. The remaining loan (4.1% of the current pool) was on the list as a result of major water damage at the property; however, the servicer indicates that the restoration work has been complete.

Two of the loans on the servicer’s watchlist, Brown Palace Hotel & Holiday Inn Express Denver Downtown (Prospectus ID#8, 5.6% of the current pool) and The Hyatt Regency Houston (Prospectus ID#9, 5.3% of the current pool), were each previously granted three-month forbearances. Other terms included a waiver on furniture, fixtures, and equipment (FF&E) reserve requirements; the use of outstanding FF&E funds to cover operating shortfalls; extensions and terminations of certain capital expenditure projects; and cash management provisions until the deferred interest is repaid. While there have been major disruptions to the borrowers’ business plans and property operations, all three of the subject hotels are open for business and both loans are current on payments.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

In conjunction with this press release, DBRS Morningstar has published a rating action report with in-depth analysis and credit metrics for the transaction with business plan updates on the select loans. To access this report, please click on the link under Related Documents below or by contacting us at [email protected].

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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