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

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of the Commercial Mortgage-Backed Notes issued by ACAM 2019-FL1, 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. In conjunction with this press release, DBRS Morningstar has published a Surveillance Performance Update report with in-depth analysis and credit metrics for the transaction, including business plan updates on the select loans. To access this report, please click on the link under Related Documents below or contact us at [email protected].

The rating confirmations reflect the overall stable performance of the transaction since issuance. The initial collateral consisted of 21 floating-rate mortgages secured by 35 mostly transitional properties with a cut-off balance totaling $400.3 million that excluded $87.4 million of future funding commitments as most loans were in a period of transition with plans to stabilize and improve asset value. During the 24-month reinvestment period, the Issuer may acquire future funding commitments and additional eligible loans subject to the Eligibility Criteria. The deal pays sequentially after the reinvestment period expires in December 2021.

As of the August 2021 remittance, there are 16 loans in the transaction with a current trust balance of $348.2 million and $52.1 million in the Reinvestment Account. Since DBRS Morningstar’s previous rating action in October 2020, 10 loans, totaling $171.2 million, have been repaid from the transaction, including three loans totaling $48.9 million that the issuer purchased out of the transaction at par. Two of these three loans were secured by hotel collateral, a property type that has been disproportionately and negatively affected by the ongoing coronavirus pandemic. Additionally, six loans, totaling $105.5 million, were added to the Trust over the same period. According to an update from the collateral manager, a cumulative amount of $55.5 million in future funding commitments has been released to 14 individual borrowers as of August 2021 to aid in business plan realization. Of the $55.5 million advanced to borrowers, $36.7 million has been purchased into the Trust. A cumulative amount of $96.2 million allocated to 15 individual borrowers has yet to be released.

As of the August 2021 remittance, seven loans, representing 42.5% of the pool, are on the servicer’s watchlist and no loans are in special servicing. Six loans, representing 49.8% of the pool, were granted some form of pandemic-related forbearance or loan modification. Most borrowers are progressing towards business plan completion and all but three loans reported rent collections at 100% as of July 2021.

Only one loan, the James Hotel NYC (Prospectus ID#3, 9.6% of the pool), is secured by hotel collateral. This full-service boutique hotel is located in the Soho neighborhood of Lower Manhattan and is currently being monitored on the servicer’s watchlist for low cash flow and a coronavirus relief request. Relief was provided in the form of a six-month interest deferral starting in November 2020 in exchange for a $5.0 million equity contribution by the sponsor to fund operating and debt service shortfalls through 2021. The sponsor’s business plan entails a $21.0 million PIP renovation that includes a major repositioning of the F&B outlets, upgrades to hotel rooms, reconfiguration of the hotel entrance, and the transformation of the second floor into a lounge. The renovations have reportedly been completed in accordance with the business plan. The hotel was closed for most of 2020 but reopened in April 2021, rebranded as ModernHaus Soho. DBRS Morningstar increased the probability of default in its analysis of this loan, given the uncertainty surrounding the hospitality market and the prolonged decline in cash flow.

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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