DBRS Morningstar Confirms All Classes of BANK 2019-BNK16

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-BNK16 issued by BANK 2019-BNK16:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the October 2021 remittance, there has been a 2.1% collateral reduction since issuance, with 68 of the original 69 loans remaining in the pool. In terms of property type concentration, 31% of the pool is secured by office properties, 36% by retail properties, 11% by hotel properties, and 6% by multifamily properties.

As of the October 2021 remittance, there was one loan in special servicing—the second-largest loan in the pool, Southeast Hotel Portfolio (Prospectus ID#2, 7.1% of the pool balance). This loan is secured by a portfolio of four limited-service hotels and one full-service hotel, totalling 759 keys. The portfolio is spread across three cities including Atlanta; Orlando; and Gastonia, North Carolina. The loan transferred to special servicing in March 2020 because a forbearance agreement was executed in response to the borrower’s Coronavirus Disease (COVID-19) relief request. The forbearance period, which began in April 2020 with a term of 180 days, allowed the borrower to use reserve funds to pay debt service, with a total of $3.1 million in reserves used for this purpose over the forbearance period. The borrower resumed payments in September 2020, with the reserve payments used during the forbearance to be repaid in 18 instalments. However, in January 2021, an amendment was executed to allow for the repayment period to be deferred to January 2022.

Based on STR, Inc. reports for all five properties for the trailing three months (T-3) ended June 30, 2021, the weighted-average occupancy rate, average daily rate, and revenue per available room (RevPAR) were 69.8%, $90.53, and $62.66, respectively. The T-3 RevPAR improved as compared with the T-12 period ended June 30, 2021, suggesting that traffic is increasing in general, but the portfolio overall is underperforming when compared with the competitive set, with a RevPAR penetration rate of 94.2% for the T-3 period ended June 30, 2021. The performance lag is noteworthy, but DBRS Morningstar notes that the borrower appears committed to the portfolio, has been keeping the debt service payments current for more than a year, and has been proactive in managing the need for an amendment for the schedule on repaying the deferred amounts.

There are currently 14 loans on the servicer’s watchlist, representing 12.0% of the pool balance. The servicer is monitoring these loans for various reasons, including low debt service coverage ratio or occupancy figures, tenant rollover risk, deferred maintenance, and/or repayment of deferred funds associated with pandemic-related forbearance agreements and modifications.

One noteworthy loan in the top 15 is the U.S. Bank Centre loan (Prospectus ID#8, 3.4% of the pool balance), which is secured by a Class A office property in Cleveland. The two largest tenants, collectively representing 31.9% of the net rentable area (NRA), have leases expiring within the next 12 months, including Cohen & Company Ltd. (Cohen) (18.5% of NRA, lease expires in July 2022) and the U.S. Department of Housing and Urban Development (HUD) (13.4% of NRA, lease expires in December 2021). According to a CBRE posting that DBRS Morningstar located as of November 2021, the subject showed 27.1% of the NRA as available for lease, including the HUD space. The Cohen space was not listed for lease. Although there is significant rollover risk in the short to medium term, there are mitigating factors such as renewal options associated with several tenants as well as cash flow triggers tied to the leasing status for the largest tenants. In addition, there is currently $2.0 million held in leasing reserves as of the October 2021 reporting.

At issuance, the Millennium Partners Portfolio (Prospectus ID#3, 6.8% of the pool) and Willowbend Apartments (Prospectus ID#11, 2.5% of the pool) were shadow-rated investment grade. The Millennium Partners Portfolio loan has several pari passu pieces in a number of commercial mortgage-backed securities (CMBS) transactions, including three other deals rated by DBRS Morningstar (Morgan Stanley Capital I Trust 2018-MP, Morgan Stanley Capital I Trust 2018-L1, and BANK 2018-BNK14). With this review, DBRS Morningstar confirmed that the loans continue to perform in line with investment-grade loan characteristics.

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, X-F, X-G, and X-H 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#2 – Southeast Hotel Portfolio (7.1% of the pool)
-- Prospectus ID#8 – U.S. Bank Centre (3.4% of the pool)

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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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