DBRS Morningstar Confirms All Ratings on CSAIL 2019-C15 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-C15 issued by CSAIL 2019-C15 Commercial Mortgage Trust as follows:

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

Classes E-RR, F-RR, and G-RR carry Negative trends. All other trends remain Stable. The rating on Class A-1 was previously discontinued as a result of a full repayment with the October 2021 remittance.

DBRS Morningstar’s loss expectations remain in line with the prior review. The Negative trends are primarily driven by select loans of concern that continue to show increased risk from issuance, as further detailed below. At issuance, the transaction consisted of 36 fixed-rate loans secured by 83 commercial and multifamily properties, with a trust balance of $829.3 million. As of the February 2022 remittance, 35 loans remain within the transaction with a trust balance of $812.6 million, reflecting nominal collateral reduction of 2.0% since issuance. Two loans, representing 4.6% of the pool, are currently in special servicing and 10 loans, representing 32.4% of the pool, are on the servicer’s watchlist.

The largest DBRS Morningstar Hotlist loan, Continental Portfolio (Prospectus ID#13; 3.1% of the pool), is secured by a 910,171-square-foot Class A office building in Rolling Meadows, Illinois, approximately 25 miles northwest of the Chicago central business district. High vacancy rates in the subject’s submarket and consistent declines in the property’s occupancy since issuance, remain DBRS Morningstar’s primary concerns. The property’s occupancy declined to 62% as of September 2021 from 73.3% at YE2020 and 89.1% at issuance. Despite this, the debt service coverage ratio (DSCR) as of the Q3 2021 financial reporting was 2.58 times (x), up from 2.38x at YE2020, primarily as a result of a higher rental collection rate and lower operating expenses. Leases representing 7.8% of the net rentable area are scheduled to roll by YE2022. The sponsor made a substantial equity infusion of $53.6 million at acquisition in 2019, which is a mitigating factor worth noting; however, the declining occupancy, upcoming tenant rollovers, and added stress of the ongoing Coronavirus Disease (COVID-19) pandemic on an already-challenged submarket are indicative of increased term risks for this loan. As of the February 2022 remittance, the loan remains current. DBRS Morningstar will continue to monitor the loan for updates.

The largest specially serviced loan, Nebraska Crossing (Prospectus ID#15; 2.9% of the pool), is secured by an outdoor mall in Gretna, Nebraska, roughly 20 miles southwest of Omaha. The loan transferred to special servicing in May 2020 at the borrower’s request and a consent agreement was subsequently executed. The special servicer has approved the borrower’s request for access to certain reserve funds and is working with the borrower to implement cash management provisions. The most recent appraisal in June 2021 valued the property at $89.4 million, lower than the issuance value of $150.0 million but above the outstanding whole loan balance of $71.7 million. According to March 2021 reporting, the DSCR was 1.71x, an improvement from the YE2020 DSCR of 1.62x. Recent occupancy has not been reported; however, a review of the tenant roster on the mall website indicates that the property is well occupied. Although the value decline is suggestive of increased risks for this loan from issuance, mitigating factors include a relatively granular rent roll, strong historical performance, and a cooperative sponsor that appears to be working with the servicer to cure the loan default. As of the February 2022 remittance, the loan is current but remains in special servicing.

The other specially serviced loan, Brooklyn Multifamily Portfolio (Prospectus ID#23; 1.7% of the pool), is secured by a multifamily portfolio of 22 units, spread across three properties in Brooklyn’s Bushwick (two properties) and Gowanus (one property) neighbourhoods. The loan transferred to special servicing in October 2020 for delinquency and is currently past due for the August 2020 payment and all subsequent payments. The special servicer’s workout strategy is foreclosure, although this has been delayed because of New York’s foreclosure moratorium, which was lifted on January 15, 2022. Additionally, the borrower has been uncooperative with a court order granting the servicer’s request to appoint a receiver. At issuance, DBRS Morningstar noted that the properties compared favourably with others within their respective neighbourhoods. However, the lack of sponsor cooperation in curing the default and failure to provide updated reporting suggests the risk profile for this loan remains elevated from issuance. DBRS Morningstar will continue to monitor the loan for updates in performance and workout.

At issuance, DBRS Morningstar shadow-rated three loans—SITE JV Portfolio (Prospectus ID#3; 6.2% of the pool), 787 Eleventh Avenue (Prospectus ID#4; 5.5% of the pool), and 2 North 6th Street (Prospectus ID#8; 4.1% of the pool)—investment grade, supported by the loans’ strong credit metrics, strong sponsorship strength, and historically stable collateral performance. With this review, DBRS Morningstar confirms that the characteristics of these loans remain consistent with the investment-grade shadow-rating.

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, and X-D 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#23 – Brooklyn Multifamily Portfolio (1.7% 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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

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