DBRS Morningstar Confirms All Classes of MFTII 2019-B3B4 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates Series 2019-B3B4 issued by MFTII 2019-B3B4 Mortgage Trust as follows:

-- Class A at AA (low) (sf)
-- Class B at A (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 loan is secured by the borrower’s fee-simple interest in the Moffett Towers II – Buildings 3 and 4, two Class A office buildings totalling 701,266 square feet (sf) in Sunnyvale, California. While not part of the collateral, the tenant also has access to and pays rent on 23,860 sf of allocated amenity space. The subject buildings were newly constructed in 2019, were built to suit Facebook, and are LEED Platinum certified Class A facilities with strong curb appeal. The whole loan of $590.0 million consists of $350.0 million of senior debt, $155.0 million of junior debt and $85.0 million of mezzanine debt. The subject transaction represents $5.0 million of the senior debt and the entire junior debt portion. The loan is sponsored by Jay Paul Company, a leading real estate development and investment management firm.

Since issuance, the collateral has remained fully occupied by Facebook, an investment-grade tenant, on two 15-year leases extending to April and May 2034. According to the YE2021 financials, the loan reported net cash flow (NCF) of $41.3 million, compared with the YE2020 NCF of $36.4 million and the DBRS Morningstar NCF of $43.3 million. At issuance, DBRS Morningstar gave credit to the effective gross income by straight-lining Facebook’s rent over the term of the loan given its consideration as a long-term credit tenant. The leases include two 84-month extension options, each at 95.0% of the fair-market value and have no termination options available.

Because of the Coronavirus Disease (COVID-19) pandemic, office usage in the Bay Area was generally restricted as a result of statewide mitigation efforts, though capacity restrictions started to lift in 2021. According to media sources, Facebook’s offices were scheduled to reopen in January 2022 at limited capacity, with employees given the option to defer their return for a period of time or continue to work remotely.

DBRS Morningstar maintains a stable performance outlook for the loan based on the credit quality of the tenant; Facebook’s long-term leases, neither of which have any termination options; and its commitment to the Silicon Valley area based on its self-funded build-outs at the properties and recent expansion within the submarket.

ESG CONSIDERATIONS
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 4, 2022), 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.

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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