DBRS Morningstar Upgrades Six Classes of PFP 2019-5, Ltd.

DBRS, Inc. (DBRS Morningstar) upgraded the ratings on the following classes of secured floating-rate notes issued by PFP 2019-5, Ltd.:

-- Class B to AA (high) (sf) from AA (low) (sf)
-- Class C to A (high) (sf) from A (low) (sf)
-- Class D to A (low) (sf) from BBB (sf)
-- Class E to BBB (high) (sf) from BBB (low) (sf)
-- Class F to BB (high) (sf) from BB (low) (sf)
-- Class G to B (high) (sf) from B (low) (sf)

In addition, DBRS Morningstar confirmed the following rating:

-- Class A-S at AAA (sf)

All trends are Stable. The rating for Class A was discontinued as the class was fully repaid as of the March 2022 remittance report.

The rating upgrades reflect the increased credit support to the bonds as a result of recent collateral reduction as 11 loans, representing 30.0% of the original trust balance, have been fully repaid since the last DBRS Morningstar review in May 2021. DBRS Morningstar has published a Surveillance Performance Update report with in-depth analysis and credit metrics for the transaction and with business plan updates on select loans. To access this report, please click on the link under Related Documents below or contact us at [email protected].

DBRS Morningstar continues to monitor the largest loan in the pool, Ross Tower (Prospectus ID#1, 24.9% of the pool), which is secured by a high-rise office building in the Dallas central business district (CBD). The sponsor’s lease-up plan is behind schedule as a result of soft submarket demand for office space following the disruption caused by the Coronavirus Disease (COVID-19) pandemic. The property was 68.2% occupied as of January 2022, and the most recently reported net cash flow figure narrowly supported debt service payments. According to Q4 2021 Reis data for the Dallas CBD, the average vacancy rate for office properties in the submarket was 30.1%. The loan maturity was recently extended by one year to February 2023, and refinance risk remains high as the loan has a final maturity date in February 2024. As a result, DBRS Morningstar increased the probability of default in its analysis as it is unlikely the sponsor will achieve its business plan during the extended loan term.

As of the March 2022 remittance, 14 of the original 35 loans remain in the pool. The initial pool balance of $764.2 million has been reduced by 58.3% to $318.5 million. Loans secured by office properties represent 48.7% of the current pool balance, followed by multifamily properties at 27.2%. One multifamily loan, totaling 9.2% of the trust balance, is secured by a student housing property near the University of Houston.

The transaction is structured with a Permitted Funded Companion Participation Acquisition Period, ending with the April 2022 Payment Date. Through this date, the collateral manager can purchase funded loan participation interests into the trust subject to Eligibility Criteria as defined at issuance. As of March 2022 reporting, the Permitted Funded Companion Participation Acquisition Account had a balance of $1.0 million.

With the exception of the Ross Tower loan, borrowers are continuing to progress in their respective business plans, as the collateral manager has advanced $40.5 million to 12 individual borrowers. Of this amount, the borrower of the Ross Tower loan received an advance of $16.2 million, most of which is allocated for completing planned capital improvements at the property. There remains an additional $39.3 million of loan future funding allocated to nine individual borrowers to further aid in property stabilization efforts. Of this amount, $19.0 million is allocated to the Ross Tower loan, exclusively for accretive leasing costs.

As of March 2022, nine loans, representing 52.6% of the pool balance, are on the servicer's watchlist, primarily because of either a low debt service coverage ratio or an upcoming loan maturity date. All remaining loans are currently in their respective extended loan terms and are structured with an additional 12-month extension option outstanding, subject to extension fees and performance tests. An additional six loans, representing 32.1% of the pool balance, have been modified or have received forbearances since the onset of the pandemic.

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.

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

-- Prospectus ID#1 – Ross Tower (24.9% of the pool)
-- Prospectus ID#8 – The Icon (9.2% of the pool)
-- Prospectus ID#10 – Vantage at Judson (8.3% of the pool)
-- Prospectus ID#13 – San Fernando Lofts (7.3% of the pool)
-- Prospectus ID#11 – CapRidge Atlanta Office Portfolio (5.2% of the pool)

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 the 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/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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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