DBRS Morningstar Confirms All Ratings of CLNC 2019-FL1, Ltd.

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of notes issued by CLNC 2019-FL1, Ltd. as follows:

-- Class A Notes at AAA (sf)
-- Class A-S Notes at AAA (sf)
-- Class B Notes at AA (low) (sf)
-- Class C Notes at A (low) (sf)
-- Class D Notes at BBB (sf)
-- Class E Notes at BBB (low) (sf)
-- Class F Notes at BB (low) (sf)
-- Class G Notes at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall performance of the transaction, which has remained in line with DBRS Morningstar’s expectations. 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 and business plan updates on select loans. For access to this report, please click on the link under Related Documents below or contact us at [email protected].

The pool’s collateral initially consisted of 21 floating-rate loans secured by cash flowing assets, many of which were in a period of transition with plans to stabilize and improve asset values. At issuance, the cut-off balance was $1.0 billion, with an additional $124.9 million of available future funding commitments held outside of the trust. The transaction included a 24-month reinvestment period, which expired in October 2021. Following this date, the bonds began to amortize sequentially with loan repayments and scheduled loan amortization.

As of the April 2022 remittance, there are 22 loans in the pool with an aggregate principal balance of $907.3 million, representative of collateral reduction of 9.9% since the Reinvestment Period ended. In total, 16 loans have been repaid from the trust, and 16 loans were added to the pool during the reinvestment period, including two loans with a cumulative trust balance of $32.2 million since the last DBRS Morningstar rating action of the transaction in September 2021.

Most borrowers are progressing toward completing their stated business plans with some delays reported as a result of the Coronavirus Disease (COVID-19) pandemic. Based on an update from the collateral manager, $72.6 million of future funding had been advanced to 15 individual borrowers through March 2022. The largest advance, $15.5 million, had been made to the borrower of the Turing at The Fields loan, which is secured by a multifamily property in Milpitas, California. The loan was structured with future funding of $16.8 million to fund capital improvements, leasing costs, and debt service shortfalls. An additional $68.4 million allocated to 17 individual borrowers remains outstanding to further aid in property stabilization efforts.

The transaction is concentrated by property type as 13 loans, representing 46.1% of the pool balance, are secured by multifamily properties, and six loans, representing 34.5% of the pool balance, are secured by office properties. With regard to location, 16 properties, representing 70.3% of the pool balance, are located in suburban markets, defined as markets with a DBRS Morningstar Market Rank of 3, 4, and 5. Suburban markets have historically exhibited less liquidity and tenant/investor demand when compared with urban markets. The remaining six properties and 29.7% of the pool are in urban markets, defined as markets with a DBRS Morningstar Market Rank of 6, 7, and 8.

As of the April 2022 remittance, there are no loans in special servicing or on the servicer’s watchlist. According to the servicer’s report, there are three loans, representing 16.1% of the pool, that were modified to provide borrowers with maturity extensions and changes to the floating interest rate spread. Based on the updates provided by the collateral manager, however, several loans were previously modified with borrower relief necessary as a direct result of hardships brought about by the coronavirus pandemic. The Blanchard Building loan (Prospectus ID#11, 4.5% of the pool) was scheduled to mature in April 2022 but remains in the pool. The loan has two 12-month extension options remaining but is subject to conditions tied to minimum debt yield and debt service coverage ratio requirements. Based on recent financials, property performance does not currently meet these thresholds, and the loan will likely require a modification to waive these conditions in order for the borrower to qualify for an extension.

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.

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. 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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