DBRS Morningstar Upgrades Three Classes of Prima Capital CRE Securitization 2019-RK1, Confirms Six

DBRS, Inc. (DBRS Morningstar) upgraded the ratings on three classes of Commercial Mortgage Pass-Through Certificates (the Certificates), issued by Prima Capital CRE Securitization 2019-RK1 as follows:

DreamWorks Campus and Headquarters (Group D Certificates):
-- Class A-D to AAA (sf) from BBB (low) (sf)
-- Class B-D to AAA (sf) from BB (low) (sf)
-- Class C-D to AAA (sf) from B (low) (sf)

In addition, DBRS Morningstar confirmed the ratings on the following classes:

The Gateway (Group G Certificates):
-- Class A-G at A (low) (sf)
-- Class B-G at BBB (low) (sf)
-- Class C-G at BB (high) (sf)

TriBeCa House (Group T Certificates):
-- Class A-T at BBB (low) (sf)
-- Class B-T at BB (low) (sf)
-- Class C-T at B (high) (sf)

All trends are Stable. Interest is deferrable on all rated Certificates other than Classes A-D, A-G, A-T, and B-G.

The upgrades reflect the defeasance of the loan backing the Group D Certificates, while the confirmations on the Group G Certificates and the Group T Certificates reflect the overall stable performance of the loans that back each of those groups of certificates. The transaction has a total mortgage balance of $152.3 million and consists of three nonpooled B-Notes tied to previously securitized collateral. The collateral includes U.S. Government Securities (which replaced the DreamWorks Campus and Headquarters) and two multifamily properties: The Gateway and TriBeCa House. The notes are secured by the grantor trust certificate representing beneficial interests in a subordinate loan, which is a portion of a whole loan. The three B-Notes are held within the trust and the loans are interest only through their respective loan terms. No loans appear on the servicer’s watchlist and none are in special servicing.

The transaction is composed of three Loan Groups — Group D, Group G, and Group T — with corresponding certificates tied to each. As nonpooled notes, proceeds from the collateral interest relating to any Loan Group will not be available to support shortfalls of any other Loan Group. Additionally, TriBeCa House is the only loan in the transaction that has existing mezzanine financing in place. No loans in the transaction are allowed to take on mezzanine or unsecured debt in the future. The Gateway and TriBeCa House loans have been determined by DBRS Morningstar to exhibit investment-grade credit characteristics on a stand-alone basis.

The Group D Certificates represent 41.2% of the total transaction. With the recent acquisition of the DreamWorks Campus and Headquarters property by Brookfield Properties, the subject loan was defeased, with U.S. Government Securities replacing the original collateral backing the Group D Certificates.

The Gateway (Group G, 34.5% of the transaction) is secured by a 1,254-unit multifamily complex with approximately 72,000 square feet (sf) of retail space in downtown San Francisco. The largest retail tenants at the property include Safeway (24.5% of the net rentable area (NRA) through May 2025) and The Bay Club at The Gateway (10.2% of the NRA through July 2032). As of September 2021, the property was 91.5% occupied, compared with 92.3% occupied at YE2020 and 95.0% at issuance. Historically, the property has been well occupied with a 15-year average occupancy of 97.0%. The servicer reported a Q3 2021 net cash flow (NCF) and debt service coverage ratio (DSCR) of $26.4 million (annualized) and 2.12 times (x), respectively, down from $37.3 million and 3.00x at issuance. The asset had performed in line with expectations prior to the Coronavirus Disease (COVID-19) pandemic, but has experienced increased vacancy loss and expenses according to the YE2020 and Q3 2021 financials. Although occupancy for the multifamily component has decreased amid the pandemic, DBRS Morningstar views the high property quality and favorable historical performance as noteworthy mitigating factors.

TriBeCa House (Group T, 24.3% of the transaction) is secured by a 503-unit high-rise multifamily complex in the southern portion of Tribeca in New York. The 50 Murray Street building totals 388-units, with an average unit size of 1,020 sf and also includes 38,436 sf in retail space on the first and second floors. The 53 Park Place building totals 115 units averaging 750 sf and one 8,600-sf retail suite accommodating one tenant. As of September 2021, the property was 97.3% occupied, compared with 83.6% occupied at YE2020. The servicer reported Q3 2021 NCF and DSCR of $14.7 million (annualized) and 1.96x, respectively, compared with $18.4 million and 2.43x, respectively, at issuance. Occupancy reportedly dipped for a period of time as a result of the coronavirus pandemic, but based on the most recent rent roll, occupancy and revenue are restabilizing.

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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

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.

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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 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.

DBRS Morningstar notes that it did not run a risk sensitivity analysis for the Group D Certificates as the collateral has been fully defeased. For the Group G, and Group T Certificates, 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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