DBRS Morningstar Changes Trends on Five Classes, Confirms Ratings on All Classes of Morgan Stanley Capital I Trust 2019-PLND

DBRS Limited (DBRS Morningstar) confirmed the ratings of the Commercial Mortgage Pass-Through Certificates, Series 2019-PLND issued by Morgan Stanley Capital I Trust 2019-PLND as follows:

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

DBRS Morningstar changed the trends on Classes A, B, C, X-EXT, and D to Stable from Negative with this review. Classes E, F, and G continue to carry Negative trends.

The transaction is secured by a $240.0 million first-lien mortgage loan on two Hilton-branded full-service hotels in Portland, Oregon. Across the two hotels are 782 rooms, approximately 63,000 square feet of meeting space, and three food and beverage outlets. The loan sponsor is an affiliate of Brookfield Asset Management Inc. (rated A (low) with a Stable trend by DBRS Morningstar).

The rating confirmations and Stable trends on five classes are supported by the valuation trends for the collateral hotel portfolio. At issuance, the portfolio’s combined value was $340.6 million, and, since the loan’s transfer to special servicing in June 2020, the special servicer has obtained three updated valuations. The value declined to a low of $267.3 million and $277.0 million on an as-is basis in the August 2020 and April 2021 appraisals, respectively. On a stabilized basis, the values were reported at $350.7 million and $365.7 million, respectively. However, as of the most recent appraisal, dated October 2021, the subject was valued at $290.9 million on an as-is basis and $365.0 million on a stabilized basis, with a continued improvement in the implied loan-to-value ratio to 82.5%. Although value remains depressed from issuance, the most recently reported as-is figure remains well above the DBRS Morningstar value derived in September 2020 of $221.0 million and suggests value outside the trust exposure that should cushion against significant loss at resolution.

The loan initially transferred to the special servicer for monetary default, and, since that time, the loan has also passed its initial maturity date of May 2021. The borrower and special servicer exchanged numerous draft modifications throughout 2020; however, no agreement could be reached and the servicer reported that modification discussions with the borrower ceased in January 2021. A receiver has been in place since December 2020, and, according to updates provided by the special servicer, a foreclosure of the collateral will be pursued and the properties will eventually be put up for sale after a period of stabilization efforts.

As of the provided Smith Travel Research (STR) report for the trailing 12-month (T-12) period ended April 30, 2022, were provided, and the Hilton Downtown Portland (Hilton Downtown) reported T-12 occupancy, average daily rate, revenue per available room (RevPAR), and RevPAR penetration figures of 32.1%, $146.84, $47.11, and 84.9%, respectively. The Duniway reported figures of 45.8%, $161.12, $73.78, and 100.9%, respectively, for the same T-12 period. The properties have seen negligible improvement in performance metrics when compared with figures for the T-12 period ended December 31, 2021. The special servicer calculated a debt service coverage ratio (DSCR) of -0.05 times (x) for the T-12 period ended February 28, 2022, a modest increase from the -0.31x at YE2020; however, the DSCR remains significantly depressed from the YE2019 figure of 1.43x.

The collateral hotel properties are well located in the Portland central business district; however, tourist and business traffic to the area has been affected by a number of factors, including the ongoing Coronavirus Disease (COVID-19) pandemic and civil unrest that led to high-profile demonstrations and riots in 2020, which resulted in damage to commercial buildings and area infrastructure. The Hilton Downtown property was closed and boarded up for most of 2020 as a result of these events. Although the transaction benefits from favourable valuation trends for the appraisals obtained since the loan’s transfer to special servicing, the in-place cash flows remain severely depressed. For these reasons, among others, there remains uncertainty with regard to the servicer’s ability to sell the assets and recover enough proceeds to repay the outstanding debt and all fees and advances, supporting the Negative trends maintained for the three lowest-rated classes with this review.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Class X-EXT is an interest-only (IO) certificate that references 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 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. For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.

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.

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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