DBRS Morningstar Confirms Ratings on BX Commercial Mortgage Trust 2019-XL

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2019-XL issued by BX Commercial Mortgage Trust 2019-XL as follows:

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

All trends are Stable.

The rating confirmations reflect the transaction’s overall stable performance, which remains in line with DBRS Morningstar’s expectations at the last rating action.

At issuance, the collateral for the trust was a $5.6 billion first-lien mortgage loan on 406 industrial properties totaling more than 65 million square feet (sf) across 18 states. As of the January 2023 remittance, 88 properties have been released, including 19 since the last rating action, and the trust balance has been paid down by $1.1 billion, representing a collateral reduction of approximately 19.5% since issuance. Proceeds from the first 15% of property releases were distributed pro rata through the capital stack, and all subsequent principal has been applied sequentially, reducing the total pool balance to $4.5 billion.

Original trust loan proceeds of $5.6 billion along with $1.0 billion of mezzanine financing, a $1.9 billion balance sheet loan, $9.4 million of assumed debt, and $2.6 billion of borrower equity facilitated the acquisition of the portfolio for approximately $11.1 billion at issuance. The interest only (IO) loan had a two-year initial term, and the borrower has exercised two of three one-year extension options with a current scheduled maturity in October 2023.

The loan remains on the servicer’s watchlist for upcoming loan maturity. The borrower has not indicated whether it will be exercising its third and final one-year extension option. According to the June 2022 rent roll, the property was 98.0% occupied, remaining in line with issuance expectations. As of the September 2022 reporting, the property reported a net cash flow of $358.9 million for the trailing 12 months ended September 30, 2022, up from $346.1 million at YE2021. The net cash flow increase is a result of increased rental income and decreased expenses. The portfolio benefits from geographic diversity and a granular tenant profile.

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.

Class X-NCP is an 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.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the North American CMBS Surveillance Methodology (October 3, 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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