DBRS Morningstar Upgrades Ratings on Four Classes of PFP 2019-6, Ltd.

DBRS, Inc. (DBRS Morningstar) upgraded the ratings on the following classes of notes issued by PFP 2019-6, Ltd.:

-- Class C to AAA (sf) from AA (sf)
-- Class D to AAA (sf) from AA (low) (sf)
-- Class E to AA (sf) from A (sf)
-- Class F to A (low) (sf) from BBB (sf)

DBRS Morningstar also confirmed the rating on the following class of notes:

-- Class G at BB (sf)

All trends are Stable.

The rating upgrades reflect the increased credit support to the bonds as a result of successful loan repayment, as there has been collateral reduction of 73.1% since issuance with nine of the original 36 loans remaining in the trust as of February 2023 reporting. 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 with 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].

As of the February 2023 remittance, the trust reported an outstanding balance of $204.2 million. Since the previous DBRS Morningstar rating action in November 2022, there has been collateral reduction of $67.7 million, including the full repayment of two loans. In general, the borrowers of the remaining loans have been unable to stabilize the properties to date because of complications from the pandemic and the changing dynamics of office property use. The transaction is concentrated by loans secured by office properties as five loans, representing 68.5% of the pool balance, are secured by office properties. The remaining four loans are secured by one mixed-use (11.8% of the pool balance), hotel (8.3% of the pool balance), multifamily (7.3% of the pool balance), and retail (4.1% of the pool balance) property each.

The remaining loans are secured by properties in suburban and urban markets. Five loans representing 53.9% of the pool are secured by properties in markets with a DBRS Morningstar Market Rank of 4, and four loans representing 46.1% of the pool are secured by properties in markets with DBRS Morningstar Market Ranks of 6, 7, or 8. At issuance, 66.7% of the loans were secured by properties in suburban and urban markets, as 42.9% of the pool had DBRS Morningstar Market Ranks of 4 or 5 and 23.9% of the pool had DBRS Morningstar Market Ranks of 6, 7, or 8. The current poolwide weighted-average as-is loan-to-value (LTV) and stabilized LTV ratios are 68.7% and 60.2%, respectively, compared with the issuance as-is and stabilized LTV ratios of 74.6% and 62.2%, respectively. The slight decrease in current leverage across the pool is a result of select loans receiving principal curtailments, which the lender required when borrowers desired to exercise loan extension options but didn’t meet property performance thresholds, so the loans did not qualify. The subsequent principal paydowns on the loans allowed the borrowers to exercise the extension options.

In total, the lender advanced $13.4 million in loan future funding to six of the remaining individual borrowers to aid in property stabilization efforts, with the largest advance to the borrower of the Wells Fargo Plaza loan. The loan is secured by an office property in Bloomington, Minnesota, with the advanced funds used to pay for leasing costs. An additional $15.1 million in loan future funding, allocated to five individual borrowers at the loan closings, was never advanced, and those funds are no longer available. The largest portion ($8.3 million) was allocated to the borrower of the 5 Wood Hollow Road loan for accretive leasing costs. The loan is secured by an office property in Parsippany, New Jersey, and the borrower has been unable to execute material new tenant leases since the loan closed. An additional $4.0 million was allocated to the borrower of the Palihotel Seattle loan as a performance-based earn-out. While property performance has since rebounded from the depths of the pandemic, the property was unable to achieve the performance metrics prior to the funding expiration date.

There are no loans in special servicing and five loans on the servicer’s watchlist, representing 34.8% of the pool balance. These loans are on the watchlist mainly for upcoming maturity; however, all loans maintain additional extension options. Six loans, representing 67.7% of the pool, have been modified or the borrowers were granted a forbearance over the life of the loan. The loan modifications generally relate to agreements between the individual borrowers and lenders to extend loan maturity, while the loan forbearance relates to relief granted because of performance issues arising from complications of the pandemic.

There were no environmental, social, and 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 (May 17, 2022).

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 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 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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