DBRS Morningstar Confirms Ratings on All Classes of CSMC 2019-ICE4

DBRS Limited (DBRS Morningstar) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2019-ICE4 issued by CSMC 2019-ICE4 as follows:

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

All trends are Stable.

The rating confirmations reflect the overall performance of the underlying collateral, which remains in line with DBRS Morningstar’s expectations at issuance.

The collateral for the $2.35 billion first-lien mortgaged loan includes 64 industrial cold storage and distribution facilities in 22 states, primarily California (23.8% of the pool balance), Washington (14.0% of the pool balance), and Texas (13.3% of the pool balance). There is more than 17.7 million square feet (sf) of storage space, of which 14.1 million sf is temperature-controlled space. The interest-only mortgage loan features a two-year initial term with three 12-month extensions and a fully extended maturity date in May 2024. Property releases are permitted with certain prepayment conditions. The bond payments follow a partial pro rata/sequential-pay structure, such that if properties are released, the first 20% of the principal balance will be paid pro rata among the classes of certificates.

At issuance, 60 of the properties were master leased by Lineage Logistics, LLC, an affiliate of the borrower, Lineage Logistics Holdings, LLC (Lineage), with the remaining four properties master leased to Southeast Frozen Foods Company, L.P. (SEFF). In May 2021, Lineage assumed all operations for SEFF because of the company’s performance difficulties. The takeover included an amendment to the Lineage master lease to include the remaining four properties from SEFF. The rental rate was reset to the market level, and the SEFF master lease was terminated. Lineage strategically located its warehouses close to customer manufacturing locations across key production corridors creating high barriers for entry.

The loan is on the servicer’s watchlist pending the upcoming May 2023 scheduled maturity, but the servicer is processing the loan’s third and final one-year extension option, which will extend the loan’s maturity date to May 2024. According to the loan documents at issuance, the extension option is exercisable under certain conditions, including no events of default and the purchase of a replacement interest rate cap agreement. In the event the extension is not executed, a cash flow sweep will be triggered.

According to the February 2023 reporting, a $5.83 million principal curtailment was applied pro rata across the capital stack, which the servicer noted was because of the release of two properties from the pool. In addition, the trust was previously reporting interest shortfalls of $3,105 on Class HRR that was related to administrative trust expenses but were repaid with principal proceeds with the February 2023 remittance. According to the trailing-nine-month (T-9) ended September 30, 2022, financials, the annualized net cash flow (NCF) improved significantly to $273.4 million from YE2021 of $233.1 million, YE2020 of $227.3 million and the DBRS Morningstar NCF of $226.6 million. Growth in cash flows stems predominantly from an increase in Effective Gross Income. According to the September 2022 financials, the property remains 100.0% occupied.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
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 was recently updated on March 16, 2023 (the updates were deemed to be not material) and 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 info@dbrsmorningstar.com.

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 info@dbrsmorningstar.com.

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