DBRS Morningstar Confirms All Classes of Prima Capital CRE Securitization 2019-RK1

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates (the Certificates), issued by Prima Capital CRE Securitization 2019-RK1 as follows:

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 Class A-G, Class A-T, and Class B-G.

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

At issuance, the transaction had a total mortgage balance of $152.3 million and consisted of three nonpooled B-notes tied to previously securitized collateral, including one office property, DreamWorks Campus and Headquarters, and two multifamily properties, The Gateway and TriBeCa House. The transaction was composed of three Loan Groups–Group D, Group G, and Group T–with certificates tied to each of the three subjects. 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. 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. As of April 2023, DreamWorks Campus and Headquarters (Group D) has been repaid, bringing the total mortgage balance to $89.5 million, and none of the loans are on the servicer’s watchlist or in special servicing.

The Gateway (Group G; 58.7% of the transaction) is secured by four high-rise multifamily buildings totaling 1,254 units with approximately 72,000 square feet (sf) of retail space in Downtown San Francisco. Since 2015, the sponsor has invested more than $21.0 million into upgrading the property, including select units as they become vacant, and releasing them at market rates. The property is composed of studio, one-, two-, three-, and four-bedroom units with monthly rental rates ranging from $2,470 to $6,300. According to the September 2022 rent roll, the residential portion was 93.2% occupied, in line with previous years, and the commercial portion was 67.8% occupied, down from 76.9% at YE2021. The largest commercial tenants include Safeway, Inc. (24.5% of net rentable area (NRA); expiring May 2025), Bay Club at Golden Gateway (10.2% of NRA; expiring July 2032), and 42nd Street Moon (6.3% of NRA; expiring June 2030). The commercial occupancy decrease is largely a result of former tenant, Bank of America (previously 9.1% of NRA), vacating at lease expiration in April 2022. The annualized net cash flow (NCF) for the period ended September 30, 2022, was $23.1 million, compared with $25.2 million at YE2021. The decrease in cash flows is largely a result of Bank of America’s departure following its lease expiration in 2022. While property performance has been decreasing over the past few years, the debt service coverage ratio (DSCR) remains healthy at 1.86 times (x).

TriBeCa House (Group T; 41.3% of the transaction) is secured by a high-rise multifamily complex totaling 503 units in the Tribeca neighborhood in New York City. The 50 Murray Street building totals 388 units and approximately 38,000 sf of retail space on the first and second floors. The 53 Park Street building totals 115 units and approximately 8,600 sf retail space. According to the February 2023 rent roll, the residential portion was 98.5% occupied, in line with previous years, and DBRS Morningstar has requested confirmation from the servicer regarding whether the commercial space was vacated. The YE2022 NCF and DSCR were $18.2 million and 1.66x, respectively, and both figures are greater than the $10.3 million and 0.94x at YE2021. Given these trends and the favorable location, DBRS Morningstar expects performance to remain stable in the near to moderate term.

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 (May 17, 2022) at https://www.dbrsmorningstar.com/research/396929.

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 (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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].

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American Single-Asset/Single-Borrower Ratings Methodology (February 23, 2023;
https://www.dbrsmorningstar.com/research/410191)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022; https://www.dbrsmorningstar.com/research/402646)

North American Commercial Mortgage Servicer Rankings (September 8, 2022; https://www.dbrsmorningstar.com/research/402499)

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022; https://www.dbrsmorningstar.com/research/402153)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008)