DBRS Morningstar Confirms Ratings on All Classes of BANK 2019-BNK24

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-BNK24 issued by BANK 2019-BNK24 as follows:

-- Class A-1 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class X-D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class X-G at BB (sf)
-- Class G at BB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains relatively unchanged since the last rating action. The pool’s financial performance remains generally healthy, but DBRS Morningstar notes that there is a high concentration of loans collateralized by office properties, representing 33.8% of the pool balance. In general, the office sector’s performance has been challenged, given the low investor appetite for the property type and high vacancy rates in many submarkets as a result of the shift in workplace dynamics. In the analysis for this review, loans backed by office properties and other properties that were showing performance declines from issuance or exhibiting increased risks from issuance were analyzed with stressed scenarios to increase the expected losses as applicable. The resulting weighted-average (WA) expected loss for the stressed office loans is approximately 45.1% higher than the pool’s average expected loss.

As of the June 2023 remittance, 70 of the original 71 loans remain in the trust with an outstanding trust balance of $1.2 billion, reflecting a collateral reduction of 1.2% since issuance. One loan, representing 1.1% of the trust balance, is defeased. Ten loans, representing 15.1% of the trust balance, are on the servicer’s watchlist, primarily because of low debt service coverage ratios (DSCRs), deferred maintenance, and/or recent transfers back to the master servicer from the special servicer. There are currently no loans in special servicing and two loans, previously in special servicing since 2021, returned to the master servicer in May 2023.

The largest loan on the servicer’s watchlist, 1412 Broadway (Prospectus ID#3; 8.3% of the pool balance), is secured by a 421,396-square-foot (sf), 24-story office building in Manhattan’s Fashion District. Based on the servicer-reported YE2022 financials, the loan reported a DSCR of 1.04 times (x), a steady decline from 1.52x in YE2021 and 1.95x in YE2020. During the same period, occupancy and average rent per sf have fluctuated but steadily increased to 99.2% and $64.88, respectively, as of YE2022, up from 95.6% and $61.18 at YE2021 and 81.1% and $62.32 at YE2020. The five largest tenants comprise 47.1% of net rentable area (NRA) and none of these tenants have leases scheduled to expire over the next 12 months; however, the largest tenant, comprising 12.5% of NRA, has a lease scheduled to expire in December 2024. Securitas Security, representing 4.5% of NRA, has an upcoming lease expiration in September 2023, and media reports suggest the tenant has already signed a lease at a competing property. In addition, Last Minute Transactions, Inc., representing 1.9% of NRA, vacated prior to its lease expiration in December 2025 and the space is currently dark, but the tenant appears to still be paying rent according to the most recent rent roll. Given the declining DSCR, tenant rollover concerns, and softening of the office market, DBRS Morningstar applied a probability of default penalty and stressed loan-to-value ratio in its analysis, resulting in an expected loss that was about 130% higher than the pool’s WA expected loss.

At issuance, DBRS Morningstar shadow-rated four loans, representing 22.5% of the current trust balance, investment grade, which included 55 Hudson Yards (Prospectus ID#1; 8.2% of the current trust balance), Jackson Park (Prospectus ID#2; 8.2% of the current trust balance), Park Tower at Transbay (Prospectus ID#9; 4.1% of the current trust balance), and ILPT Industrial Portfolio (Prospectus ID#15; 2.1% of the current trust balance). With this review, DBRS Morningstar confirms that the performance of all four loans remains in line with the shadow ratings assigned at issuance.

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/416784 (July 4, 2023).

Classes X-A, X-B, X-D, X-F, and X-G are interest-only (IO) certificates that reference 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 credit ratings are subject to surveillance, which could result in credit 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 (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 credit rating was initiated at the request of the rated entity.

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

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model version 1.1.0.0 https://www.dbrsmorningstar.com/research/410913

Rating North American CMBS Interest-Only Certificates (December 19, 2022) https://www.dbrsmorningstar.com/research/407577

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 (June 9, 2023) https://www.dbrsmorningstar.com/research/415687

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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].