DBRS Morningstar Confirms Ratings on All Classes of BANK 2019-BNK22
CMBSDBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates, Series 2019-BNK22 issued by BANK 2019-BNK22 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (high) (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class X-D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class X-F at BBB (sf)
-- Class F at BBB (low) (sf)
-- Class X-G at BB (high) (sf)
-- Class G at BB (sf)
-- Class X-H at BB (low) (sf)
-- Class H at B (high) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of the transaction as illustrated by the strong financial performance of the pool with a weighted-average (WA) debt service coverage ratio (DSCR) more than 2.0 times (x) based on the most recent year-end financials. In addition, there are no specially serviced or delinquent loans. As of the August 2023 remittance, all of the original 58 loans remain in the pool, representing a marginal collateral reduction of 1.1% since issuance, with a current trust balance of approximately $1.2 billion. Two loans are fully defeased, representing 7.7% of the pool balance. Only four loans are on the servicer’s watchlist, representing 7.6% of the pool; two of which, representing only 2.2% of the pool, are being monitored for low DSCRs and occupancy rates.
The pool is concentrated by property type with loans backed by office and multifamily properties, representing 37.1% and 16.4% of the pool, respectively. Most of those office loans continue to perform in line with issuance expectations, but the concentration is noteworthy given the overall stress for the office market as a whole in recent years. There is no immediate maturity risk for the office loans but the Tysons Tower loan (Prospectus ID#9, 3.8% of the pool) has exhibited increased levels of credit risk given the significant tenant rollover concerns coupled with soft submarket conditions, as further discussed below. Given these concerns, the loan was analyzed with a stressed loan-to-value ratio (LTV), resulting in an expected loss that was more than triple the pool average expected loss. Other loans that have illustrated increased risk from issuance were analyzed with a stressed scenario in the analysis.
The Tysons Tower loan is secured by a 528,730-square-foot suburban office property in McLean, Virginia, located approximately 14 miles west of Washington. As of the December 2022 rent roll, the property was 92.4% occupied with tenants, representing 20.9% of its net rentable area (NRA), that have leases that expired/will be expiring in the next 12 months. Most notably, the third largest tenant, Splunk Inc (10.9% of the NRA) had a lease that expired in May 2023. According to an online article dated January 2023, the tenant was reported to have renewed its lease for only a portion of the space. While no updated rent roll from 2023 was provided, DBRS Morningstar has reached out to the servicer for additional details on the new lease terms. Other largest tenants at the subject include Intelsat (34.6% of NRA, lease expiry in December 2030) and Deloitte (17.8% of the NRA, lease expiry in August 2027).
The Tysons Corner/Vienna submarket is experiencing high vacancy rates with Reis reporting a 21.4% vacancy rate for YE2022. According to the YE2022 financials, the loan reported a net cash flow (NCF) of $19.3 million (reflecting a DSCR of 3.00x), a significant improvement from the YE2021 NCF of $8.9 million and above the DBRS Morningstar NCF of $15.9 million. Although the financial performance remains robust and has improved significantly from YE2021, the rollover concerns combined with the soft submarket conditions are of concern. As previously stated, DBRS Morningstar stressed the LTV in its analysis resulting in an expected loss nearly triple the deal average.
At issuance, DBRS Morningstar shadow-rated Park Tower at Transbay (Prospectus ID#1, 9.6% of the pool), 230 Park Avenue South (Prospectus ID#2, 9.3% of the pool), and Midtown Center (Prospectus ID#3, 7.4% of the pool) as investment grade. These loans reported a WA YE2022 DSCR of 2.95x with an occupancy rate of 99.6% with no notable rollover concerns in the next 12 months. For this review, DBRS Morningstar confirmed that the loan performance trends remain in line with investment-grade loan characteristics.
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 (July 4, 2023) at https://www.dbrsmorningstar.com/research/416784.
Classes X-A, X-B, X-D, X-F, X-G, and X-H 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 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 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 Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577
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 v1.1.0.0 (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 (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)
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)
A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/417279.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].
ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.