DBRS Morningstar Confirms All Classes of CSAIL 2019-C16 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates issued by CSAIL 2019-C16 Commercial Mortgage Trust as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since the last rating action in November 2022. There are increased risks for a few loans, including one loan, representing 1.1% of the pool balance, that recently transferred to special servicing; however, servicer-reported performance metrics for the majority of the pool have been strong, evidenced by the pool’s healthy weighted average (WA) debt service coverage ratio (DSCR) of 1.97 times (x). In addition, the increased risk profile for the loans of concern is mitigated by the majority of the loans being secured by lodging and retail property types, which account for more than half of the pool balance, that have reported improved performance metrics over the last several months, demonstrating continued improvement and stabilization since the onset of the Coronavirus Disease (COVID-19) pandemic.

The pool is concentrated by property type, with hotel, retail, and office representing 30.1%, 30.3%, and 22.0% of the pool balance, respectively. While DBRS Morningstar anticipates upward pressure on vacancy rates in the broader office market, the majority of the loans secured by office properties have reported healthy performance metrics, demonstrated by the WA DSCR of 2.64x as of YE2022. In the analysis for this review, DBRS Morningstar identified nine loans representing 14.8% of the pool as exhibiting declines in performance and/or demonstrating increased risks from issuance. These loans were analyzed with stressed loan-to-value ratios or increased probability of default assumptions to increase the expected losses as applicable. The primary drivers behind DBRS Morningstar’s expected losses for the pool are cash flow declines for both retail and hospitality properties, generally related to the effects of the pandemic.

As of August 2023 remittance, all of the original 47 fixed-rate loans secured by 96 commercial and multifamily properties remain in the pool with a trust balance of $772.6 million, representing a collateral reduction of approximately 1.9% since issuance as a result of scheduled loan amortization. Two loans, representing 1.5% of the pool balance, are secured by defeased collateral. Two loans, representing 5.5% of the trust balance, are in special servicing, and an additional 13 loans, representing 34.0% of the trust balance, on the servicer’s watchlist.

The largest specially serviced loan, Santa Fe Portfolio (Prospectus ID#6; 4.4% of the pool), is secured by an 11-property mixed-use portfolio totaling approximately 218,000 square feet, located primarily in downtown Santa Fe, New Mexico. The portfolio has a high concentration of art gallery tenants, many of which are affiliates of the sponsor. The loan transferred to special servicing in August 2022 after becoming delinquent. The loan had previously transferred to special servicing in June 2020, also for payment default, and was modified in June 2021. The portfolio was performing below issuance expectations prior to the onset of the pandemic, compounding the risks of an extended delinquency. An updated December 2022 appraisal valued the property at $43.4 million, reflecting a slight value decline from the August 2020 appraisal of $44.5 million, and a variance of -17.5% from the issuance figure. While the loan is full recourse to the guarantor, the servicer commentary indicates the sponsor has not been in compliance with the modification agreement. However, the most recent value suggests a loss in the event of a liquidation would be relatively small.

At issuance, DBRS Morningstar shadow-rated two loans, 3 Columbus Circle (Prospectus ID#1; 6.5% of the pool) and 787 Eleventh Avenue (Prospectus ID#9; 3.9% of the pool), investment grade, supported by their strong credit metrics, strong sponsorship strength, and historically stable collateral performance. With this review, DBRS Morningstar confirms that the characteristics of these loans remain consistent with the investment-grade shadow rating.

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, and X-D 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 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 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 v 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 (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)

Legal Criteria for Canadian Structured Finance (June 20, 2023; https://www.dbrsmorningstar.com/research/416101)

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