DBRS Morningstar Confirms All Classes of Benchmark 2019-B15 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2019-B15 issued by Benchmark 2019-B15 Mortgage Trust 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-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (sf)
-- Class F at BB (low) (sf)
-- Class G-RR at B (high) (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction, which generally remains in line with DBRS Morningstar’s expectations since issuance. While there are increased risks for a handful of loans, reported performance metrics for most of the loans in the pool have been strong, as illustrated by the weighted-average (WA) debt service coverage ratio (DSCR) of 2.50 times (x) based on the most recent year-end financials. As of the September 2023 remittance, all of the original 32 loans remain in the pool, reflecting a current trust balance of approximately $834.7 million and minimal collateral reduction of 1.4% since issuance. There are eight loans, representing 21.5% of the pool, on the servicer’s watchlist; however, only four of these, representing 12.6% of the pool, are being monitored for recent or upcoming tenant rollover risk and/or a low DSCR while the remaining four are being monitored for deferred maintenance or tenant credit rating concerns. Two loans, representing 5.5% of the pool balance, are delinquent. One of those loans, representing 2.3% of the pool balance, is in special servicing and the collateral property was recently appraised with an implied loan-to-value ratio (LTV) of 81.2%, which suggests the likelihood of a significant loss in a liquidation scenario remains relatively low, as further detailed below.

The pool is concentrated by property type, with loans backed by office properties representing 41.8% of the pool. The majority of the office loans continue to perform in line with issuance expectations as evidenced by the healthy WA DSCR of 3.12x. However, the concentration of office, primarily represented by collateral properties in suburban markets, is considered noteworthy given the low investor appetite for the property type and the high vacancy rates in many submarkets that have been compounded by the shift in workplace dynamics in since the onset of the pandemic. Among the mitigating factors are the lack of immediate maturity risk and structural features, including cash management provisions for the majority of the loans backed by office properties. In addition, the three largest loans in the pool, which account for nearly 25% of the pool balance and are secured by collateral backed by office properties, continue to report strong financial performance with healthy DSCRs above 3.00x as of YE2022.

In the analysis for this review, DBRS Morningstar identified four office loans, each backed by suburban office properties and representing only 9.4% of the pool, and one retail loan, representing 1.4% of the pool, as exhibiting increased risks since issuance. These loans were analyzed with stressed scenarios, including increased probability of default (POD) penalties and/or increased LTVs, as applicable, to increase the expected losses in each case. The three loans with the largest increases to their expected-loss percentages are Tysons Tower (Prospectus ID#9; 4.2% of the pool) and 8 West Centre (Prospectus ID#19; 2.0% of the pool), which are both secured by suburban office properties with tenant rollover concerns in the next 18 months, along with Vineyard Marketplace (Prospectus ID#22; 1.4% of the pool), which is secured by a retail property also facing tenant rollover challenges.

The Tysons Tower loan is secured by a 528,730-square foot suburban office property in McLean, Virginia, approximately 14 miles west of Washington. As of the June 2023 rent roll, the property was 87.5% occupied by tenants representing 10.9% of its net rentable area (NRA) with leases that have expired or will be expiring in the next 12 months. The third-largest tenant, Splunk Inc. (previously 10.9% of the NRA) had a lease that expired in May 2023 and was renewed for only a portion of the space, reducing its footprint to 5.4% of NRA. Other large tenants 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 21.3% vacancy rate for Q1 2023. 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 more than the DBRS Morningstar NCF of $15.9 million. Although the financial performance remains robust and has improved significantly from YE2021, the lease rollovers combined with the soft submarket conditions are of concern. Given these increased risks, DBRS Morningstar stressed the LTV in its analysis, resulting in an expected loss that is relatively in line with the deal average.

The 8 West Centre loan is secured by an office property in Houston that was added to the servicer’s watchlist in February 2023 after the second-largest tenant, Cameron International Corp. (47.0% of NRA), confirmed it would be vacating upon lease expiration in November 2023. Tenant reserves have accumulated to $2.7 million as of the September 2023 reporting as a result of cash management provisions that were triggered in November 2022, 12 months prior to the tenant’s lease expiration date. The West/Katy Freeway submarket of Houston has a high vacancy rate of 26.6% as of Q2 2023, according to Reis. Historical operating performance had been strong with a DSCR of 2.09x as of YE2022 and occupancy rate of 100% since issuance. However, given the soft submarket and occupancy concerns, the loan was analyzed with a stressed LTV and a POD penalty resulting in an expected loss that was more than three times the deal average.

The Hilton Cincinnati Netherland Plaza (Prospectus ID#18; 2.3% of the pool) is a pari passu loan secured by a 561-key full-service hotel in Cincinnati that transferred to special servicing in February 2021 because of imminent monetary default stemming from performance-related disruptions following the onset of the pandemic. While the borrower and servicer previously agreed to settle the outstanding penalty fees, the borrower was unable to meet the obligation under the agreement and the servicer ultimately filed for foreclosure. The servicer reported the YE2022 DSCR dipped to 0.31x, down from 0.53x as of YE2021, but up from the pandemic low of -0.70x as of YE2020. As previously mentioned, despite the decline in performance metrics, the January 2023 appraisal valued the property at $84.5 million, a decline of less than 2.0% from the previous appraisal of April 2021 but down by 20.0% from the issuance appraisal of $105.5 million. Based on the outstanding whole loan balance of $68.6 million and total outstanding advances of $5.6 million across the two transactions holding pieces of the loan, the appraised value remains above the total exposure of $74.2 million, suggesting a significant loss at liquidation is relatively unlikely.

At issuance, DBRS Morningstar shadow-rated the Century Plaza Towers (Prospectus ID#3; 7.5% of the pool), The Essex (Prospectus ID#14; 3.0% of pool), and Osborn Triangle (Prospectus ID#16; 2.4% of pool) loans as investment-grade. As performance metrics for each of the three loans remain in line with expectations, DBRS Morningstar maintained the shadow rating on all three loans with this review.

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, and X-F 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 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 22, 2023; https://www.dbrsmorningstar.com/research/420982)

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)

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