Morningstar DBRS Confirms All Credit Ratings of BANK 2019-BNK21

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2019-BNK21 issued by BANK 2019-BNK21 as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 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 (low) (sf)
-- Class C at A (high) (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 credit rating confirmations and Stable trends reflect the overall stable performance of the transaction since Morningstar DBRS' last surveillance review given the relatively low concentration of loans on the servicer's watchlist and the lack of specially serviced and delinquent loans as of the August 2024 remittance. Cash flows have remained in line with issuance expectations as evidenced by the pool's weighted-average (WA) debt service coverage ratio (DSCR) of 2.65 times (x). The pool remains relatively unchanged since Morningstar DBRS' last review with 47 of the original 49 loans remaining in the pool, with an aggregate principal balance of $1.12 billion, representing a collateral reduction of 5.1%, per the August 2024 remittance. Two loans, representing 8.7% of the pool, are fully defeased and seven loans, representing 15.3% of the pool, are currently being monitored on the watchlist. Only two loans, representing 1.8% of the pool, are being monitored for performance-related concerns.

The pool is concentrated by property type with office, retail, and lodging properties representing 38.8%, 22.1%, and 14.0% of the pool, respectively. In general, the office sector 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. Although the trust has significant exposure to this property type, these loans are generally performing as expected and, in several cases, benefit from stable long-term tenancy from investment-grade-rated tenants. The majority of loans secured by office properties in this transaction continue to perform as expected, reporting a WA DSCR of 2.72x as of the YE2023 financial reporting.

The eight loans secured by office properties reported a WA occupancy rate of 92.2% as of the March 2024 reporting. Three office properties have reported occupancy declines from issuance including the Tower at Burbank (Prospectus ID#5, 6.2% of the pool) and Tysons Tower (Prospectus ID#7, 4.5% of the pool). The Tower at Burbank loan is secured by a 32-story, 490,000-square-foot (sf) office tower in Burbank, California. Following the departure of WeWork (previously occupying 15.2% of net rentable area (NRA)) in Q4 2022, occupancy declined to 77.2%. Occupancy remained stagnant throughout 2023 and was most recently reported at 75.0% as of the March 2024 rent roll. Despite the drop in occupancy, the loan continues to perform in line with Morningstar DBRS' issuance expectation. The loan reported a YE2023 DSCR of 2.40x and a Q1 2024 DSCR of 2.49x, as compared with the Morningstar DBRS DSCR of 2.37x. However, given the drop in occupancy and lack of leasing activity, Morningstar DBRS analyzed the loan using a stressed loan-to-value ratio (LTV), resulting in an expected loss (EL) approximately double the pool average.

The Tysons Tower loan, secured by a 528,730-sf suburban office property in Mclean, Virginia, continues to report year-over-year occupancy declines. Occupancy declined from 92.0% at YE2022 to 85.0% at YE2023 because the third-largest tenant, Splunk Inc. (5.9% of NRA, lease expires May 2028) downsized its space at its lease expiry in May 2023. Other large tenants include Intelsat (36.2% of NRA, lease expires December 2030) and Deloitte (17.8% of the NRA, lease expires August 2027). As of the March 2024 rent roll, occupancy further declined to 79.0%. Furthermore, the Tysons Corner/Vienna submarket continues to experience high vacancy rates with Reis reporting a 24.2% vacancy rate as of Q2 2024. Despite the downward trend in occupancy, the DSCR remains above the Morningstar DBRS DSCR derived at issuance. The loan reported a YE2023 DSCR of 2.96x and a Q1 2024 DSCR of 2.71x, as compared with the Morningstar DBRS DSCR of 2.48x. As a result of the continuing decline in occupancy, Morningstar DBRS analyzed the loan using a stressed LTV, resulting in an EL approximately 75.0% greater than the pool average.

At issuance, Morningstar DBRS assigned investment-grade shadow ratings to the following three loans: Park Tower at Transbay (Prospectus ID#1, 10.3% of the pool), 230 Park Avenue South (Prospectus ID#2, 9.8% of the pool), and Grand Canal Shoppes (Prospectus ID#10, 3.6% of the pool). With this review, all loans continue to exhibit investment-grade characteristics. As such, Morningstar DBRS has maintained the shadow ratings for all three loans with this review.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, or Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

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 Morningstar DBRS.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.

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

The credit ratings were initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for these credit rating actions.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.
These are solicited credit ratings.

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

DBRS, Inc.
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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://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology (March 1, 2024)/North American CMBS Insight Model version 1.2.0.0, https://dbrs.morningstar.com/research/428797
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (June 28, 2024), https://dbrs.morningstar.com/research/435293
-- North American Commercial Mortgage Servicer Rankings (August 23, 2023), https://dbrs.morningstar.com/research/419592
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.