Morningstar DBRS Confirms Credit Ratings on All Classes of BANK 2022-BNK41

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2022-BNK41 issued by BANK 2022-BNK41 as follows:

-- Class A-1 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (high) (sf)
-- Class X-D at BBB (sf)
-- Class X-F at BB (high) (sf)
-- Class X-G at BB (low) (sf)
-- Class A-3-X1 at AAA (sf)
-- Class A-3-X2 at AAA (sf)
-- Class A-4-X1 at AAA (sf)
-- Class A-4-X2 at AAA (sf)
-- Class A-S-X1 at AAA (sf)
-- Class A-S-X2 at AAA (sf)
-- Class B-X1 at AA (sf)
-- Class B-X2 at AA (sf)
-- Class C-X1 at A (sf)
-- Class C-X2 at A (sf)
-- Class A-3-1 at AAA (sf)
-- Class A-3-2 at AAA (sf)
-- Class A-4-1 at AAA (sf)
-- Class A-4-2 at AAA (sf)
-- Class A-S-1 at AAA (sf)
-- Class A-S-2 at AAA (sf)
-- Class B-1 at AA (sf)
-- Class B-2 at AA (sf)
-- Class C-1 at A (sf)
-- Class C-2 at A (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction, which remains in line with Morningstar DBRS' expectations. Overall, the pool continues to exhibit healthy credit metrics, as evidenced by the strong weighted-average (WA) debt service coverage ratio (DSCR) of 2.44 times (x) and the WA debt yield of 9.5% based on the most recent financial reporting available.

The pool's office concentration is noteworthy, representing 36.5% of the pool balance, given the low investor appetite for this property type and the high vacancy rates in many submarkets as a result of the shift in workplace dynamics. However, two of these loans, representing 15.1% of the pool balance, are shadow-rated investment grade, and the office loans are generally performing in line with Morningstar DBRS' expectations.

As of the August 2024 remittance, all of the original 69 loans remained in the pool with a trust balance of $1.17 billion, representing a collateral reduction of 0.4% since issuance. Five loans, representing 2.6% of the pool balance, are on the servicer's watchlist and are being monitored for deferred maintenance items, tenant rollover risk, or cash flow triggers. There are no delinquent, specially serviced, or defeased loans.

The largest loan in the pool, Constitution Center (Prospectus ID#1, 9.4% of the pool), is secured by a 1.4 million-square-foot (sf) Class A office tower in Washington, D.C. The loan was shadow-rated investment grade at issuance as a result of its investment-grade tenancy and superior quality and location. The property underwent a $250.0 million renovation in 2007 to bring the building to a Stage IV security level and improve the curb appeal through an all-glass and stainless steel facade. The building is currently 100.0% occupied by four investment-grade-rated government tenants. One tenant, General Services Administration (26.6% of the net rentable area), had a lease expiration in February 2024 but is working toward exercising its five-year extension option. With this review, Morningstar DBRS confirms that the loan's performance trends remain consistent with investment-grade loan characteristics.

The second-largest loan in the pool is 1600 Broadway (Prospectus ID#2, 8.4% of the pool), which is secured by approximately 26,000 sf of anchored retail property on the bottom two floors of a 25-story residential building in Times Square. The two commercial units serve as collateral for the loan, while the 137 residential dwellings that comprise the remainder of the building are non-collateral. The loan is sponsored through a joint venture between Paramount Group Inc. and German pension fund BVK, which have shown strong commitment to the property through a $96.0 million equity contribution at issuance.

The entire retail space is leased to Mars Retail Group, LLC (Mars), which is operating under the M&M brand as its flagship store. The lease extends to April 2036, is structured with two five-year extension options, and is fully guaranteed by the investment-grade parent company. Mars had planned a $25.0 million renovation to the store in order to align with the M&M global brand, which required a full store closure starting in August 2022 and was scheduled to be completed by July 2023. The work appears to have been completed as the property is currently open to the public. As of the YE2023 financials, the loan reported a DSCR of 2.42x, compared with the YE2022 DSCR of 2.37x and Morningstar DBRS DSCR of 2.70x. The volatility in net cash flow is expected considering the deal is two years post-issuance, and Morningstar DBRS expects performance to stabilize as the loan continues to season.

At issuance, Morningstar DBRS shadow-rated two other loans¿601 Lexington Avenue (Prospectus ID#5, 5.6% of the pool) and Journal Squared Tower II (Prospectus ID#13, 2.0% of the pool) - as investment grade. Morningstar DBRS confirms that the loan performance trends remain consistent with the investment-grade shadow ratings, as supported by the strong credit metrics, strong sponsorship strength, and historically stable performance of the collateral underlying those loans.

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/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 at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

Classes 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 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 info-DBRS@morningstar.com.

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.

Morningstar DBRS 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://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, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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