Morningstar DBRS Confirms All Credit Ratings of BANK 2019-BNK22

DBRS Limited (Morningstar DBRS) confirmed all credit ratings on the classes of 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 X-A at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B 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 credit rating confirmations and Stable trends reflect overall pool performance, which remains in line with Morningstar DBRS' expectations at issuance, evidenced by the weighted-average (WA) debt service coverage ratio (DSCR) of 2.53 times (x) and debt yield of 9.8% as of the year-end (YE) 2023 reporting. As of the August 2024 remittance, there are no delinquent loans nor any loans in special servicing, and only five loans, representing 15.6% of the pool, on the servicer's watchlist. The most recently reported financials suggest performance for the remaining pool has been stable.

As of the August 2024 remittance, all of the original 59 loans remain in the pool with an aggregate principal balance of $1.18 billion, representing a marginal collateral reduction of 1.4% since issuance. By property type, when excluding defeased loans, the pool is most concentrated by loans that are secured by office properties, representing 38.8% of the pool balance. Morningstar DBRS has a cautious outlook on this asset type as sustained upward pressure on vacancy rates in the broader office market may challenge landlords' efforts to back-fill vacant space, and, in certain instances, contribute to value declines, particularly for assets in noncore markets and/or with disadvantages in location, building quality, or amenities offered. Where applicable, Morningstar DBRS increased the probability of default penalties, and, in certain cases, applied stressed loan-to-value ratios (LTV) for loans exhibiting performance concerns.

The largest loan of concern identified by Morningstar DBRS is The Midtown Center - Trust (Prospectus ID#3, 7.5% of the pool), which is secured by the Midtown Center, an 867,654-square-foot (sf), 14-story Class A office campus built in 2018 and located in Washington, D.C., with ground-floor retail and a three-level below-grade parking garage. The trust loan is pari passu with the DC Office Trust 2019-MTC (lead securitization, Morningstar DBRS-rated) and COMM 2018-GC44 (not rated by Morningstar DBRS). The underlying fixed-rate loan for the subject transaction is interest only (IO) until its stated maturity in September 2033; however, the loan has an anticipated repayment date (ARD) in October 2029. If the borrower is unable to refinance or pay off the loan as of the ARD, the loan shall begin to hyperamortize through use of all excess property cash flow.

The loan was added to the servicer's watchlist in February 2024 following news that the largest tenant, Fannie Mae (82.2% of the net rentable area (NRA)), would be exercising its termination right for the majority of its space, effective May 2029. As part of the termination agreement, a termination fee in the amount of $52.3 million was paid by the tenant, which is currently held in the lead securitization reserve account. The tenant also has a contraction option on up to 160,200 sf (22.4% of NRA) annually between the loan's sixth and ninth years. The servicer confirmed that the tenant will exercise its first contraction option in May 2025 and subsequent contraction options for each year thereafter until May 2028. The tenant has so far paid an additional $18.4 million in contraction fees, which is also held in the lead securitization reserve account. According to Commercial Observer, Fannie Mae has since executed a new lease at the subject property for just under half of its original footprint, effective after the termination of the current lease. The servicer has also confirmed that Fannie Mae will occupy approximately 38.0% of building NRA on a16-year lease from 2029 to 2045.

The second largest tenant is WeWork, which originally occupied 12.7% of the NRA on a lease through November 2036. In May 2023, WeWork was granted a 25.0% rent forbearance through December 2024. Other terms included adding another year to WeWork's lease to November 2037 and increasing its corporate guaranty to 24 months of rent, with the borrower holding the right to void the forbearance at any time. While WeWork remains current on its rent obligations under the current terms of forbearance, the servicer has confirmed that WeWork has relinquished some of its space at the subject property. According to the March 2024 rent roll, WeWork only appears to be leasing 8.6% of the NRA.

According to the YE2023 financials reported by the servicer, the subject reported a debt service coverage ratio (DSCR) of 2.86 times (x), which remains in line with historical reporting. Morningstar DBRS expects the reported cash flow will remain stable until Fannie Mae's contraction options take effect beginning in May 2025. Increasing submarket vacancy may make backfilling this space challenging. Offsetting some of this concern is the large termination and contraction fees totalling $70.7 million currently held by the servicer of the lead transaction. At issuance, the loan was shadow rated investment grade to reflect the property's location, excellent curb appeal, and strong long-term tenancy. However, with this review, Morningstar DBRS has removed the shadow rating to reflect weakening submarket fundamentals and increased concerns regarding potential cash flow volatility given the downsizing of two major tenants.

Another loan of concern, The Tysons Tower (Prospectus ID#9, 3.8% of the pool) loan is secured by a 528,730-sf suburban office property in McLean, Virginia, located approximately 14 miles west of Washington, D.C. As of the March 2024 rent roll, the property was 78.9% occupied, down from 85% as of YE2023 and 92.4% as of YE2022, with leases representing another 5.0% of the NRA scheduled to expire in the next 12 months. Largest tenants at the subject include Intelsat (36.2% of NRA, lease expiry in December 2030) and Deloitte (17.8% of the NRA, lease expiry in August 2027). The Tysons Corner submarket is experiencing high vacancy, at 24.4% according to Reis as of Q2 2024, up from 21.3% as of Q2 2023. Morningstar DBRS expects the 2024 financial reporting will reflect a decline in cash flow given the occupancy loss, though the DSCR remains strong as of the March 2024 reporting. In its analysis for this loan, Morningstar DBRS stressed the LTV resulting in an expected loss over triple the deal average.

At issuance, Morningstar DBRS shadow-rated Park Tower at Transbay (Prospectus ID#1, 9.7% of the pool) and 230 Park Avenue South (Prospectus ID#2, 9.3% of the pool) as investment grade. As part of this review, Morningstar DBRS confirmed that the performance of these loans remains in line with investment-grade loan characteristics.

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 factor(s) 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 Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024; https://dbrs.morningstar.com/research/437781).

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 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
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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 v 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/north-american-commercial-mortgage-servicer-rankings)
Legal Criteria for U.S. Structured Finance (April 15, 2024; https://dbrs.morningstar.com/research/431205/legal-criteria-for-us-structured-finance)

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 (July 17, 2023).

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