Morningstar DBRS Confirms All Credit Ratings on Wells Fargo Commercial Mortgage Trust 2019-C53

DBRS Limited (Morningstar DBRS) confirmed the credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2019-C53 issued by Wells Fargo Commercial Mortgage Trust 2019-C53 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-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class C at A (high) (sf)
-- Class D at A (low) (sf)
-- Class E-RR at BBB (sf)
-- Class F-RR at BBB (low) (sf)
-- Class G-RR at BB (high) (sf)
-- Class H-RR at BB (low) (sf)
-- Class J-RR at B (high) (sf)
-- Class K-RR at B (low) (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (low) (sf)
-- Class X-D at A (sf)

All trends are Stable.

The credit rating confirmations and Stable trends reflect the overall stable performance of the transaction, which remains in line with Morningstar DBRS' expectations at issuance. Overall, the pool continues to exhibit healthy credit metrics as evidenced by the strong weighted-average (WA) debt service coverage ratio (DSCR) of 2.21 times (x) and the WA debt yield of 10.7% based on the most recent financial reporting available. Although the pool has a notable concentration of loans secured by office properties, which represent the largest property type concentration at 25.9% of the pool, these loans are generally performing in line with issuance expectations, reporting a WA DSCR of 1.86x and a WA occupancy rate of 93.4%. Morningstar DBRS continues to maintain its cautious outlook on the office asset type and, in the analysis for this review, stressed the loan-to-value ratios (LTVs) for all seven loans secured by office properties, resulting in a WA expected loss (EL) that is double the pool average.

As of the August 2024 remittance, all 58 of the original loans remain in the pool with a collateral reduction of 2.9% since issuance because of scheduled loan amortization. Nine loans, representing 20.4% of the pool, are on the servicer's watchlist, however, only three of those loans, representing 4.0% of the pool, are being monitored for low cash flow or large upcoming tenant lease expiries while the remaining six loans are being monitored for various noncredit issues, including unsubmitted financial statements, deferred maintenance, and upcoming loan maturity. Four loans, representing 3.0% of the pool, are fully defeased and no loans are in special servicing.

The two largest office loans, 777 East Eisenhower (Prospectus ID#4; 6.2% of the pool) and 1000 Chesterbrook (Prospectus ID#5; 5.6% of the pool), are both secured by suburban, Class A office properties. 777 East Eisenhower, consisting of 272,502 square feet (sf) of office space in Ann Arbor, Michigan, benefits from its proximity to the University of Michigan, an investment-grade rated institution that leases 51.9% of the net rentable area (NRA) at the subject on two leases scheduled to expire in May 2028 and September 2035. The property was 91.0% occupied as of March 2024 and, as of the YE2023 financials, the loan reported a DSCR of 1.41x in comparison with the Morningstar DBRS DSCR of 1.31x derived at issuance. Although the loan continues to perform above Morningstar DBRS' issuance expectations, there remain concerns about the subject's suburban location and the soft Ann Arbor submarket that, according to Reis, reported a 20.7% vacancy rate as of Q2 2024. In its analysis, Morningstar DBRS analyzed the loan with a stressed LTV, which resulted in an EL that was approximately 3.5x greater than the pool average.

The 1000 Chesterbrook loan, secured by a suburban, Class A office property in Berwyn, Pennsylvania, continues to report a 100% occupancy rate and healthy DSCR of 2.40x as of the YE2023 financials. After expanding its space in 2022, Envestment, a provider of wealth management and wealth management services to financial services clients, occupies nearly 100% of the NRA on a lease scheduled to expire in December 2032 with an early termination option in December 2029. The termination option requires 15 months' notice and the payment of a $1 million termination fee. As with the 777 East Eisenhower loan, despite the strong performance which is expected to persist while Envestnet stays in occupancy, Morningstar DBRS is concerned with the subject's suburban location and soft submarket which, according to Reis, reported a vacancy rate of 20.5% as of Q2 2024. In its analysis, Morningstar DBRS analyzed the loan with a stressed LTV, which resulted in an EL that was approximately 3.5x greater than the pool average.

Morningstar DBRS also has a cautious outlook for the third-largest office loan in the pool, 600 & 620 National Avenue loan (Prospectus ID#7; 4.4% of the pool), which is secured by a Class A office property in Mountain View, California, approximately 12 miles north of San Jose. The property is fully leased to single-tenant Google through May 2029 and is structured with three five-year renewal options. In 2023, various news articles revealed that Google is no longer in occupancy and that the company was looking to offload more than 1.4 million sf of office space in Silicon Valley, including the subject location. Google's lease does not contain a termination option, suggesting that loan performance should remain steady through lease expiration despite the dark space. According to Reis, the Santa Clara/Sunnyvale submarket reported a Q2 2024 vacancy rate of 19.4%, which is expected to remain flat through 2029 when Google's lease expires and the loan matures. Given the increased maturity default risk associated with the fully dark building and a lease that is scheduled to expire three months before the loan maturity, Morningstar DBRS analyzed the loan with a stressed LTV, which resulted in an EL that was approximately 15% greater than the pool average.

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

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 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 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

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.