Morningstar DBRS Confirms Credit Ratings on All Classes of CSAIL 2019-C16 Commercial Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2019-C16 issued by CSAIL 2019-C16 Commercial Mortgage Trust as follows:

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

All trends are Stable.

The credit rating confirmations reflect the transaction's overall stable performance, which remains in line with Morningstar DBRS' expectations. Overall, the pool continues to exhibit healthy credit metrics, as evidenced by the weighted-average (WA) debt service coverage ratio (DSCR) of 1.83 times (x) and the WA debt yield of 10.9% based on the most recent financial reporting available. Although there are two loans, representing 5.4% of the pool balance, in special servicing, the largest specially serviced loan is pending a return to the master servicer in the near term while the underlying collateral for the smaller loan received an updated appraisal in September 2023, reflecting a value that is approximately double the loan's current outstanding balance. Additional details are outlined below. In addition, two loans, representing 10.5% of the pool balance, are shadow-rated as investment grade by Morningstar DBRS.

The transaction is concentrated by property type with loans representing 30.2%, 27.5%, and 18.16% of the pool collateralized by lodging, retail, and office properties, respectively. The majority of loans secured by office properties continue to exhibit healthy credit metrics with a WA debt yield and DSCR of 11.1% and 2.2x, respectively.

As of the August 2024 remittance, all of the original 47 loans remain in the pool with a trust balance of $763.7 million, representing a collateral reduction of 3.0% since issuance. Thirteen loans, representing 34.8% of the pool balance, are on the servicer's watchlist, seven of which (20.3% of the pool balance) are being monitored for performance-related reasons. Three loans, representing 3.1% of the pool balance, have fully defeased.

The largest loan in special servicing, Santa Fe Portfolio (Prospectus ID#6, 4.3% of the pool), is secured by an 11-building mixed-use office and retail portfolio in Santa Fe, New Mexico. The loan transferred to special servicing in August 2022 for payment default shortly after undergoing a loan modification in June 2021, terms of which included the deferral of interest and reserve payments that have since been repaid. According to the servicer, a reinstatement agreement has been signed and the loan is slated to transfer back to the master servicer upon the borrower's repayment of outstanding charges and fees. The portfolio was reappraised in December 2023 for $43.5 million, unchanged from the December 2022 appraised value but below the issuance appraised value of $52.6 million. Although no updated financial reporting was provided, the largest tenant, Peters Gallery (23.5% of net rentable area (NRA)), has a long-term lease that runs through October 2033. The remainder of the rent roll is relatively granular with no other tenant occupying more than 10.0% of the portfolio's NRA. Morningstar DBRS analyzed this loan with an elevated probability of default (POD) penalty, resulting in an expected loss (EL) that is approximately 3.5x greater than the pool average.

The 1600 Western Buildings (Prospectus ID#29, 1.1% of the pool) loan is secured by two industrial buildings in Chicago totaling approximately 290,000 square feet. The loan transferred to special servicing in July 2023 for payment default and, since that time, the lender has engaged legal counsel with a receivership hearing scheduled for the end of September 2024. Despite the loan's transfer to special servicing, the properties continue to perform well with the most recent financial reporting dated June 2023 reflecting a DSCR of 1.80x and an occupancy rate of 100.0%. The properties were reappraised in September 2023 for $19.4 million, a modest increase from the issuance appraised value of $12.9 million and above the current whole loan balance of $8.4 million. Morningstar DBRS analyzed this loan with a stressed POD penalty, resulting in an EL that exceeded the pool average by approximately 150.0%.

The second-largest loan on the watchlist, Embassy Suites Seattle Bellevue (Prospectus ID#3, 5.4% of the pool), is secured by a 240-key full service hotel in Bellevue, Washington. The hotel's performance was trending downward even prior to the pandemic and the loan continues to be monitored on the servicer's watchlist for a low DSCR, which was reported at 1.05x as of the trailing 12 months (T-12) ended March 31, 2024. Although performance continues to improve with a net cash flow (NCF) of $2.4 million for the T-12 period ended March 31, 2024, up from $2.2 million (a DSCR of 0.98x) at YE2022, NCF remains considerably below the Morningstar DBRS NCF of $3.9 million derived at issuance. Similarly, the hotel's revenue per available room penetration rate remains well below pre-pandemic levels, most recently reported at 96.1% as of the STR, Inc. report dated March 31, 2024, compared with the December 2019 T-12 figure of 128.8%. Given the sustained decline in cash flow and extended period of time on the servicer's watchlist, Morningstar DBRS analyzed the loan with a conservative POD penalty, resulting in an EL that was approximately double the pool average.

At issuance, Morningstar DBRS shadow-rated two loans, 3 Columbus Circle (Prospectus ID#1, 6.5% of the pool) and 787 Eleventh Avenue (Prospectus ID#9, 3.9% of the pool), investment grade. This assessment was supported by the loans' strong credit metrics, strong sponsorship strength, and historically stable collateral performance. With this review, Morningstar DBRS confirms that the performance of these loans remains consistent with investment-grade 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 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, 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 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 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), 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.