Morningstar DBRS Downgrades Credit Ratings on Two Classes of Benchmark 2019-B15 Mortgage Trust, Changes Trends on Seven Classes to Negative from Stable

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on two classes of Commercial Mortgage Pass-Through Certificates, Series 2019-B15 issued by Benchmark 2019-B15 Mortgage Trust as follows:

-- Class F to B (high) (sf) from BB (low) (sf)
-- Class G-RR to B (low) (sf) from B (high) (sf)

In addition, Morningstar DBRS confirmed its credit ratings on the remaining classes 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-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (sf)

Morningstar DBRS changed the trends on Classes C, D, E, F, G-RR, X-D, and X-F to Negative from Stable. All other trends are Stable.

The downgrades reflect the moderate increase in expected losses (ELs) to the trust driven by specially serviced loan Hilton Cincinnati Netherland Plaza (Prospectus ID#18; 2.2% of the pool). The loan is secured by a 561-key full-service hotel in Cincinnati that transferred to special servicing in February 2021. Since the last credit rating action, a new appraisal was obtained, valuing the property at $57.1 million, a value reduction of more than 30% from its previous appraisal in January 2023. Morningstar DBRS analyzed this loan with a liquidation scenario, resulting in implied losses of approximately $7.1 million, which would partially erode the non-rated Class J-RR Certificate.

The Negative trends reflect increased risks outside of the specially serviced loan, primarily driven by two large loans, Innovation park (Prospectus ID#2; 8.1% of the pool) and Downtown Winter Haven Portfolio (Prospectus ID#8; 4.7% of the pool). Both loans are secured by suburban office collateral that have illustrated cash flow contraction since issuance and have major tenants vacating during the loan term, which could lead to large reductions in property value when compared to issuance. The pool's concentration of loans backed by office properties is considered high at nearly 40.0% of the pool balance, most of which are located in noncore suburban markets. In the analysis for this review, Morningstar DBRS increased the probability of default (POD) penalties and/or stressed loan-to-value ratios (LTV) for each of the office loans to increase the expected losses as applicable.

Morningstar DBRS also maintains a cautious outlook for large loans Tysons Tower (Prospectus ID#9; 4.2% of the pool) and 600 & 620 National Avenue (Prospectus ID#13; 3.5% of the pool). The Tysons Tower loan is secured by a 528,730-sf suburban office property in McLean, Virginia, approximately 12 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 net rentable area (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.

600 & 620 National Avenue is secured by a Class A office property in Mountain View, California, approximately 12 miles north of San Jose. The property is currently vacant but fully leased to single-tenant Google through May 2029 and is structured with three five-year renewal options. In 2023, various news outlets 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 loan maturity. However, there is significant tail-end risk given the lease expiration is commensurate with the loan's maturity. Morningstar DBRS analyzed both of these loans with a stressed LTV, which resulted in an average EL that was in line with the pool average.

The credit rating confirmations reflect the otherwise overall stable performance of the transaction, as illustrated by the weighted average debt service coverage ratio (WA DSCR) of 2.45 times (x) based on the most recent year-end financials. As of the September 2024 remittance, all of the original 32 loans remain in the trust, with minimal collateral reduction since issuance. There are nine loans, representing 37.5% of the pool, on the servicer's watchlist; however, only two of these, representing 10.1% of the pool, are being monitored for unresolved recent or upcoming tenant rollover risk and/or a low DSCR. There are two specially serviced loans representing 5.4% of the pool balance, one of which, 2.2% of the pool, is delinquent and the other, which transferred for payment default but is current and reporting a DSCR of 2.46x as of YE2023, is expected to return to the master servicer in the coming months.

Morningstar DBRS shadow-rated the Century Plaza Towers loan (Prospectus ID#3; 7.5% of the pool), The Essex (Prospectus ID#14; 3.0% of the pool) and Osborn Triangle (Prospectus ID#16; 2.4% of the pool) loans as investment-grade. As performance metrics for each of the three loans remain in line with expectations, Morningstar DBRS maintained the shadow rating on 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 at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

Classes X-A, X-B, X-D, and X-F 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 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.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS, Inc.
22 West Washington Street
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), https://dbrs.morningstar.com/research/428797
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- 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 (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.