Morningstar DBRS Confirms All Credit Ratings of Wells Fargo Commercial Mortgage Trust 2019-C49

DBRS Limited (Morningstar DBRS) confirmed all credit ratings on the classes of Commercial Mortgage Pass-Through Certificates, Series 2019-C49 issued by Wells Fargo Commercial Mortgage Trust 2019-C49 as follows:

-- 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-SB 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-RR at BBB (low) (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at BB (sf)
-- Class H-RR at B (high) (sf)
-- Class J-RR at B (low) (sf)
-- Class X-A at AAA (sf)
-- Class X-B at A (high) (sf)
-- Class X-D at A (low) (sf)

All trends are Stable.

The credit rating confirmations and stable trends reflect the overall stable performance of the underlying loans in the pool as evidenced by the weighted-average (WA) debt service coverage ratio (DSCR) of 1.66 times (x), and the healthy WA debt yield (DY) of 9.9%, based on the most recent financials reported (excluding defeased loans). Additionally, the pool benefits from a relatively low office concentration, with only eight loans, representing 15.3% of the pool, secured by office collateral. Although there are four office loans, representing 11.7% of the pool, in the top 15, those loans are generally performing as expected with minimal near-term credit risk, with the exception of the Merge Office loan (Prospectus ID#11; 2.2% of the pool), the largest loan on the servicer's watchlist. That loan is secured by a suburban office property in Westminster, California, which has been reporting declining occupancy since issuance and has been late on making payments since April 2024. For this review, Morningstar DBRS increased the probability of default (POD) penalty and stressed the loan-to-value ratio (LTV) for the loan, resulting in an expected loss (EL) that was more than 165% higher than the pool average.

As of the October 2024 remittance, 61 of the original 64 loans remain in the pool, with a collateral reduction of 5.6% since issuance. A total of eight loans, representing 8.7% of the pool have fully defeased. An additional seven loans, representing 8.2% of the pool, are on the servicer's watchlist, being predominantly monitored for declining DSCR and/or occupancy. The pool is mostly concentrated by loans backed by retail and lodging properties, which represent 30.8% and 20.5% of the pool, respectively.

There are two loans in special servicing, representing 2.4% of the pool, Florissant Marketplace (Prospectus ID#19, 1.6% of the pool) and 659 Broadway (Prospectus ID#46, 0.8% of the pool). Following Morningstar DBRS' last credit rating action, Morningstar DBRS received updated 2023 appraisals for both collateral properties, reflecting a WA value decline from issuance of 48.8% and a WA LTV of 128.5% based on the respective outstanding loan amounts. Both loans were transferred to special servicing in the second half of 2020 for payment default, and disposition strategies are at various stages for both loans, which are both delinquent. For this review, Morningstar DBRS maintained a liquidation scenario for both loans, based on haircuts to the most recent appraised values for each property, which resulted in a WA implied loss severity of 70.9%, with a cumulative projected loss of $12.3 million, eroding more than half of the nonrated Class K-RR balance. Although this reduction in support is noteworthy, given the low credit ratings assigned for the four certificates above that Class in Classes F-RR, G-RR, H-RR, and G-RR between BB (high) (sf) and B (low) (sf), with a combined balance of $37.7 million and liquidated credit support of just under 6.0% for the highest of the four classes in the waterfall, Morningstar DBRS believes there remains sufficient cushion against loss for the investment-grade credit rated classes, supporting the credit rating confirmations and Stable trends for all classes with this review.

The largest loan in special servicing, Florissant Marketplace, is secured by a 146,257-square-foot (sf) grocery-anchored retail property in the St. Louis suburb of Florissant, Missouri. Per the servicer's most recent commentary, the receiver has secured a new lease with Crunch Fitness to backfill the gym space that had been vacant since 2020, a development which will bring the physical occupancy rate back to issuance levels approaching 100%. The property was reappraised in October 2023 at $8.5 million, reflecting a 50.9% decline from the issuance value of $17.3 million, and results in a current LTV of 135.8%. The October 2023 value is in line with previous values obtained in 2021 and 2022. Morningstar DBRS analyzed a liquidation scenario based on a 15.0% haircut to the October 2023 value, which resulted in a loss severity in excess of 77.0%.

The second loan in special servicing, 659 Broadway, is secured by a 4,876-sf, single-tenant retail property located within a larger residential co-op building known as Bleecker Court, in Manhattan. According to the servicer, the lender was the successful bidder at the property's foreclosure sale in November 2023, and the property became real estate owned as of December 2023. The building is currently occupied by an unauthorized tenant, Sneaker City (lease expiration in April 2027), and per the servicer's commentary, management is currently working with the tenant to sign an authorized lease. The property was reappraised in March 2023 for $5.1 million, reflecting a 44.6% decline from the issuance value of $9.2 million and generally in line with previous appraisals obtained in 2020 and 2022. The Morningstar DBRS liquidation scenario for this loan, also based on a 15.0% haircut to the most recent appraised value, resulted in a projected loss severity in excess of 57.0%.

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 (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
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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 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.

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