Press Release

Morningstar DBRS Confirms Credit Ratings on All Classes of Ready Capital Mortgage Trust 2019-6

CMBS
December 20, 2024

DBRS, Inc. (Morningstar DBRS) confirmed its credit ratings on the following classes of Commercial Mortgage Pass-Through Certificates issued by Ready Capital Mortgage Trust 2019-6:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class IO-A at AAA (sf)
-- Class IO-B/C at AA (high) (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (sf)
-- Class F at BB (sf)
-- Class G at B (high) (sf)

The trends on Classes C, D, and IO-B/C are Positive. The trends on all remaining classes are Stable.

The credit rating confirmations reflect the overall stable performance of the transaction since the previous Morningstar DBRS credit rating action in February 2024. Two loans remain in special servicing, representing 8.8% of the current pool balance, and there are 18 loans on the servicer's watchlist, representing 48.0% of the current pool balance. Morningstar DBRS' analysis includes conservative adjustments made, where appropriate, to reflect increased credit risk, and its projections for these loans remains largely unchanged since the last credit rating action.

Offsetting this concentration is the significant increase in credit support as a result of continued amortization and loan repayments. Since the previous credit rating action, two loans have been repaid. As of the November 2024 remittance, 50 of the original 89 loans remain in the pool with a current trust balance of $218.8 million, reflecting a collateral reduction of 49.2% since issuance. This forms the basis of the Positive trends placed on Classes C, D, and the interest-only Class IOBC. Credit support to Classes C and D has nearly doubled since issuance, indicating positive pressure in the middle of the capital stack. There are a number of loans scheduled to mature over the next 12 to 24 months. As the pool continues to deleverage and granted performance remains stable, these classes may be subject to future upgrades to reflect the improved credit enhancement. Upward ratings movement may be constrained by adverse selection and lack of resolution for underperforming loans.

The largest loan in special servicing, 777 E 12th St (Prospectus ID#5; 8.4% of the pool balance), is secured by a mixed-use property in the Fashion District of downtown Los Angeles. The loan transferred to special servicing in October 2023 due to imminent monetary default, and the special servicer is pursuing foreclosure. Occupancy has declined in recent years, most recently reported at 80.1% as of the September 2024 rent roll, down from 91.6% as of September 2023. As of the Q3 2023 annualized net cash flow (NCF) provided by the servicer, the property generated a NCF of $1.1 million, equating to a debt service coverage ratio (DSCR) of 0.84 times (x). Morningstar DBRS has yet to receive an updated appraised value from the servicer; however, at issuance, the property's value was $31.6 million. Given the prolonged decline in operating cash flow, Morningstar DBRS believes the property's current market value has significantly declined. In its analysis, Morningstar DBRS considered a stressed value in its liquidation scenario resulting in a loss severity in excess of 50%.

The other loan in special servicing, Lakeland Medical Office Building (Prospectus ID#81; 0.5% of the pool balance), is secured by an office property in Niles, Michigan. The loan has been in special servicing since September 2020 and became real estate owned in July 2022. While the servicer has not provided updated financials, the property was appraised for $1.5 million as of August 2023. Morningstar DBRS also assumed a liquidation scenario in its analysis of this loan, resulting in a loss severity above 60.0%. The cumulative projected losses from both specially serviced loans are projected to be contained to the unrated bond, Class H.

The largest loan on the servicer's watchlist, 1001 Ross (Prospectus ID#2; 11.0% of the pool), is secured by a 204-unit multifamily property with a 30,164-square-foot retail component in downtown Dallas. Despite historically stable occupancy, the loan continues to be monitored for low DSCR, which was reported at 0.68x for the trailing 12 months (T-12) ended September 30, 2024. In September 2024, the loan was modified extending loan maturity to September 2025, inclusive of a 12-month extension subject to certain performance thresholds. As part of the modification the borrower paid down the loan by $2.5 million and purchased a new rate cap agreement with a 3.25% strike rate. In its current analysis, Morningstar DBRS applied increased loan-to-value ratio and probability of default adjustments to reflect the current credit risk of the loan. The adjustments resulted in a loan expected loss approximately 2x greater than the expected loss for the pool.

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 credit 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 IO-A and IO-B/C are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO credit 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 (December 13, 2024) https://dbrs.morningstar.com/research/444617/north-american-cmbs-surveillance-methodology.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating assigned to Classes D and E are lower than the credit rating implied by the predictive model by three or more notches. Morningstar DBRS typically expects there to be a substantial likelihood that a reasonable investor or other user of the credit rating would consider a three-notch or more deviation from the credit rating stress implied by the predictive model to be a significant factor in evaluating the credit rating. The rationale for the material deviation is uncertain loan-level event risk given the concentration of loans in special servicing and on the servicer's watchlist. Although there is positive pressure on these classes stemming from significant deleveraging in the pool, upwards rating changes may be constrained by adverse selection or lack of resolution for underperforming loans.

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.

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 (December 13, 2024)/North American CMBS Insight Model Version 1.2.0.0, https://dbrs.morningstar.com/research/444616)

-- Morningstar DBRS North American 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 (December 3, 2024), https://dbrs.morningstar.com/research/444064

-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294

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/410863.

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

Ratings

  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.