DBRS Morningstar Assigns Provisional Ratings to Wells Fargo Commercial Mortgage Trust 2019-C53

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2019-C53 (the Certificates) to be issued by Wells Fargo Commercial Mortgage Trust 2019-C53:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AAA (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class X-D at A (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)

All trends are Stable. Classes X-D, D, E-RR, F-RR, G-RR, H-RR, J-RR and K-RR will be privately placed. The Class X-A, X-B and X-D balances are notional.

The collateral consists of 58 fixed-rate loans secured by 85 commercial and multifamily properties. The transaction is a sequential-pay pass-through structure. The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of a loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Morningstar Stabilized Net Cash Flow and their respective actual constants, one loan — Smoke Tree Village and Smoke Tree Commons, representing 1.5% of the pool — had a DBRS Morningstar Issuance DSCR below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default. The pool additionally includes 25 loans comprising a combined 47.2% of the pool balance with an issuance loan-to-value (LTV) ratio in excess of 67 .1%, a threshold generally indicative of above-average default frequency. The weighted-average (WA) DBRS Morningstar LTV of the pool at issuance was 64.6%, and the pool is scheduled to amortize down to a DBRS Morningstar WA LTV of 58.6% at maturity.

Only three loans, representing a combined 2.4% of the pool by allocated loan balance, were assigned Average (-) property quality scores, and only one property comprising 0.6% of the pool by allocated loan balance was deemed to exhibit Below Average property quality. Additionally, four loans comprising 18.7% of the pool by allocated loan balance exhibited Average (+) property quality. Term default risk is relatively low, as is evidenced by a relatively strong WA DBRS Morningstar Issuance DSCR of 1.82x. Across the pool, DBRS Morningstar Issuance DSCRs generally ranged from 1.14x to 4.35x and only nine loans comprising a combined 16.6% of the pool by allocated loan balance exhibited a DBRS Morningstar Issuance DSCR of less than 1.32x, a threshold generally associated with above-average default frequency. Additionally, excluding hospitality properties, 13 loans comprising 32.0% of the pool by allocated loan balance exhibited a favorable DSCR in excess of 1.69x, a threshold generally associated with below-average default frequency.

The pool has a relatively high concentration of loans secured by office properties, as evidenced by eight loans, representing a combined 25.2% of the pool by allocated loan balance) being secured by such properties. DBRS Morningstar considers office properties to be a riskier property type with above-average default frequency. Two of the identified loans (comprising 22.4% of the pool’s total office composition) are secured by office properties located in areas with a DBRS Morningstar market rank of 6, which are generally characterized as urban locations. These markets generally benefit from increased liquidity that is driven by consistently strong investor demand and therefore tend to benefit from lower default frequencies than less dense suburban, tertiary or rural markets. The WA expected loss of the seven loans secured by office properties is more than two times the WA expected loss of the overall pool. As a result, the risk of these loans is reflected in the credit enhancement levels of the pool.

The pool exhibits some leverage barbelling, as is evidenced by 26 loans comprising 48.5% of the pool by allocated loan balance having DBRS Morningstar Issuance LTV ratios in excess of 67.1%, a threshold historically indicative of relatively high-leverage financing and generally associated with above-average default frequency. Only four of the identified properties exhibited a DBRS Morningstar Issuance DSCR of less than 1.32x, a threshold generally associated with above-average default frequency. The three identified loans with a DBRS Morningstar Issuance DSCR of less than 1.32x exhibited a WA expected loss of 9.2%, more than three times the WA expected loss of the overall pool. As a result, the risk of these loans is reflected in the credit enhancement levels of the pool. The WA DBRS Morningstar Issuance DSCR exhibited by the 26 loans identified to represent relatively high-leverage financing was 1.54x.

The pool has a relatively high concentration of loans secured by non-traditional property types such as self-storage, hospitality, data center and manufactured housing community (MHC) assets, which, on a combined basis, represent 40.8% of the pool by allocated loan balance across 30 loans. While not historically considered core property types, CBMS loans secured by MHC and self-storage properties have performed better than other property types over the past two decades and are generally associated with below-average default frequency.

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 ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS Morningstar.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrs.com.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID #1 – Equinix Data Center (8.5% of the pool)
-- Prospectus ID #2 – Caesar’s Bay Shopping Center (6.5% of the pool)
-- Prospectus ID #3 – Planet Self Storage Portfolio (6.4% of the pool)
-- Prospectus ID #4 – 777 East Eisenhower (6.3% of the pool)
-- Prospectus ID #5 – 1000 Chesterbrook (5.4% of the pool)
-- Prospectus ID #6 – 112-118 West 125th Street (4.6% of the pool)
-- Prospectus ID #7 – 600 & 620 National Avenue (4.3% of the pool)
-- Prospectus ID #8 – 800 Delaware (3.8% of the pool)
-- Prospectus ID #9 – Martin Brower (3.3% of the pool)
-- Prospectus ID #10 – Bird Creek Crossing (3.1% of the pool)
-- Prospectus ID #11 – Southern California Retail Portfolio (3.1% of the pool)
-- Prospectus ID #12 – Doubletree ABQ (2.7% of the pool)
-- Prospectus ID #14 – Glenview Corporate Center (2.6% of the pool)
-- Prospectus ID #23 – Meadows Place Seniors Village (1.4% of the pool)
-- Prospectus ID #24 – Walgreens Brooklyn (1.3% of the pool)
-- Prospectus ID #30 – Holiday Inn and Suites - N Scottsdale (0.9% of the pool)
-- Prospectus ID #31 – Bank of America Brooklyn (0.8% of the pool)
-- Prospectus ID #38 – Cactus Wren (0.6% of the pool)
-- Prospectus ID #39 – Mesa Retail (0.6% of the pool)
-- Prospectus ID #46 – Tyler Street Self Storage (0.4% of the pool)
-- Prospectus ID # 52 – Downtown Storage (0.3% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is North American CMBS Multi-borrower Rating Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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