DBRS Morningstar Confirms Ratings on Prima Capital CRE Securitization 2019-RK1

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-RK1 issued by Prima Capital CRE Securitization 2019-RK1 as follows:

DreamWorks Campus and Headquarters (Group D):
-- Class A-D at BBB (low) (sf)
-- Class B-D at BB (low) (sf)
-- Class C-D at B (low) (sf)

The Gateway (Group G):
-- Class A-G at A (low) (sf)
-- Class B-G at BBB (low) (sf)
-- Class C-G at BB (high) (sf)

TriBeCa House (Group T):
-- Class A-T at BBB (low) (sf)
-- Class B-T at BB (low) (sf)
-- Class C-T at B (high) (sf)

All trends are Stable. Interest is deferrable on all rated Certificates other than Classes A-D, A-G, A-T, and B-G.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The transaction has a total mortgage balance of $152.3 million and consists of three nonpooled B-Notes tied to previously securitized collateral. The collateral includes one office property, DreamWorks Campus and Headquarters, and two multifamily properties, The Gateway and TriBeCa House. The notes are secured by the grantor trust certificate representing beneficial interests in a subordinate loan, which is a portion of a whole loan. The three B-Notes are held within the trust and the loans are interest only through their respective loan terms. As of the April 2021 remittance, no loans appear on the servicer’s watchlist and none are in special servicing.

The transaction is composed of three Loan Groups — Group D, Group G, and Group T — with certificates tied to each of the three subjects. As nonpooled notes, proceeds from the collateral interest relating to any Loan Group will not be available to support shortfalls of any other Loan Group. Additionally, TriBeCa House is the only loan in the transaction that has existing mezzanine financing in place. No loans in the transaction are allowed to take on mezzanine or unsecured debt in the future. The Gateway and TriBeCa House loans have been determined by DBRS Morningstar to exhibit investment-grade credit characteristics on a stand-alone basis.

DreamWorks Campus and Headquarters (Group D, 41.2% of the transaction) is secured by a 497,403-square foot (sf) office campus in Glendale, California, roughly 10 miles north of the Los Angeles central business district. The collateral was built to suit for DreamWorks Animation SKG, Inc. (DreamWorks) in 1997 and has remained 100.0% occupied by the tenant since completion. The subject is improved with a central plant building for the property and a five-story parking structure that was renovated in 2010. In addition to 1,006 parking stalls in the structure, the property offers 417 street-level parking spaces. DreamWorks renewed its lease on a 20-year triple net lease in 2015, extending through 2035. The lease is structured with four five-year renewal options and the tenant currently pays $28.10 per sf with annual rent escalations of 1.5%. As of the December 2020 rent roll, the property remains 100% occupied.

The Gateway (Group G, 34.5% of the transaction) is secured by a 1,254-unit multifamily complex with approximately 72,000 sf of retail space located in downtown San Francisco. The property, which was constructed between 1965 and 1967, and subsequently renovated between 2010 and 2018, consists of four high-rise buildings and 916 parking stalls. The property has a mix of unit types, composed of studios to four-bedroom units, ranging in price from $2,470 per month to $6,300 per month. Since 2015, the sponsor has invested more than $21.0 million into the boiler system, elevator upgrades, corridor upgrades, and upgrades to select units. Management has been able to further increase value by renovating apartments that are vacant and re-leasing them at market rents. The largest retail tenants at the property include Safeway (24.5% of the net rentable area (NRA) through May 2025), The Bay Club at The Gateway (10.2% of the NRA through July 2032), and Bank of America (9.1% of the NRA through April 2022). Historically, the property has been well occupied with a 15-year average occupancy of roughly 97.0%. As of the December 2020 rent roll, the property was 92.0% occupied, compared with 94.0% occupied at YE2019.

TriBeCa House (Group T, 24.3% of the transaction) is secured by a 503-unit high-rise multifamily complex located at 50 Murray Street and 53 Park Place in the southern portion of Tribeca in New York. The 50 Murray Street building is a 21-story, 388-unit high-rise multifamily building. Unit sizes average 1,020 sf and there is 38,436 sf in retail space on the first and second floors. The 53 Park Place building is a 12-story multifamily building with 115 units averaging 750 sf and one 8,600-sf retail suite accommodating one tenant. From 2015 through mid-2018, the sponsor invested about $12.0 million ($23,842 per unit) in TriBeCa House, which included a thorough renovation to 319 apartment units and lobby and common area upgrades in both locations. Additional units are also renovated as tenants roll. The property has a mix of unit types, from studios to three-bedroom duplexes, ranging in price from $4,600 per month to $14,100 per month. According to the December 2020 rent roll, the property was 89.0% occupied, compared with 98.0% occupied at YE2019. DBRS Morningstar notes that occupancy has decreased at the multifamily properties amid the pandemic; however, the high property quality and favourable historical performance are considered noteworthy mitigating factors for both loans.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.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.

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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@dbrsmorningstar.com.

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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

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