DBRS Morningstar Confirms Ratings on MTRO Commercial Mortgage Trust 2019-TECH

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-TECH issued by MTRO Commercial Mortgage Trust 2019-TECH (the Issuer) as follows:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class X-NCP at AAA (sf)
-- Class C at AA (high) (sf)
-- Class D at BBB (sf)
-- Class E at BB (sf)
-- Class F at BB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The December 2020 financials reported net cash flow that was in line with 2019 and 16% above the Issuer’s assumptions. Occupancy remained stable at 97% as of YE2020.

The transaction comprises a $200.0 million loan with an initial term of two years with three one-year extension options (the first of which has been exercised) and a final maturity in December 2023. The loan pays interest only (IO) throughout its term at a rate of Libor plus 1.725%. In addition to the trust debt, there is $30.0 million in mezzanine debt (which is coterminous with the trust debt), bringing the total debt to $230.0 million. This debt, combined with $106.8 million of sponsor equity, was used to purchase the properties and fund upfront reserves.

The collateral consists of the leasehold interest in two Class A office buildings totaling 1.1 million square feet (sf) in Brooklyn, New York. The buildings are part of the MetroTech office/educational campus, which totals 5.5 million sf across 11 buildings. One MetroTech Centre is a Class A, 24-story office building with ground-floor retail, totaling 906,009 sf. This property is encumbered by a 97-year ground lease that expires in March 2087 with no renewal options. Eleven MetroTech Center is a Class A, five-story office building with ground-floor retail, totaling 216,000 sf. This property is encumbered by a 99-year ground lease that expires in January 2092, with no renewal options.

The largest tenant at the properties is J.P. Morgan Chase (JPMC) which occupies 270,223 sf in the One MetroTech building on a lease that expires in June 2024 with one 10-year extension option. This extension option also provides JPMC the ability to return up to 50% of its space in contiguous full floor space at the time of renewal. National Grid is the second-largest tenant at the properties, occupying 259,561 sf in the One MetroTech building on a lease that expires in February 2025 with two 10-year extension options. National Grid is an electricity, natural gas, and clean energy delivery company serving the U.S. and Great Britain. The third-largest tenant at the properties is the New York City Department of Information Technology & Telecommunications (DoITT) which occupies 155,500 sf (making it the largest tenant in the Eleven MetroTech building) on a lease that expires in March 2030. DoITT delivers IT services, infrastructure, and telecommunications across New York City’s governmental operations. This property serves as its headquarters, although the lease does not contain any extension options.

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.

Class X-NCP is an IO certificate that references 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.

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 issuer and servicer 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 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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