DBRS Morningstar Confirms Ratings on COMM 2019-521F Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on the COMM 2019-521F Mortgage Trust, Commercial Mortgage Pass-Through Certificates issued by COMM 2019-521F Mortgage Trust as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. The $242.0 million first-lien mortgage loan is secured by a 39-storey Class A office building in New York that was built in 1929. The sponsor, Savanna Capital Partners, acquired the property in May 2019 for $381.0 million. The 495,636-square foot (sf) building has three underground levels and multilevel retail space. The 521 Fifth Avenue building sits at the northeast corner of East 43rd Street, which is within the Grand Central office submarket per Reis. The property is a short distance from Grand Central Terminal, Bryant Park, and the New York City Public Library.

The building offers efficient and flexible floorplates with outdoor terraces that appeal to both large and boutique tenants. Tenants can enter the office space using the main office lobby along 43rd Street, which provides additional access to the two side street retail tenants within the property. The office floorplates range in size from 3,000 sf to 22,500 sf. The property also has eight setback outdoor terraces on the fifth, 14th, 16th, 19th, 22nd, 24th, and 37th floors. Urban Outfitters occupies the prime Fifth Avenue retail space on the ground floor, while Equinox and Cazzolina Restaurant occupy the side street retail suites.

The loan had an initial term of two years with the initial maturity date in June 2021. The borrower has notified the servicer of its intent to exercise the first of three one-year extension options. These options are not subject to any performance hurdles and we expect the loan’s maturity to be extended to June 2022.

The property consists of 89.9% office space (floors three to 39) and 10.1% retail space (sub-lower level to floor 2). Retail tenancy combined represents approximately 17.4% of the DBRS Morningstar gross potential rent with the subject’s largest contributor by rent being the clothing retailer Urban Outfitters (13.2% of the DBRS Morningstar rent), which occupies 9,644 sf on the ground level and 12,525 sf on the second level. The Urban Outfitters lease commenced in August 2010, and expires in February 2026, and is structured with two five-year extension options. The largest tenant by square footage is Equinox (5.4% of the net rentable area (NRA) through January 2035), which occupies 26,914 sf of primarily below-ground-level retail space. No other tenant represents more than 5.0% of the NRA. Major office tenants at the property include BMO Capital Markets (4.5% of the NRA through May 2022), Modis Inc. (4.4% of the NRA through November 2021), and Major, Lindsey & Africa (4.4% of the NRA through January 2024).

According to the March 2021 rent roll, the property was 89.6% occupied at an average gross rental rate of $61.17 per square foot (psf), compared with the occupancy rate of 93.0% and average gross rental rate of $64.83 psf at issuance.

As of Q1 2021 Reis data, comparable office properties within the Grand Central submarket reported an average rental rate of $62.57 psf and a vacancy rate of 9.5%. However, these figures have changed since Q1 2020 when Reis reported figures of $66.77 psf and 7.7%.

The loan benefits from the experienced institutional sponsorship of Savanna Investment Management LLC. The New York-based firm is vertically integrated with acquisition, asset management, leasing, and project management capabilities. It invests exclusively in New York City and has significant experience owning and operating office buildings throughout New York City, having managed a collective 8.4 million sf of space across 20 assets. DBRS Morningstar also notes that the collateral has a land value of $250.0 million, which exceeds the securitized loan balance.

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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