DBRS Morningstar Confirms All Classes of Benchmark 2019-B11 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2019-B11 issued by Benchmark 2019-B11 Commercial Mortgage Trust as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class X-B at A (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (sf)
-- Class F at BB (low) (sf)
-- Class X-G at B (high) (sf)
-- Class G at B (sf)

DBRS Morningstar also changed the trend on Classes F, G, X-F, and X-G to Negative; all other trends are Stable. The Negative trends are reflective of DBRS Morningstar’s concerns with the largest loan in special servicing, Greenleaf at Howell (Prospectus ID#15, 2.4% of the current pool balance), as discussed in greater detail below.

Outside of the specially-serviced loan mentioned above, the overall performance of the other loans in the transaction remains in line with DBRS Morningstar’s expectations, supporting the Stable trends for most classes. There are two other loans in special servicing, as detailed below, but that number has declined from a total of five loans in special servicing at the time of the last full transaction review by DBRS Morningstar, in November 2020.

As of the September 2021 remittance, all of the original 40 loans remain in the pool with a negligible amortization of 0.5% since issuance. The transaction is concentrated in loans backed by office properties, representing 43.5% of the pool, with the next-largest concentrations in hotel properties, representing 14.9% of the pool and multifamily properties, representing 14.4% of the pool. As of the September 2021 remittance, three loans, representing 4.3% of the pool, are in special servicing. Additionally, nine loans, representing 19.8% of the pool, are on the servicer’s watchlist. Loans on the servicer’s watchlist have been flagged for various reasons including low debt service coverage ratios (DSCRs), servicing trigger events, deferred maintenance, and monitoring after a return from the special servicer.

The Greenleaf at Howell loan is secured by a 227,045 square foot (sf) anchored retail center located in Howell, New Jersey. At issuance, the largest tenants included Xscape Theatres (25.0% of the net rentable area (NRA)), LA Fitness (16.3% of the NRA), and ClimbZone Howell (10.7% of the NRA). However, Xscape Theatres, which initially closed temporarily last year in response to the Coronavirus Disease (COVID-19) pandemic, has since permanently closed, bringing the property’s physical occupancy rate down considerably. The loan transferred to the special servicer in September 2020 and the borrower’s forbearance request remains under review by the special servicer over a year later. The September 2021 remittance report shows the loan remains 121+ days delinquent. An August 2021 appraisal obtained by the special servicer showed an as-is value of $30.0 million, down from the December 2020 appraisal value of $32.9 million and well below the issuance value of $66.9 million. Based on the August 2021 value, DBRS Morningstar assumed a liquidation scenario for this review, resulting in a loss severity in excess of 50.0% for this loan.

The second-largest loan in special servicing is Magnolia Hotel St. Louis (Prospectus ID#24, 1.5% of the current pool balance), secured by a 182-room full-service hotel. The loan transferred to special servicing in April 2020 as a result of imminent monetary default. The loan was delinquent until January 2021, when the terms of a forbearance agreement executed in December 2020 came into effect. The agreement allowed for the deferral of payments from July 2020 to March 2021, with interest-only payments to resume in April 2021 through December 2021. In addition, seasonality reserve payments were waived during the deferral period. The deferred payments will be repaid from January 2022 to June 2023.

Of these nine loans on the servicer’s watchlist, three are top 10 loans that have been flagged for credit concerns, including SWVP Portfolio (Prospectus ID#5, 4.6% of the current pool balance), Arbor Hotel Portfolio (Prospectus ID#6, 4.6% of the current pool balance), and Green Hills Corporate Center (Prospectus ID#7, 4.6% of the current pool balance). The SWVP Portfolio is secured by a portfolio of four full-service hotels in New Orleans; Durham, North Carolina; Charlotte, North Carolina; and Sunrise, Florida. The portfolio has seen significant revenue declines as a result of the coronavirus pandemic, with a trailing three months ended March 2021 DSCR of -0.37 times (x), relative to the DBRS Morningstar DSCR of 1.79x derived at issuance. Although the collateral hotel portfolio performance has been significantly affected, the loan has remained current and the sponsor, Southwest Value Partners, has not requested any relief to date. The loan is also modestly leveraged with a loan-to-value (LTV) ratio of 62.2%, suggesting cushion against near to moderate term value declines as the effects of the pandemic continue to impact hotel properties across the country.

The Arbor Hotel Portfolio loan is secured by six limited-service hotels in major cities, including Salt Lake City; Santa Barbara, California; Minneapolis; and Arlington, Texas. The borrower has been granted two separate relief requests since the start of the coronavirus pandemic, the most recent of which was executed in June 2021. According to the terms of the second modification, the servicer approved a waiver of all furniture, fixtures, and equipment (FF&E) reserve deposits for the entirety of 2021. All used FF&E reserve deposits were to be paid over a 12-month period beginning January 2022, all cash management triggers were suspended until January 2022, and a $1.4 million letter of credit was required to be on file with the servicer until all reserves have been repaid. The borrower continues to comply with the terms of the granted modifications and the loan has reported current or less than 30-days delinquent since the start of the pandemic.

With this review, DBRS Morningstar confirms that the performance of the 3 Columbus Circle loan (Prospectus ID#1, 9.1% of pool) remains in line with the investment-grade shadow rating derived when DBRS Morningstar assigned ratings to the subject transaction in December 2019.

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.

Classes X-A, X-B, X-D, X-F, and X-G 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.

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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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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