DBRS Morningstar Confirms All Classes of BANK 2019-BNK24

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-BNK24 issued by BANK 2019-BNK24 as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since last review. At issuance, the transaction consisted of 71 fixed-rate loans secured by 104 commercial and multifamily properties at a trust balance of $1.2 billion. According to the November 2021 remittance, all loans remain in the pool and there has been negligible amortization of 0.45% to date. No loans are defeased. The weighted-average (WA) loan-to-value (LTV) ratio of the pool at issuance was 52.3% and the pool is scheduled to amortize down to a WA LTV of 50.4% at loan maturity. The transaction is most concentrated in loans backed by office properties with 10 loans of that type, representing 33.7% of the current trust balance. The second-largest concentration by property type is multifamily, with 10 loans secured by that property type, representing 26.7% of the current trust balance.

As of the November 2021 remittance report, there were 16 loans representing 26.8% of the current pool balance on the servicer’s watchlist, and two loans representing 3.0% of the current pool balance in special servicing. Of the loans on the servicer’s watchlist, eight loans representing 1.3% of the pool were secured by cooperative housing properties. The five largest loans on the servicer’s watchlist, all of which are in the top 15, representing a combined 24.4% of the current pool balance, include two secured by multifamily assets and three secured by hotel properties. Four of these loans are being monitored for low debt service coverage ratios (DSCR), related to the effects of the Coronavirus Disease (COVID-19) pandemic, while the smallest of the five is continuing to be monitored for deferred maintenance items observed during the most recent servicer’s site inspection of the collateral.

The two loans in special servicing, 325-329 Third Avenue (Prospectus ID #18; 1.7% of pool) and 3800 Broadway (Prospectus ID #20; 1.3% of pool) are each secured by mixed-use assets in Manhattan (Kips Bay and Washington Heights neighborhoods, respectively), comprising multifamily buildings with ground floor retail units, but revenue for both of the assets is primarily driven by the multifamily components. The two loans share common sponsorship but are not cross-collateralized or cross-defaulted. Both loans transferred to special servicing in February 2021 and are now 12-months delinquent. The servicer notes that the borrower has been uncooperative, and although the workout strategy appears to be foreclosure for both loans, a change in special servicer for the transaction, as well as a significant backlog of foreclosure cases in the courts, has likely delayed the timing on that front. The special servicer reports that appraisals are being finalized and DBRS Morningstar expects the as-is values to show declines from issuance given the market challenges and the lower occupancy rates reported in the spring of 2021 for the multifamily components. The small loan size and potential for improvement in the as-is values are noteworthy considerations and, for now, DBRS Morningstar believes the overall risk to the trust is low to moderate for these loans.

At issuance, DBRS Morningstar shadow-rated four loans, representing 22.5% of the current trust balance, investment grade, which included 55 Hudson Yards (Prospectus ID#1; 8.2% of the current trust balance), Jackson Park (Prospectus ID#2; 8.2% of the current trust balance), Park Tower at Transbay (Prospectus ID #9; 4.1% of the current trust balance), and ILPT Industrial Portfolio (Prospectus ID#15; 2.1% of the current trust balance). The Jackson Park loan is currently on the servicer’s watchlist for a low DSCR and a decline in occupancy since issuance. The loan is secured by a four building, 1,871-unit luxury multifamily complex in Long Island City in Queens, New York, and has been severely affected by the coronavirus pandemic. Occupancy, according to the March 2021 rent roll, declined to 55.1% from 96.1% at issuance, while the DSCR declined to 0.63x from 2.15x at issuance, according to the Q2 2021 financials. Despite the declines, the March rent roll was showing positive leasing momentum and the servicer reported a June 2021 occupancy rate of 65.1%. The servicer’s watchlist commentary since August has noted that the market demand the borrower has seen in recent weeks has exceeded its expectations, suggesting the property is well on its way to a recovery. With this review, DBRS Morningstar maintains that the overall performance for all four loans remains in line with the shadow ratings assigned at issuance.

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.

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

The principal methodology is the 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 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.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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