DBRS Morningstar Confirms All Ratings on Benchmark 2019-B9 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-B9 issued by Benchmark 2019-B9 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-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BB (high) (sf)
-- Class F at BB (sf)
-- Class X-G at BB (low) (sf)
-- Class G at B (high) (sf)
-- Class X-H at B (sf)
-- Class H at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since last review, despite more recent challenges that have generally been driven by the effects of the Coronavirus Disease (COVID-19) pandemic. At issuance, the transaction consisted of 50 fixed-rate loans secured by 88 commercial and multifamily properties, with a trust balance of $883.5 million. As of the January 2022 remittance report, all 50 loans remain in the transaction, with no losses or defeasance to date.

There has been minimal amortization, with only 0.9% collateral reduction since issuance. Nineteen loans, representing 53.8% of the pool, are interest only (IO) for the full term, and an additional 18 loans, representing 33.4% of the pool, are structured with partial IO periods. The pool is only scheduled to amortize by 6.1% through maturity.

The transaction is concentrated with loans backed by office properties, which represent 38.0% of the pool. The next largest property types are retail and lodging, which represent 19.0% and 10.2% of the current trust balance, respectively. According to the January 2022 remittance report, two loans are in special servicing and 14 loans, representing 32.2 % of the current trust balance, are on the servicer’s watchlist. The primary performance drivers for watchlisted loans are cash flow declines for retail and hospitality properties, which continue to experience performance challenges stemming from ongoing disruptions related to the pandemic.

The largest loan on the servicer’s watchlist, 3 Park Avenue (Prospectus ID#1; 10.0% of the pool), is secured by a mixed-use office and retail building located on the corner of 34th Street and Park Avenue in New York. The loan became delinquent in May 2020 and has subsequently faced multiple short-term periods of delinquency through November 2021, when the loan was brought current. Occupancy at the property has declined to 60% as of June 2021 from 85.4% at issuance following tenant departures and downsizing over the past 18 months. As a result, the debt-service coverage ratio fell to 0.71 times (x) as of June 2021 from 1.77x at YE2019. A loan modification was granted in November 2021, terms of which included the utilization of leasing reserves to pay debt service payments and a deferral of reserve deposits between November 2021 and October 2022. The one-year reserve replenishment period is scheduled to begin in November 2022. Additional stresses on office use caused by the coronavirus pandemic, combined with recent tenant departures, suggest increased risks for the loan from issuance.

The largest loan in special servicing, La Quinta Inn Berkeley (Prospectus ID#33; 1.2% of the pool), is secured by a 113-key limited-service hotel in Berkeley, California. The loan transferred to special servicing in September 2020 due to payment default, triggered by a substantial decline in cash flow and operational performance. The loan was brought current in October 2021; however, a return to the master servicer has been delayed until cash management provisions are set up. The property was re-appraised in February 2021 with an as-is value of $15.4 million, a decline from the issuance value of $21.8 million but indicative of an above-water loan-to-value ratio of 68.4%. The property has experienced performance declines largely attributed to the pandemic. DBRS Morningstar expects the property will likely face sustained downward pressure on operational performance in the near to medium term given its segment and location relative to competitors. DBRS Morningstar will continue to monitor the loan for updates.

At issuance, DBRS Morningstar shadow-rated one loan—Aventura Mall (Prospectus ID#22; 1.7% of the pool)—investment grade, supported by the loans’ strong credit metrics, strong sponsorship strength, and historically stable collateral performance. With this review, DBRS Morningstar confirms that the characteristics of the loan remains consistent with the investment-grade shadow rating.

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, X-G, and X-H are 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1–3 Park Avenue (10.0% of the pool)
-- Prospectus ID#33– La Quinta Inn Berkeley (1.2% of the pool)

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.

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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