DBRS Morningstar Upgrades Two Classes of CORE 2019-CORE Mortgage Trust

DBRS Limited (DBRS Morningstar) upgraded the following two classes of Commercial Mortgage Pass-Through Certificates, Series 2019-CORE issued by CORE 2019-CORE Mortgage Trust as follows:

-- Class C to AA (high) (sf) from AA (sf)
-- Class D to AA (sf) from A (sf)

In addition, DBRS Morningstar confirmed the remaining classes as follows:

-- Class B at AAA (sf)
-- Class X-NCP at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)

All trends are Stable.

The ratings upgrades reflect the continued paydown of the trust, as a result of property releases (and their associated release premiums) since the last review and the continued stable performance of the remaining properties that back the underlying loan collateralizing the transaction. The underlying loan is composed of four pari passu notes that totalled the $402.8 million balance at issuance consisted of the borrower’s fee-simple and leasehold interests in six office properties and one mixed-use property, totalling 2.6 million square feet (sf), across New York, Pennsylvania, Maryland, and Virginia. The loan is structured with an initial term of two years and three one-year extension options. As of the March 2022 remittance, the trust balance has paid down to $148.1 million. The whole loan amount also included a $92.2 million senior mezzanine loan and a $55.0 million junior mezzanine loan, both held outside the trust. The properties are cross defaulted.

Two property releases and paydowns have occurred in the last year. Starting with the June 2021 remittance, the Harlem Office property was released from the portfolio, resulting in a paydown of $34.2 million, representing 110.0% of the allocated loan balance of $31.1 million. Next, with the December 2021 remittance, Glen Forest Office Park was released from the pool, resulting in a paydown of $56.5 million, representing 110.0% of the allocated loan balance of $51.4 million. With these releases, only two of the original seven properties remain in the portfolio, representing a collateral reduction of approximately 63.3% since issuance. The properties, One Pierrepont Plaza and Station Square, represent 71.6% and 28.4% of the outstanding loan balance, respectively.

One Pierrepont Plaza, is a high-rise office tower in downtown Brooklyn, New York, and belongs to a 5.5-million-sf corporate campus known as MetroTech Center. As of the January 2022 rent roll, the collateral was 84.4% occupied, with the largest tenants including the Icahn School of Medicine at Mount Sinai (11.6% of the net rentable area (NRA), lease expiry March 2023), NYS Workers Compensation (7.4% of the NRA, lease expiry May 2030), U.S. Probation and Pretrial Services (6.6% of the NRA, lease expiry August 2023), and NYC Transit Authority (6.3% of the NRA, lease expiry March 2028). There is a cumulative rollover risk of 12.3% of the NRA within the next 12 months, primarily represented by the largest tenant’s upcoming lease expiration.

Station Square is composed of four mixed-use commercial buildings and one parking garage in downtown Pittsburgh along the Monongahela River. As of the January 2022 rent roll, the collateral was 87.5% occupied with a marginal cumulative rollover risk of 0.7% of the NRA within the next 12 months. The largest collateral tenants include WESCO Distribution (17.1% of the NRA, lease expiry March 2029), CardWorks Servicing (9.3% of the NRA, lease expiry June 2024), and ERT (7.0% of the NRA, lease expiry March 2027).

The servicer reported an annualized Q2 2021 debt service coverage ratio (DSCR) of 2.46 times (x), a modest increase from the year-end 2020 DSCR of 2.35x. As of the March 2022 reserve report, there is a sizable current balance of $20.7 million in the loan’s tenant reserve account. The loan sponsor is Brookfield Strategic Real Estate Partners III GP L.P. The sponsor’s parent, Brookfield Property Partners L.P. (BPY; rated BBB (low) with a Stable trend by DBRS Morningstar) is an owner, operator, and investor in commercial real estate with a diversified portfolio of office and retail assets as well as interests in multifamily, triple-net lease, industrial, hospitality, self-storage, student housing, and manufactured housing assets. BPY’s core office portfolio includes interests in 150 office properties in Tier 1 cities around the world, totalling 99 million sf.

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 interest-only (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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

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 4, 2022), 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.

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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