DBRS Morningstar Confirms Ratings on SG Commercial Mortgage Securities Trust 2019-787E

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-787E issued by SG Commercial Mortgage Securities Trust 2019-787E as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The transaction consists of a $187.5 million portion of a $410.0 million whole loan that pays interest only for the full term and matures in 2029. The whole loan is divided into $175.0 million in senior companion loans, a $117.5 million subordinate A note, and a $117.5 million junior B note. The subject securitization contains the $70.0 million A-1A note and the subordinate $117.5 million A-2 note. Noncontrolling A notes with a combined $105.0 million trust balance are included in the CSAIL 2019-C16, BBCMS 2019-C3, and CSAIL 2019-C15 securitizations.

The collateral consists of a 513,638-square-foot (sf), 10-storey Class A mixed-use building with office as well as automotive retail showroom and service centre space. The building is well located in Manhattan’s Automotive Row, which is also home to 20 other automotive dealers. The retail-auto showroom and service space is 100% leased to Jaguar Land Rover and Nissan/Infiniti, two high-quality tenants with initial lease terms that run three years beyond the loan’s maturity in 2029. Combined, the two tenants contribute more than half of the collateral’s base rent.

Per the December 2021 rent roll, the property is 100.0% leased and 63.5% occupied. In February 2021, the Icahn School of Medicine at Mount Sinai (Mount Sinai) leased approximately 163,000 sf (36.2% of the net rentable area (NRA)), which includes the space previously vacated by the third-largest tenant Regus (formerly 19.3%, of NRA), through 2054. Labs, outpatient clinics, and research space operated by the healthcare network will occupy three floors. About 36,000 sf will be built out for a research facility that will be exclusively for scientist and inventor Neri Oxman.

According to the December 2021 financials, loan performance improved over the previous year but is still below the DBRS Morningstar issuance figures. The YE2021 reported net cash flow (NCF) was $16.1 million, an increase of $1.5 million (10.5%) over 2020, but still $5.4 million (25.1%) lower than the DBRS Morningstar NCF derived at issuance. Two tenants are currently receiving rent abatements, including Mount Sinai, which is currently going through a major tenant improvement build-out. The tenant is likely to take occupancy and begin paying rent in 2024. During the Mount Sinai rent abatement period, the borrower is required to deposit the minimum of the quarterly debt service shortfall or $600,000 into a free rent reserve to cover debt service shortfalls from April 2021 through March 2023. Mount Sinai’s initial base rent exceeds the rent the previous tenant paid. Once the current in-place abatement periods burn off, DBRS Morningstar expects rental revenue and NCF to stabilize.

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 is an 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 the underlying loan 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.

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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