DBRS Morningstar Upgrades Ratings on Six Classes of TRTX 2019-FL3 Issuer, Ltd.

DBRS Limited (DBRS Morningstar) upgraded its ratings on six classes of notes issued by TRTX 2019-FL3 Issuer, Ltd. as follows:

-- Class B to AA (sf) from AA (low) (sf)
-- Class C to A (sf) from A (low) (sf)
-- Class D to A (low) (sf) from BBB (high) (sf)
-- Class E to BBB (sf) from BBB (low) (sf)
-- Class F to BB (sf) from BB (low) (sf)
-- Cass G to B (sf) from B (low) (sf)

DBRS Morningstar also confirmed its ratings on two classes as follows:

-- Class A at AAA (sf)
-- Class A-S at AAA (sf)

All trends are Stable.

The rating upgrades reflect the increased credit support to the bonds as a result of successful loan repayment, representing a collateral reduction of 27.0% since issuance as of the June 2022 remittance. While select loans remain in the transaction, notably those secured by hotel properties or office properties, have experienced delays in the stated business plans as a result of the Coronavirus Disease (COVID-19) pandemic, DBRS Morningstar has generally observed performance improvements across the collateral pool since its last rating action in August 2021. In conjunction with this press release, DBRS Morningstar has published a Surveillance Performance Update report with in-depth analysis and credit metrics for the transaction and with business plan updates on select loans. For access to this report, please click on the link under Related Documents below or contact us at info@dbrsmorningstar.com.

At issuance, the collateral consisted of 22 floating-rate mortgages secured by 98 mostly transitional commercial real estate properties with a cut-off balance of $1.23 billion, excluding approximately $231.8 million of future funding commitments to fund capital expenditures and operating shortfalls to aid in the individual properties’ stabilization plans.

The transaction was structured with an initial 24-month Reinvestment Period, which ended with the October 2021 Payment Date, whereby the Issuer could acquire additional future funding participations and funded companion participations with principal repayment proceeds.

As of the June 2022 reporting, 16 loans remained in the pool with a current principal balance of $890.0 million. According to the collateral manager, $206.5 million of loan future funding had been advanced to 13 individual borrowers to aid in business plan completion. The majority of this funding, totalling $133.5 million, had been advanced to the borrowers on the 888 Broadway, 300 Lafayette, The Curtis and City Center Square loans, which have used the funds to complete capital improvements and fund leasing costs and operating shortfalls. An additional $100.9 million of loan future funding is allocated to 12 individual borrowers. The majority of these funds, totalling $42.8 million, are allocated to the borrower in the Lenox Park Portfolio (6.1% of the pool) as one of the five properties was released at a sale price of $148.5 million, which paid down the whole loan amount by $72.0 million, with $65.3 million swept into a future leasing reserve.

The transaction is concentrated by property type as there are two loans (64.4% of the current pool balance) secured by office properties. The second-largest concentration is hotels, as two loans (13.2% of the current pool balance) are secured by the property type. Nine loans, representing 61.2% of the current pool balance, are in urban markets with DBRS Morningstar Market Ranks of 6, 7, and 8. These markets have historically shown greater liquidity and demand. The remaining seven loans, representing 38.8% of the current pool balance, secured by properties in markets with a DBRS Morningstar Market Rank of 3, 4, or 5, which are suburban in nature and have historically had higher probability of default levels when compared with properties in urban markets.

As of June 2022 reporting, all loans remain current and there are two loans on the servicer’s watchlist, representing 13.1% of the pool balance. Both loans, City Plaza (7.0% of the current pool balance) and Lenox Park Portfolio (6.1% of the current pool balance), were added to the servicer’s watchlist because of upcoming loan maturity dates; however, all loans feature extension options. DBRS Morningstar expects the individual borrowers to exercise the loan extension options and, in any instances where property performance not does meet performance-based hurdles to qualify for the extension options, DBRS Morningstar expects the borrowers and lender to negotiate an agreement to allow the extension to be exercised.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

DBRS Morningstar materially deviated from its North American CMBS Insight Model when determining the rating assigned to Class G as the quantitative results suggested a higher rating. The material deviation is warranted given that the sustainability of loan performance trends has not been demonstrated, as several properties securing loans in the transaction have yet to stabilize.

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#31 – Marriott Burbank Airport (12.6% of the pool)
-- Prospectus ID#23 – 300 Lafayette (12.4% of the pool)
-- Prospectus ID#5 – 888 Broadway (7.9% of the pool)
-- Prospectus ID#32 – City Plaza (7.0% of the pool)
-- Prospectus ID#19 – City Center Square (4.2% of the pool)

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.

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

The principal methodology is the 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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