DBRS Morningstar Upgrades Ratings on Six Classes of PFP 2019-6, Ltd.

DBRS Limited (DBRS Morningstar) upgraded the ratings on the following classes of notes issued by PFP 2019-6, Ltd.:

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

In addition, DBRS Morningstar confirmed the following class of notes:

-- Class A-S at AAA (sf)

All trends are Stable. The rating for Class A was discontinued as the class was fully repaid as of the July 2022 remittance report.

The rating upgrades reflect the increased credit support to the bonds as a result of successful loan repayment as there has been 58.2% collateral reduction since closing with 13 of the original 36 loans remaining in the trust as of the July 2022 remittance. 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. To access this report, please click on the link under Related Documents below or contact us at info@dbrsmorningstar.com.

As of the July 2022 remittance, the trust reported an outstanding balance of $317.8 million. Since the previous DBRS Morningstar rating action in October 2021, 11 loans were repaid from the trust. To date, the lender has advanced $19.1 million in loan future funding to eight individual borrowers to aid in property stabilization for the remaining loans in the pool. An additional $8.2 million in loan future funding allocated to the borrower of the 5 Wood Hollow Road loan remains outstanding. The loan is secured by an office property in Parsippany, New Jersey, and the borrower’s business plan was to complete capital improvements and fund leasing cost through available future funding dollars to lease the property to stabilization. According to the Q2 2022 collateral manager update, an additional $13.5 million of formerly available loan future funding dollars previously allocated to six additional borrowers will no longer be advanced as the period in which the borrowers could have requested those dollars has now expired.

The transaction is concentrated by property with office, multifamily, mixed-use, and hotel properties representing 45.4%, 29.5%, 8.2%, and 5.3% of the pool balance, respectively. The property type concentration is generally similar with the pool composition as of September 2021 but has changed since issuance when office, multifamily, mixed-use, and hotel properties represented 29.8%, 47.5%, 4.1%, and 2.2% of the pool balance, respectively. As of July 2022, the majority of loans are secured by properties in suburban and urban markets. Loans representing 36.8% of the pool are secured by properties in markets with a DBRS Morningstar Market Rank of 4 and loans representing 48.8% of the pool are secured by properties in markets with DBRS Morningstar Market Ranks of 6, 7, or 8. At issuance, 66.7% of the loans were secured by properties in suburban and urban markets, as 42.9% of the pool had DBRS Morningstar Market Ranks of 4 or 5 and 23.9% of the pool had DBRS Morningstar Market Ranks of 6, 7, or 8. The current poolwide weighted-average as-is loan-to-value (LTV) and stabilized LTV ratios are 65.9% and 63.6%, respectively, compared with the issuance as-is and stabilized LTV ratios of 74.6% and 62.2%, respectively.

There are no loans in special servicing and five loans on the servicer’s watchlist, representing 26.4% of the pool balance. These loans are being monitored mainly for upcoming maturity, although the majority of the loans in the transaction, including loans not on the servicer’s watchlist, have exercised the first or second extension options with all loans having a fully extended maturity date in 2024. There is one loan on the servicer’s watchlist, Palihotel Seattle (Prospectus ID#16, 5.3% of pool), that is being monitored for a low debt service coverage ratio as performance continues to rebound following the impacts of the Coronavirus Disease (COVID-19) pandemic. Four loans, representing 34.9% of the pool, were modified or the borrowers were granted a forbearance. In each, relief was granted to performance issues arising from complications of the pandemic.

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 CMBS Insight Model when determining the ratings assigned to Classes C, F, and G as the quantitative results suggested higher ratings. These material deviations are warranted given the structural features (loan or transaction) and/or provisions in other relevant methodologies that outweigh the quantitative analysis output. In addition, the sustainability of the loan performance trends has not been demonstrated as there are loans remaining that are secured by transitional properties with business plan interruptions, which are delaying stabilization.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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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