DBRS Morningstar Confirms Ratings on Wells Fargo Commercial Mortgage Trust 2019-C49, Maintains Negative Trends on Three Classes

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-C49 issued by Wells Fargo Commercial Mortgage Trust 2019-C49 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-SB 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 X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class E-RR at BBB (low) (sf)
-- Class F-RR at BB (high) (sf)
-- Class G-RR at BB (sf)
-- Class H-RR at B (high) (sf)
-- Class J-RR at B (low) (sf)

Classes G-RR, H-RR, and J-RR continue to carry Negative trends. All other trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, while the Negative trends largely reflect DBRS Morningstar’s outlook for some of the loans in special servicing, as further discussed below for the largest of these loans. In general, the loans contributing to the increased likelihood of loss to the trust were exhibiting performance declines prior to the onset of the Coronavirus Disease (COVID-19) pandemic, and those increased risks are now exacerbated amid the effects of the pandemic.

According to the December 2021 remittance, all of the original 64 loans remain in the pool with an aggregate principal balance of $765.7 million, representing a 1.1% collateral reduction since issuance as a result of scheduled amortization. One loan, representing 0.4% of the pool, has fully defeased. The pool is most heavily concentrated in retail, lodging, and office properties, representing 29.9%, 21.5%, and 14.9% of the current pool balance, respectively. There are currently 13 loans, representing 24.2% of the pool, on the servicer’s watchlist for a variety of reasons, but primarily stemming from coronavirus-driven cash flow declines; eight of the loans, representing 16.5% of the pool, are secured by lodging and retail properties, which have been the most acutely affected.

There are also four loans, representing 4.3% of the pool, in special servicing. One of these loans, 599 Johnson Ave (Prospectus ID#45, 0.8% of the pool), is currently negotiating terms of a reinstatement. The remaining three loans have received updated appraisals since issuance, with value declines ranging between 23% and 72%, putting the pool at a greater risk of loss as these loans get resolved.

The largest loan in special servicing, Florissant Marketplace (Prospectus ID#19, 1.6% of the pool), is secured by the borrower’s fee-simple interest in a grocery-anchored retail property in the St. Louis suburb of Florissant, Missouri. The loan transferred to special servicing in July 2020 because of imminent default and a receiver was appointed in January 2021 to manage, lease-up, and market the property for sale.

Occupancy fell to 72.5% from 100% when the second-largest tenant, Gold’s Gym (27.5% of net rentable area (NRA)), filed for bankruptcy and vacated the property in Q2 2020, ahead of its October 2022 lease expiration. Following the loss of Gold’s Gym, the loan’s coverage fell precipitously to -0.39 times (x) as of Q2 2021, well below the YE2019 figure of 2.08x, as the tenant’s rental rate of $17.91 per square foot (psf) was well above the average of $7.82 psf for the remaining tenants at the property. As of September 2021, the property was 70.3% occupied with an average rental rate of $7.42 psf. The servicer has indicated that cash flow has recently improved given increased rental collections and that the receiver had a letter of intent out for review with a fitness tenant to backfill the Gold Gym’s space in late December 2021, but nothing has been finalized at this point.

The grocery anchor, Schnucks, represents 48.0% of the NRA and recently renewed its lease for five years through November 2026. Plato’s Closet (2.5% of the NRA) also extended its lease by five years through January 2026. A September 2021 appraisal obtained by the special servicer indicated an as-is value of $8.4 million, a marginal decline from the October 2020 value of $8.5 million and well below the issuance figure of $17.3 million. Based on the most recent value over the December 2021 loan exposure, the loan has an implied loan-to-value ratio of 154.8%.

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, and X-D are interest-only (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 loan in the transaction:

-- Prospectus ID#19 – Florissant Marketplace (1.6% 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

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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