DBRS Morningstar Confirms All Ratings on CSAIL 2019-C16 Commercial Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-C16 issued by CSAIL 2019-C16 Commercial Mortgage Trust as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 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 (sf)
-- Class C at A (low) (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 (sf)
-- Class G-RR at B (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since last review, despite some recent challenges that have generally been driven by the effects of the Coronavirus Disease (COVID-19) pandemic, particularly as lodging and retail property types account for over half of the pool balance. At issuance, the transaction consisted of 47 fixed-rate loans secured by 96 commercial and multifamily properties, with a trust balance of $787.5 million. According to the January 2022 remittance report, all 47 loans remain within the transaction, with no losses to date. Collateral reduction as a result of scheduled amortization has been negligible since issuance. Defeasance has been nominal as well, with two small loans, representing 1.6% of the pool, defeased since issuance.

According to the January 2022 remittance report, three loans are in special servicing and there are 16 loans, representing 43.6% of the current trust balance, on the servicer’s watchlist. These loans are on the watchlist for a variety of reasons, including low debt service coverage ratios (DSCRs), low occupancy, and tenant rollover concerns. However, the primary drivers are cash flow declines for retail and hospitality properties, generally related to the effects of the pandemic.
The largest loan on the servicer’s watchlist, GNL Portfolio (Prospectus ID#2; 6.3% of the pool), is secured by the borrower’s fee (15) and leasehold (one) interests in a 2.4 million-square-foot (sf) industrial portfolio. The properties are located in 14 unique markets across the United States and were constructed between 1953 and 2018. The loan was added to servicer’s watchlist in October 2021 due to the activation of a cash trap, triggered by a lease termination option exercised by Diebold in October 2021, which occupied 100% of the net rentable area (NRA; 158,338 sf) at one of the properties in the portfolio. Given the tenant in question represented just 7% of the total portfolio NRA, DBRS Morningstar does not view this as an indicator of increased risk. The loan has a history of strong performance with a year-end 2020 DSCR of 1.95 times (x). According to the September 2021 financial reporting, the consolidated DSCR remained healthy at 1.68x, with occupancy reported at 100% for the period.

The largest specially serviced loan, Santa Fe Portfolio (Prospectus ID#6; 4.4% of the pool), is secured by an 11-property mixed-use portfolio totaling approximately 218,000 sf, located primarily in Downtown Santa Fe, New Mexico. The portfolio has a high concentration of art gallery tenants, many of which are affiliates of the sponsor. The loan transferred to special servicing in June 2020 for monetary default, with payments after March 2020 outstanding as of the January 2022 remittance. A loan modification was granted allowing the deferral of leasing reserve payments for a period of nine months, with remittance resuming April 2021 and spread over a 12-month period. The loan remains in cash management and the special servicer noted accrued interest and late fees will be conditionally waived, subject to full compliance with the proposed modification. The portfolio was performing below issuance expectations prior to the onset of the pandemic, compounding the risks of an extended delinquency. In addition, an updated August 2020 appraisal showed a value decline to $44.5 million, a variance of -15.4% from the issuance figure. The loan is full recourse to the sponsor, however, and the most recent value suggests a loss in the event of a liquidation would be relatively small.

At issuance, DBRS Morningstar shadow rated two loans, 3 Columbus Circle (Prospectus ID#1; 6.4% of the pool) and 787 Eleventh Avenue (Prospectus ID#9; 3.7% of the pool), investment grade, supported by the loans’ strong credit metrics, strong sponsorship strength, and historically stable collateral performance. With this review, DBRS Morningstar confirms that the characteristics of these loans remain consistent with the investment-grade shadow rating.

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 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.

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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