Morningstar DBRS Downgrades Credit Ratings on Five Classes of CSAIL 2019-C15 Commercial Mortgage Trust, Changes Trends on Nine Classes to Stable From Negative

DBRS, Inc. (Morningstar DBRS) downgraded its credit ratings on five classes of the Commercial Mortgage Pass-Through Certificates, Series 2019-C15 issued by CSAIL 2019-C15 Commercial Mortgage Trust as follows:

-- Class C to A (low) (sf) from A (sf)
-- Class X-D to BBB (sf) from BBB (high) (sf)
-- Class D to BBB (low) (sf) from BBB (sf)
-- Class E-RR to BB (high) (sf) from BBB (low) (sf)
-- Class F-RR to B (low) (sf) from B (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class G-RR at CCC (sf)

Morningstar DBRS also changed the trends on Classes A-S, X-A, X-B, B, C, X-D, D, E-RR, and F-RR to Stable from Negative. The trends on all remaining classes are Stable with the exception of Class G-RR, which has a credit rating that does not typically carry a trend in commercial mortgage-backed securities (CMBS) credit ratings.

At the prior credit rating action in October 2023, Morningstar DBRS changed the trends on nine classes to Negative from Stable to reflect ongoing concerns for underperforming loans in the pool. Since that time, the performance of the underlying collateral securing several of those loans has remained stagnant, or in some cases has further deteriorated. Morningstar DBRS recognizes the noteworthy remaining concentration of loans secured by office collateral or collateral with an office component, which poses increased credit risks for the transaction in general. Morningstar DBRS is most concerned about the Continental Towers loan (Prospectus ID#13, 3.3% of the pool), a specially serviced loan secured by a Class A office property in the Chicago suburb of Rolling Meadows, Illinois, with persisting declines in occupancy and debt service coverage ratio (DSCR). The property most recently reported an occupancy rate of 59% as of September 2023 and has been performing below breakeven for some time. Given these risks, Morningstar DBRS considered a liquidation scenario as part of this review, based on a significant haircut to the issuance appraisal, resulting in a loss severity of nearly 50%. The analysis for this review also considered stressed scenarios for other loans secured by office and other collateral types that were demonstrating increased risks from issuance. As a result, the pool's overall adjusted expected loss (EL) has increased since the previous credit rating action, supporting the credit rating downgrades with this review.

The One Lincoln Center loan (Prospectus ID#17, 2.9% of the pool) is secured by an office building in Syracuse, New York, and is currently on the servicer's watchlist for a low DSCR, which has been below breakeven since YE2022 and was most recently reported at 0.69 times (x) as of March 2024. The occupancy rate continues to hover around 70.0%, in line with the last few years, and tenants representing more than half of the net rentable area have leases scheduled to expire during the loan's term. The Town Point Center loan (Prospectus ID#22, 2.0% of the pool) is secured by a 12-story, 132,583-square-foot (sf) Class A office property in downtown Norfolk, Virginia, that is also reporting a below breakeven DSCR, most recently reported at 0.81x as of March 2024. Occupancy at the property declined to 74% as of March 2024 from 92% at issuance, and the underlying collateral has exposure to concentrated tenant rollover for three of the five largest tenants by YE2025. Both loans were analyzed with stressed scenarios to increase the loan-level ELs, which averaged about 2.6x the pool average EL.

Morningstar DBRS changed the trends on nine classes, as noted above, to Stable from Negative, as the credit rating downgrades were driven by analysis that considered stressed scenarios for those loans exhibiting increased risks from issuance, and Morningstar DBRS does not anticipate further deterioration in the near to moderate term as the deal continues to season. Should there be unforeseen circumstances that further increase the risks for the underlying loans in question, Morningstar DBRS could change the trends on the credit ratings and/or the credit ratings could be subject to further downgrades.

The credit rating confirmations reflect the overall stable performance of the majority of the loans in the pool. Since the last credit rating action, Morningstar DBRS' outlook has improved for the Nebraska Crossing loan (Prospectus ID#15, 3.1% of the pool), which was specially serviced at the last credit rating action but has since returned to the master servicer, following a settlement agreement between the servicer and the borrower to address the related covenant defaults identified during an audit of the financial statements. The loan is secured by a 368,126-sf retail property in Gretna, Nebraska, which most recently reported an occupancy rate and DSCR of 96% and 1.74x, respectively, as of September 2023, in line with the underlying collateral's historical operating performance.

As of the September 2024 remittance, 34 of the original 36 loans remained in the trust, with an aggregate trust balance of $750.0 million, representing a collateral reduction of about 9.6% since issuance as a result of repayment and scheduled loan amortization. One smaller loan, representing less than 1.0% of the pool, has been fully defeased. As previously mentioned, there is one loan, representing 3.3% of the pool, that is specially serviced. There are an additional seven loans, representing 23.1% of the pool, being monitored on the servicer's watchlist; however, only four of these are being monitored for unresolved performance-related concerns.

Outside of the specially serviced loans, the office loans in the transaction most recently reported a weighted-average DSCR of 1.65x, illustrating that, overall, the office loans are performing as expected, with a few exceptions described above. In addition, the overall risk is somewhat mitigated by a few large loans in the pool, representing 16.7% of the pool balance, that are secured by office properties; these properties most recently reported DSCRs in excess of 1.70x and have minimal exposure to major tenant rollover prior to loan maturity. The largest of these is Darden Headquarters (Prospectus ID#1, 10.7% of the pool), which is secured by a suburban office property in Orlando that is fully occupied by Darden Restaurants, Inc. and serves as the tenant's global headquarters on a long-term lease through October 2035. The loan has strong credit metrics, including a YE2023 DSCR of 1.71x.

The second-largest office loan in the pool, the 787 Eleventh Avenue loan (Prospectus ID#4, 6.0% of the pool), which Morningstar DBRS shadow-rated as investment grade at issuance, is secured by a Class A mixed-use property in Manhattan's Midtown West neighborhood. The loan most recently reported healthy credit metrics, evidenced by the YE2023 DSCR of 1.89x. The first five floors consist of automotive showroom space for luxury car brands, with the remaining space configured for office use. In addition, several tenants have benefited from rental abatements, the last of which burned off in February 2024; this suggests that DSCR should continue to increase by YE2024.

In addition to the 787 Eleventh Avenue loan, 2 North 6th Place (Prospectus ID#8, 4.5% of the pool balance) was shadow-rated investment grade at issuance. With this review, Morningstar DBRS confirms that the performance trends for both loans remain consistent with investment-grade loan characteristics.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

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

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024), https://dbrs.morningstar.com/research/428798.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit 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.

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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American CMBS Multi-Borrower Rating Methodology/North American CMBS Insight Model version 1.2.0.0 (March 1, 2024), https://dbrs.morningstar.com/research/428797
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.