DBRS Morningstar Confirms Ratings on Real Estate Asset Liquidity Trust, Series 2019-HBC, Places Negative Trends on All Classes.
ENPNewswire-September 14, 2021--DBRS Morningstar Confirms Ratings on Real Estate Asset Liquidity Trust, Series 2019-HBC, Places Negative Trends on All Classes
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Release date- 13092021 - DBRS, Inc. (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-HBC issued by Real Estate Asset Liquidity Trust, Series 2019-HBC as follows.
Class A at AAA (sf)
Class X at AA (high) (sf)
Class B at AA (sf)
Class C at A (sf)
DBRS Morningstar removed all classes from Under Review with Negative Implications, where it placed them on April 24, 2020. With this review, DBRS Morningstar placed Negative trends on all classes as a reflection of ongoing concerns with the underlying collateral amid the Coronavirus Disease (COVID-19) pandemic, as further described below.
The transaction includes two cross-collateralized and cross-defaulted loans secured by Hudson's Bay (The Bay) flagship stand-alone department stores in downtown Montreal and Ottawa. The sponsor acquired the properties in 2015 as part of a five-property portfolio sale-leaseback transaction with an allocated purchase price of approximately $535.0 million. The vendor, Hudson's Bay Company (HBC), retains an 87.5% ownership interest in the properties through RioCan-HBC Limited Partnership, the purchaser of the properties, which is a joint venture (JV) between HBC and RioCan Real Estate Investment Trust (RioCan; rated BBB (high) with a Negative trend by DBRS Morningstar). Although HBC signed 20-year absolute-net leases that include five six-year renewal options, DBRS Morningstar considers the net cash flow (NCF) from these properties to be more volatile given that the rental revenue stream is closely linked to HBC's retail operating business, which has been affected by the decline in traffic for some The Bay stores in recent years, even prior to the pandemic.
The Bay stores in Montreal and Ottawa are flagship stores that have been operating in both locations for more than 50 years. However, HBC and RioCan announced their plan to redevelop the Montreal location and add roughly 1 million square feet (sf) of office space over a four-year construction period. Construction is expected to begin in 2023, and be completed in 2027. According to news reports, the redevelopment would shrink The Bay's current footprint down to 295,000 sf from 655,000 sf at issuance. The existing HBC store will remain open and continue...
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