DBRS Morningstar Finalizes Provisional Ratings on BBCMS Mortgage Trust 2020-C6

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2020-C6 issued by BBCMS Mortgage Trust 2020-C6:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class X-A AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at A (high) (sf)
-- Class C at A (sf)
-- Class D at A (low) (sf)
-- Class X-D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class F-RR at BBB (low) (sf)
-- Class G-RR at BB (sf)
-- Class H-RR at B (high) (sf)
-- Class J-RR at B (low) (sf)
-- Class F5T-A at A (low) (sf)
-- Class F5T-B at BBB (low) (sf)
-- Class F5T-C at BB (low) (sf)
-- Class F5T-D at B (low) (sf)

All trends are Stable. Classes X-D, D, E, F-RR, G-RR, H-RR, J-RR, F5T-A, F5T-B, F5TD, and F5T-D have been privately placed.

DBRS Morningstar subsequently placed the finalized provisional ratings of Class F5T-A, F5T-B, F5T-C, and F5T-D Under Review with Developing Implications because of the request for comments (RFC) on the “North American Single-Asset/Single-Borrower Ratings Methodology” on November 14, 2019. If the updated methodology is adopted following the RFC, there will likely be no ratings impact on the ratings assigned to this transaction. For more information, please see the press release “DBRS Morningstar Requests Comments on North American Single-Asset/Single-Borrower Ratings Methodology.”

The transaction consists of 45 fixed-rate loans secured by 118 commercial and multifamily properties. Two separate groups of loans are cross-collateralized and cross-defaulted into separate crossed groups, one of which has five loans and the second of which has two loans. The DBRS Morningstar analysis of this transaction incorporates these groups of loans as separate portfolios, resulting in a modified loan count of 40, and the loan number referenced within the related report reflects this total. The transaction is of a sequential-pay pass-through structure. Five loans, representing 30.8% of the pool, are shadow-rated investment grade by DBRS Morningstar. The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Morningstar Stabilized Net Cash Flow and their respective actual constants, the initial DBRS Morningstar Weighted-Average (WA) Debt Service Coverage Ratio (DSCR) of the pool was 2.53 times (x). None of the loans had a DBRS Morningstar DSCR below 1.32x, a threshold indicative of a higher likelihood of midterm default. The pool additionally includes 14 loans, comprising a combined 14.8% of the pool balance, with a DBRS Morningstar Loan-to-Value (LTV) ratio in excess of 67.1%, a threshold generally indicative of above-average default frequency. The WA DBRS Morningstar LTV of the pool at issuance was 56.9%, and the pool is scheduled to amortize down to a DBRS Morningstar WA LTV of 53.6% at maturity. These credit metrics are based on A-note balances.

Five of the loans—Parkmerced, 650 Madison Avenue, Kings Plaza, F5 Tower, and Bellagio Hotel and Casino—exhibit credit characteristics consistent with investment-grade shadow ratings. Combined, these loans represent 30.8% of the pool. Bellagio Hotel and Casino has credit characteristics consistent with a AAA shadow rating, Parkmerced has credit characteristics consistent with AA (high), F5 Tower has credit characteristics consistent with A (high), and 650 Madison Avenue and Kings Plaza have credit characteristics consistent with BBB (low).

Term default risk is low, as indicated by a strong DBRS Morningstar DSCR of 2.53x. Only five loans, representing 6.9% of the allocated loan balance, have a DBRS Morningstar DSCR less than 1.50x. Even with the exclusion of the shadow-rated loans, representing 30.8% of the pool, the deal exhibits a very favorable DBRS Morningstar DSCR of 1.96x. Additionally, 11 loans, representing a combined 40.0% of the pool by allocated loan balance, exhibit issuance LTVs of less than 59.3%, a threshold historically indicative of relatively low-leverage financing and generally associated with below-average default frequency.

The pool exhibits heavy leverage barbelling. While the pool has 11 loans, comprising 40.0% of the pool balance, with an issuance LTV lower than 59.3%, a threshold historically indicative of relatively low-leverage financing and generally associated with below-average default frequency, there are also 10 loans, comprising 13.1% of the pool balance, with an issuance LTV higher than 67.1%, a threshold historically indicative of relatively high-leverage financing and generally associated with above-average default frequency. The WA expected loss of the pool’s investment-grade component was approximately 0.5%, while the WA expected loss of the pool’s conduit component was substantially higher at over 2.4%, further illustrating the barbelled nature of the transaction. The WA DBRS Morningstar DSCR exhibited by the loans that were identified as representing relatively high-leverage financing was 1.67x. Additionally, no loans exhibited a DBRS Morningstar Issuance DSCR of less than 1.32x, a threshold generally associated with above-average default frequency.

Twenty-one loans, representing a combined 69.8% of the pool by allocated loan balance, are structured with full-term interest-only (IO) periods. An additional nine loans, representing 21.4% of the pool, have partial IO periods ranging from 12 months to 60 months. Expected amortization for the pool is only 4.8%, which is less than recent conduit securitizations. Of the 21 loans structured with full-term IO periods, nine loans, representing 30.7% of the pool by allocated loan balance, are located in areas with a DBRS Morningstar Market Rank of 6, 7, or 8. These markets benefit from increased liquidity even during times of economic stress. Additionally, three of the 21 identified loans, representing 17.0% of the total pool balance, are shadow-rated investment grade by DBRS Morningstar: 650 Madison Avenue, F5 Tower, and Bellagio Hotel and Casino.

The pool features a relatively high concentration of loans secured by properties located in less favorable suburban market areas, as evidenced by 18 loans, representing 29.1% of the pool balance, being secured by properties located in areas with a DBRS Morningstar Market Rank of either 3 or 4. An additional eight loans, totaling 19.2% of the pool balance, are secured by properties located in areas with a DBRS Morningstar Market Rank of either 1 or 2, which are typically considered more rural or tertiary in nature. Seventeen of the identified loans, representing 21.2% of the pool balance, that are secured by properties located in areas with a DBRS Morningstar Market Rank of 1, 2, 3, or 4 will amortize over the loan term, which can reduce risk over time. The average expected amortization of these loans is 21.2%, which is notably higher than the pool’s total WA expected amortization of 4.8%.

Classes X-A, X-B, and X-D are 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.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrs.com.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Parkmerced (7.2% of the pool)
-- Prospectus ID#2 – 650 Madison Avenue (6.6% of the pool)
-- Prospectus ID#3 – Kings Plaza (6.6% of the pool)
-- Prospectus ID#4 – 545 Washington Boulevard (5.6% of the pool)
-- Prospectus ID#5 – F5 Tower (5.5% of the pool)
-- Prospectus ID#6 – Exchange On Erwin (5.5% of the pool)
-- Prospectus ID#7 – Bellagio Hotel and Casino (4.8% of the pool)
-- Prospectus ID#8 – ExchangeRight Net Leased Portfolio #31 (4.4% of the pool)
-- Prospectus ID#9 – CNP Headquarters (3.7% of the pool)
-- Prospectus ID#10 – Brooklyn Flats & 482 Seneca Avenue Crossed Group (3.3% of the pool)
-- Prospectus ID#11 – Millikan Business Center (3.1% of the pool)
-- Prospectus ID#12 – Satellite Flex Office Portfolio (3.0% of the pool)
-- Prospectus ID#13 – 2000 Park Lane (3.0% of the pool)
-- Prospectus ID#14 – Advance Auto Parts Portfolio (2.9% of the pool)
-- Prospectus ID#15 – Trinity Multifamily Portfolio (2.8% of the pool)
-- Prospectus ID#16 – Gardena Valley Shopping Center (2.5% of the pool)
-- Prospectus ID#17 – BlueLinx Portfolio III (2.5% of the pool)
-- Prospectus ID#18 – Springhill Suites – New Smyrna Beach (2.2% of the pool)
-- Prospectus ID#20 – Landing At The Quarter (1.7% of the pool)
-- Prospectus ID#25 – The Alhambra Lofts (1.4% of the pool)
-- Prospectus ID#29 – 101 Stanton (1.2% of the pool)
-- Prospectus ID#30 – Hampton Inn & Suites Oklahoma City (0.9% of the pool)
-- Prospectus ID#34 – La Jolla Seaview (0.8% of the pool)
-- Prospectus ID#38 – Sioux City MHC Portfolio (0.6% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for most outstanding commercial mortgage-backed security transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodologies are the North American CMBS Multi-borrower Rating Methodology and North American Single-Asset/Single-Borrower Methodology, which can be found on www.dbrs.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 www.dbrs.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 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrs.com or contact us at [email protected].

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