Press Release

DBRS Morningstar Confirms All Classes of BXMT 2020-FL2, Ltd.

CMBS
February 11, 2021

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of notes issued by BXMT 2020-FL2, Ltd. (the Issuer), as follows:

-- Class A at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The transaction closed in February 2020 and the initial collateral consisted of 34 floating-rate mortgages secured by 80 mostly transitional properties with a cut-off balance totaling $1.5 billion, excluding approximately $1.2 billion of participated loan future funding cut-off date commitment. As of the January 2021 remittance, a total of 31 loans secured by 77 commercial properties remained in the trust with a total current balance of $1.44 billion.

The collateral is primarily secured by properties located in core markets with the overall pool’s weighted-average (WA) DBRS Morningstar Market Rank of 5.6. The pool’s property quality is considered strong as 12 loans, representing 38.8% of the trust cut-off balance, have an above-average property quality rating. Most of the loans were used to fund acquisitions (64.4% of the trust balance at issuance), which typically include fresh borrower equity. As of January 2021, the pool had a WA loan-to-value (LTV) ratio of 73.0% based on the issuance appraised value and a WA LTV of 57.7% based on the respective stabilized appraised values.

In this transaction, rating agency confirmation (RAC) is not required to acquire participations of existing trust assets, but the transaction documents require the resulting pool DBRS Morningstar WA expected loss (EL) to be no greater than 6.5%. This is intended by the Issuer to keep credit risk fairly constant, as the initial-pool DBRS Morningstar WA EL is 6.0%. While it is possible for loans to get worse (or better) after securitization, and the EL being used could be lower (or higher) than it truly should be, DBRS Morningstar believes that the capital structure adequately accounts for the risk of negative credit migration. Any significant modifications will require RAC, and such loan will have its EL updated based on such modification.

Four loans, representing 15.1% of the trust cut-off balance, are on the servicer’s watchlist. Most of these loans were placed on the servicer’s watchlist because of upcoming initial loan maturity dates; however, all watchlist loans feature extension options. Based on the most recent reporting, all loans are performing in line with issuance expectations and reported cash flow growths ranging from 17% to 31% as of the Q2 2020 financials when compared with year-end 2019. Hospitality properties represent a significant property type concentration in the pool with seven loans representing 25.3% of the trust cut-off balance secured by this property type. The hospitality properties are in high barrier-to-entry markets, such as the San Francisco CBD, the Las Vegas Strip, and the Hawaii coastline.

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.

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 loans in the transaction:

-- Prospectus ID#21 – Westin Maui Resort & Spa (3.2% of the pool)
-- Prospectus ID#27 – Park Central (4.4% 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 6, 2020), 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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. 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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

Ratings

BXMT 2020-FL2, Ltd.
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.