DBRS Morningstar Confirms All Classes of FREMF 2020-K105 Mortgage Trust, Series 2020-K105
CMBSDBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Multifamily Mortgage Pass-Through Certificates, Series 2020-K105 issued by FREMF 2020-K105 Mortgage Trust, Series 2020-K105 as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X1 at AAA (sf)
-- Class X2-A at AAA (sf)
-- Class XAM at AA (low) (sf)
-- Class A-M at A (high) (sf)
-- Class X2-B at BBB (high) (sf)
-- Class B at BBB (high) (sf)
-- Class C at BBB (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the January 2021 remittance, all of the original 71 fixed-rate loans secured by multifamily properties, manufactured housing communities, and student housing properties remain in the pool with a collateral reduction of 0.04% since issuance as a result of scheduled amortization. The DBRS Morningstar weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield at issuance were 1.35 times (x) and 7.3%, respectively. The top 15 loans represent approximately 52.8% of the current pool balance. As of the January 2021 remittance, there are no specially serviced or delinquent loans.
There are three loans on the servicer’s watchlist, representing 5.5% of the current pool balance, as of the January 2021 remittance. These loans remain current and have been flagged for reasons including fire damage, a forbearance request, and declines in occupancy, with the last two monitoring items driven by the impacts of the Coronavirus Disease (COVID-19) pandemic.
The largest loan on the servicer’s watchlist, Arches At Hidden Creek (Prospectus ID#7, 3.8% of the pool), is secured by a garden-style multifamily property in Chandler, Arizona. According to the servicer, one of the buildings sustained fire damage in July 2020, affecting 16 of the total 432 units. The borrower anticipates the repairs will be completed by December 2021. The servicer is holding the insurance proceeds in reserve and will disburse as repairs are complete. As of September 2020, the property reported an occupancy rate of 92.0% with an in place DSCR of 2.12x, both of which remain in line with the occupancy rate at issuance of 95.0% and the DBRS Morningstar DSCR at issuance of 1.82x. Although the damaged units will remain down for a majority of the year, the insurance policy likely includes business interruption coverage that will replace any lost rental revenues through the duration of the repairs.
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 X1, XAM, X2-A and X2-B 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.
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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.
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