DBRS Morningstar Upgrades Five Classes of Grand Avenue CRE 2020-FL2 Ltd.

DBRS, Inc. (DBRS Morningstar) upgraded the ratings on five classes of notes (the Notes) issued by Grand Avenue CRE 2020-FL2 Ltd. (the Issuer) as follows:

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

DBRS Morningstar also confirmed the ratings on the remaining classes as follows:

-- Class A at AAA (sf)
-- Class A-S at AAA (sf)

All trends are Stable.

The rating upgrades reflect the collateral reduction to date, with the rating confirmations generally a reflection of the overall stable performance of the remaining collateral in the transaction. Since issuance in June 2020, seven of the initial 18 loans have repaid from the trust and there has been additional paydown from another two loans originally secured by multiple properties. As a result, there has been total collateral reduction of 39.4%. The remaining 11 loans are secured by seven multifamily properties (73.6% of the pool balance), two office properties (17.2% of the pool balance), and two mixed-use properties (9.2% of the pool balance). The transaction is also concentrated by loan size as the largest loan, Cape Coral Portfolio (Prospectus ID#1), represents 26.6% of the pool balance and the largest four loans cumulatively represent 67.7% of the pool balance.

All loans in the pool are secured by transitional assets in the process of stabilization. At issuance, eight of the remaining 11 loans in the transaction had outstanding future funding, with a total available balance of $31.6 million to fund capital expenditures, leasing costs, and operating shortfalls to aid in property stabilization. As of May 2021, a total of $23.1 million of future funding has yet to be released; the majority of the unreleased funds are allocated to the 9300 Wilshire loan (Prospectus ID#3; 14.6% of the pool balance), which has $12.7 million available in future funding. The transaction is structured with a 24-month Permitted Funded Companion Participation Acquisition Period whereby the Issuer can contribute funded participations of loans into the Trust. The period ends with the June 2022 Payment Date. As of the May 2021 remittance, there was $8.8 million available in the Permitted Funded Companion Participation Acquisition Account.

There are no loans in special servicing and all loans are current. There are five loans on the servicer’s watchlist, representing 41.6% of the pool balance, which have been flagged for low occupancy rates and/or debt service coverage ratios. As initial performance declines were expected for many loans given individual borrower’s business plans to implement capital expenditure programs and the existence of upfront operating shortfall reserves, a loan’s placement on the servicer’s watchlist is not necessarily indicative of increased risks from issuance.

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.

DBRS Morningstar materially deviated from its quantitative model when determining the rating assigned to Class F by assigning a rating lower than the implied ratings suggesting by the quantitative model. The material deviation(s) is warranted given uncertain loan level event risk.

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#1 – Cape Coral Portfolio (26.6% of the pool)
-- Prospectus ID#2 – 2500 Biscayne (16.5% of the pool)
-- Prospectus ID#3 – 9300 Wilshire (14.6% 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 26, 2021), 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 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 [email protected].

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429