DBRS Morningstar Confirms Ratings on MOFT Trust 2020-ABC

DBRS, Inc. (DBRS Morningstar) confirmed all ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-ABC (the Trust) issued by MOFT Trust 2020-ABC (the Issuer) as follows:

-- Class X-A at A (sf)
-- Class A at A (low) (sf)
-- Class B at BBB (low) (sf)
-- Class C at BB (low) (sf)
-- Class D at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. The transaction closed in February 2020 and consists of a $328.0 million participation in a $770.0 million whole mortgage loan. The components of the whole mortgage loan securitized in this transaction include $1.0 million of the Senior Trust Notes and all of the $327.0 million in Junior Trust Notes. The remaining $442.0 million of Senior Trust Notes were later securitized across seven commercial mortgage-backed securities (CMBS) transaction, including two DBRS Morningstar-rated transactions (BMARK 2020-IG2 and BMARK 2020-IG3). Loan proceeds paid off existing debt totaling $364.0 million, returned $314.1 million of cash equity to the sponsor, covered unfunded sponsor obligations totaling $89.2 million, and paid closing costs of $2.7 million.

The 10-year interest-only (IO) whole mortgage loan is secured by the fee-simple interest in three Class A office buildings totaling more than 950,000 square feet (sf) in Sunnyvale, California. The A, B, and C buildings were built in 2008 by Jay Paul Company and are a component of the larger Moffett Towers technology office campus. The three buildings are 100% leased to five tenants, including two high-investment-grade tenants Google, LLC (Google) and Comcast Cable Communications (Comcast) accounting for 97.4% of net rentable area (NRA).

The loan reported a YE2020 net cash flow (NCF) of $34.3 million (resulting in a 1.26 times (x) debt service coverage ratio (DSCR)), lower than the Issuer’s underwritten NCF of $56.9 million (2.09x DSCR) and the DBRS Morningstar NCF of $47.9 million. However, DBRS Morningstar and the Issuer anticipated this lower NCF because the rent commencement dates for Google’s space in buildings B and C did not occur until May 2021 and June 2020, respectively, and the loan included $34.0 million of free rent/gap rent reserves. Per the May 2021 loan-level reserve report, there was $6.3 million remaining in the reserve account.

The February 2021 rent roll showed the collateral remains 100% occupied with a high concentration of investment-grade tenants. Google occupies 85.7% of NRA, and the tenant’s parent company, Alphabet, carries a high corporate credit rating. The three Google leases feature staggered lease expiration terms of June 2026, September 2027, and May 2031, respectively, which reduce the rollover risk. The second-largest tenant, Comcast (11.7% of NRA; lease expiration of October 2027), is also an investment-grade entity.

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.

Class X-A is an IO certificate that references 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.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level 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 the 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].

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