DBRS Morningstar Confirms Ratings on BX Commercial Mortgage Trust 2020-VKNG

DBRS Limited (DBRS Morningstar) confirmed all ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-VKNG (the Trust) issued by BX Commercial Mortgage Trust 2020-VKNG (the Issuer) as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. The loan is secured by a portfolio of 67 industrial and logistics properties totaling approximately 8.2 million square feet (sf) across six states—Minnesota, Colorado, California, New Jersey, Georgia, and New York. The portfolio consists of 53 light industrial properties, seven warehouses, one parking lot, and six flex/office properties. The whole loan of $645.0 million consists of $600.0 million of senior debt held in the Trust and $45.0 million of mezzanine debt held outside of the Trust. The sponsors, Blackstone Real Estate Partners IX and certain co-investment and managed vehicles under common control, purchased the property through several transaction from October 2019 to March 2020. The whole-loan proceeds and $212.1 million of sponsor equity facilitated the acquisition of the portfolio at a purchase price of $834.5 million, funded upfront reserves of $2.8 million, paid defeasance costs of $4.2 million, and covered acquisition and closing costs. The interest-only loan includes an initial two-year term with three, one-year extension options.

The loan has a partial pro rata/sequential-pay structure, which allows for pro rata paydowns for the initial 30.0% of the unpaid principal balance. The loan also has release provisions where the prepayment premium to release individual assets is 105.0% of the allocated loan balance until the outstanding principal balance has been reduced to $420.0 million, at which point, the release premium will increase to 110.0%.

The portfolio reported a December 2020 occupancy rate of 86.6%, compared with the issuance occupancy rate of 90.0%. At issuance, the largest 20 tenants in the portfolio represented 40.2% of net rentable area. According to the trailing nine months ended December 2020 financials, the loan reported net cash flow (NCF) of $33.7 million, compared with the DBRS Morningstar NCF of $46.3 million.

ESG CONSIDERATIONS
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.

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.

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 [email protected].

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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