DBRS Morningstar Confirms All Classes of Cold Storage Trust 2020-ICE5

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2020-ICE5 issued by Cold Storage Trust 2020-ICE5:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (sf)
-- Class D at A (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class HRR at B (sf)
-- Class A-Y at AAA (sf)
-- Class A-Z at AAA (sf)
-- Class A-IO at AAA (sf)

All trends are Stable.

Classes A-Y, A-Z, and A-IO are CAST certificates that can be exchanged for other classes of CAST certificates and vice versa.

The transaction is collateralized by the borrowers’ fee-simple interest in a portfolio of 46 industrial cold storage facilities in the United States. The portfolio benefits from strong diversity with a Herfindahl score of 30.4 by allocated loan amount. The collateral spans across 19 states in multiple regions and favorable markets near major population centers. The portfolio also exemplifies diversity in terms of income and customer granularity perspectives. At issuance, the top 10 customer accounts represented 29.9% of total revenue, with the largest account representing just 5.5%.

The borrowers amassed the portfolio in phases across seven acquisitions dating from October 2019 to April 2020 and used whole-loan proceeds to recapitalize the borrowers’ interest in the portfolio, which was unencumbered by secured debt.

The borrowers lease the properties (except for the Chicago Cold - Bartlett property) to an operating company, Lineage Logistics, LLC (Lineage), pursuant to six master leases. The rent from the master leases is the sole source of cash flow to pay debt service for the trust loan. The six master leases (collectively, the Master Leases) are between the borrowers and affiliates of the borrowers. The Master Leases allow the related master tenant (or subtenants of such master tenant) or operators engaged by the master tenant or subtenants to operate such properties.

The transaction also benefits from property quality and functionality. The portfolio's properties generally exhibit favorable ceiling heights, loading capacity, and temperature configurations. The portfolio has a weighted-average clear height of more than 30 feet, and it benefits from a very high proportion of freezer space (80.4%, based on the appraisal). Freezer space generally commands higher rents and valuations and is more flexible through down-conversion to refrigeration temperatures when necessary to accommodate customer demand.

Cold storage properties require specialized knowledge and expertise to operate effectively. Therefore, the pool of potential buyers may be more limited than traditional warehouse facilities. Furthermore, a substantial component of the portfolio's value depends on Lineage's client roster and extensive industry expertise.

The mortgage loan is interest only through the five-year fully extended term and does not benefit from deleveraging through amortization.

The loan is currently on the servicer’s watchlist for a force-placed insurance advance. The loan is otherwise performing in line with issuance expectations. The servicer reported a T-12 ended June 2021 net cash flow (NCF) of $132.1 million, which exceeds DBRS Morningstar’s assumed NCF at issuance of $122.5 million. As of the T-12 ended June 2021, the loan had a debt service coverage ratio of 5.30 times.

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 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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