DBRS Morningstar Confirms All Ratings of BDS 2020-FL5 Ltd.

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of notes issued by BDS 2020-FL5 Ltd. as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations. In conjunction with this press release, DBRS Morningstar has published a Surveillance Performance Update rating report with in-depth analysis and credit metrics for the transaction and business plan updates on select loans. For access to this report, please click on the link under Related Documents below or contact us at [email protected].

At issuance, the trust consisted of 24 loans secured by transitional real estate properties with a cut-off pool balance of $492.2 million. The $57.8 million ramp-up period ended in August 2020, increasing the pool balance to $550.0 million. The trust features a two-year reinvestment period that is scheduled to expire with the February 2022 Payment Date. Loans contributed during the reinvestment period are subject to an Eligibility Criteria, which includes a rating agency condition by DBRS Morningstar for funded companion participations that are being acquired for more than $1.5 million and for any other mortgaged assets.

As of the October 2021 remittance report, there were 22 loans in the pool totalling $521.5 million. Since issuance, 10 loans were repaid and eight loans have been added to the pool. The pool is heavily concentrated with loans secured by multifamily properties, which represent 67.0% of the currently funded pool balance. Multifamily properties have generally been more resilient during the Coronavirus Disease (COVID-19) pandemic relative to other property types. Most of the multifamily properties in the pool are in a transitional phase that commenced prior to the pandemic; however, the pandemic has delayed some of the original business plan timelines, which could affect the collaterals’ stabilization process prior to the respective initial loan maturities. There is only one loan secured by a hotel property, which represents 5.7% of the currently funded loan balance.

According to an update from the collateral manager, a cumulative amount of $20.6 million of loan future funding has been advanced to 13 individual borrowers to aid in property stabilization efforts through September 2021. An additional $43.6 million of loan future funding allocated to 19 individual borrowers has yet to be advanced.

As of the October 2021 remittance, there are no loans in special servicing and two loans on the servicer’s watchlist, representing 8.7% of the fully funded pool balance. Both loans are secured by multifamily properties and are being monitored for a low debt service coverage ratio (DSCR) as a result of the pandemic, which has delayed the borrowers’ capital improvement and lease-up plans to stabilize the properties. Despite these challenges, the loans remain current on debt service obligations.

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 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.

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

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