DBRS Morningstar Confirms Ratings on Citigroup Commercial Mortgage Trust 2020-GC46

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-GC-46 issued by Citigroup Commercial Mortgage Trust 2020-GC46 as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class X-D at BBB (sf)
-- Class E at BBB (low) (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G-RR at BB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. According to the November 2021 remittance, all 46 of the original loans remain in the pool with an aggregate principal balance of approximately $1.2 billion, representing a collateral reduction of just 0.3% since issuance due to loan amortization.

The transaction includes eight loans, representing 36.3% of the trust balance, that were shadow-rated investment grade by DBRS Morningstar at issuance. The trust benefits from the high amount of urban properties as there are seven loans, representing 29.2% of the trust balance, with a DBRS Morningstar Market Rank of seven or greater. The loans also exhibit relatively low leverage as the weighted-average loan-to-value (LTV) ratio was 54.3% based on the issuance appraised values. However, the leverage of the pool is barbelled by 16 loans, representing 25.5% of the trust balance, that had LTVs greater than 67.1%, and 17 loans, comprising 52.8% of the pool balance, with an issuance LTV lower than 59.3%. Most of the higher leverage loans are secured by retail properties, which have been more susceptible to stress during the Coronavirus Disease (COVID-19) pandemic. Additionally, there are 23 loans, totaling 66.5% of the trust balance, that are structured with full-term interest-only (IO) periods and an additional 13 loans, totaling 25.5% of the trust balance, structured with partial IO terms. The lack of amortization is mitigated by seven of the full-term IO loans being shadow-rated investment grade by DBRS Morningstar at issuance.

Per the November 2021 reporting, there was one loan, representing 3.7% of the current pool, in special servicing and an additional 10 loans representing 17.0% of the pool on the servicer’s watchlist. The Westin Book Cadillac loan is secured by the fee interest in a 32-story, 453-key, full-service hotel located in the Detroit central business district. The loan transferred to special servicing in August 2020 for imminent default following the hotel’s closure from April to June 2020 and the subsequent decline in performance as a result of the pandemic. At closing, the Westin Book Cadillac was owned by The Ferchill Group, a real estate development and management company in Cleveland; however, according to an article published by the Detroit Free Press in December 2021, the property has been sold to a subsidiary of Chicago-based Oxford Capital Group (Oxford Capital). Per the reporting, Oxford Capital will assume the $77.0 million in debt and would then spend approximately $16.5 million on renovations and maintenance throughout the building, including maintenance on the HVAC system and elevators. According to the article, the company was also seeking a 12-year commercial redevelopment tax break valued at $26.0 million. The collateral was reappraised in May 2021 for $82.3 million, up from $74.6 million in September 2020, but down by 39% from the issuance appraised value of $136.0 million. Based on the current loan balance, the loan has an LTV of 102.6% based on the total loan exposure as of the November 2021 remittance. The reported sale to Oxford Capital and the plans to inject funds to renovate the property, coupled with the potential tax break, should help stabilize the property; a return to the master servicer is likely.

The loans on the servicer’s watchlist were all performing as of the November 2021 remittance report. Most of the watchlist loans exhibited low debt service coverage ratios or exhibited increased risk of default caused by the coronavirus pandemic. The three largest loans on the watchlist, 10.1% of the current trust balance, are shadow-rated investment grade, mainly due to their senior debt positions.

At issuance, DBRS Morningstar assigned an investment-grade shadow rating to 650 Madison Avenue (Prospectus ID#1 – 9.5% of the trust balance), 1633 Broadway (Prospectus ID#2 – 9.0% of the trust balance), Southcenter Mall (Prospectus ID#3 – 4.8% of the trust balance), CBM Portfolio (Prospectus ID#5 – 4.1% of the trust balance), 805 Third Avenue (Prospectus ID#7 – 3.7% of the trust balance), Parkmerced (Prospectus ID#18 – 2.3% of the trust balance), Bellagio Hotel and Casino (Prospectus ID#20 – 1.6% of the trust balance), and 510 East 14th Street (Prospectus ID#31 – 1.2% of the trust balance). With this review, DBRS Morningstar confirmed that the performances of these loans remain consistent with investment-grade loan characteristics.

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.

Classes X-A, X-B, X-D, and X-F are IO certificates that reference 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#8 – The Westin Book Cadillac (3.7% 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 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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