DBRS Morningstar Confirms Ratings on Natixis Commercial Securities Trust 2020-2PAC

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-2PAC, Amazon Phase VII Loan Specific Certificates issued by Natixis Commercial Mortgage Securities Trust 2020-2PAC (NCMS 2020-2PAC) as follows:

-- Class AMZ1 at BBB (low) (sf)
-- Class AMZ2 at BB (low) (sf)
-- Class AMZ3 at B (low) (sf)
-- Class V-AMZ at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the loan, which remains consistent with DBRS Morningstar’s expectations at issuance. The loan is secured by the borrower’s fee-simple interest in Amazon Phase VII, a 12-story, Class A office property in Seattle. The property was constructed in 2015 and was built to suit for Amazon Corporate LLC (Amazon), a subsidiary of Amazon.com, Inc, an investment-grade rated tenant. The building is LEED Gold certified and totals 318,617 square feet (sf), including 5,651 sf of ground-floor retail space, a four-level subterranean parking garage containing 429 parking spaces, a public plaza, and a landscaped rooftop terrace with sweeping views of Seattle. The property is one of more than 40 office buildings comprising Amazon’s corporate headquarters campus in Seattle’s South Lake Union submarket.

Amazon occupies 98.2% of the net rentable area (NRA), and its lease, which is structured with a 9.3% rent increase every three years, is fully guaranteed by the parent company. The lease commenced on September 2015 and expires in August 2031, well beyond the anticipated repayment date of April 2025 and the final maturity of December 2026. In addition, the lease is structured with two five-year extension options and no early termination options. The only other tenant at the property is Sam’s Tavern (1.8% NRA) on a lease through January 2026. As of September 2021, the property was 100.0% occupied and the reported net cash flow (NCF) for the trailing 12 months was $11.4 million, an increase from the year-end (YE) 2020 NCF of $10.6 million and the DBRS Morningstar NCF of $10.9 million. DBRS Morningstar assumed a straight-line credit for Amazon’s rent over the loan term given its consideration as a long-term credit tenant.

The Amazon Phase VII whole loan of $220.0 million is composed of $160.0 million of senior debt and $60.0 million of junior debt. The loan is interest only for the full term. The Amazon Phase VII A note was contributed to the subject trust and split into four components: one senior pooled component with an outstanding principal balance of $100.1 million and three subordinate nonpooled components totalling $59.9 million, which serve as collateral for these rated loan-specific certificates. DBRS Morningstar does not rate the NCMS 2020-2PAC pooled certificates. The sponsors cashed out $17.5 million as part of the transaction; however, they still have approximately $68.0 million of implied equity behind the deal based on the issuance appraised value.

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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

The DBRS Morningstar 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.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), 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.

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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