DBRS Morningstar Confirms Ratings on All Classes of BBCMS Mortgage Trust 2020-C8

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-C8 issued by BBCMS Mortgage Trust 2020-C8 as follows:

-- Class A-1 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB 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 A (low) (sf)
-- Class X-D at A (low) (sf)
-- Class E at BBB (high) (sf)
-- Class X-FG at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class G at BB (high) (sf)
-- Class X-H at BB (sf)
-- Class H at BB (low) (sf)
-- Class J-RR at B (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since DBRS Morningstar’s last review. At issuance, the transaction consisted of 48 fixed-rate loans secured by 127 commercial and multifamily properties with a trust balance of $700.2 million. As of the May 2022 remittance, all loans remain in the pool with negligible amortization to date. Loans secured by office properties represent the greatest property type concentration, accounting for 36.4% of the current pool balance, followed by self-storage properties at 15.8%. There are no loans in special servicing and eight loans, representing 33.6% of the current pool balance, on the servicer’s watchlist. These loans have been flagged for declining performance, outstanding advances, and deferred maintenance items.

One of the largest loans on the servicer’s watchlist, MGM Grand and Mandalay Bay (10.0% of the pool), is secured by two full-service luxury resorts consisting of 9,748 rooms on the Las Vegas Strip. The trust loan is part of a whole loan that was split pari passu among several CMBS transactions The loan was added to the servicer’s watchlist in April 2021 as a result of a depressed debt service coverage ratio (DSCR), driven by Coronavirus Disease (COVID-19)-related traffic reductions for both properties. According to the trailing 12 months (T-12) ended September 30, 2021, financials, the MGM Grand and the Mandalay Bay properties reported occupancy rates of 59.8% and 63.7%, respectively, both of which are well below the year-end (YE) 2019 occupancy rates of 91.4% and 92.8%, respectively. The loan reported a negative DSCR for both 2020 and the Q3 2021 reporting periods, prompting a cash flow sweep that will remain in place until the covrage reaches the threshold of 2.50 times (x) for two consecutive quarters.

Sponsorship is provided by a joint venture between Blackstone Real Estate Income Trust (49.9%) and MGM Growth Properties (50.1%), which together acquired the property for $4.6 billion as part of a sale-lease back transaction including $1.6 billion of equity. The sponsors subsequently executed a 30-year triple net master lease with two 10-year renewal options. Under the terms of the master lease, MGM Tenant is required to make an initial master lease payment of $292 million per annum, with $159 million allocated to MGM Grand and $133 million allocated to Mandalay Bay. The loan has never been delinquent and no coronavirus-relief request was ever made. Given confirmed reports that tourist traffic to Las Vegas continues to build toward pre-pandemic levels, DBRS Morningstar believes cash flows should be back in line with issuance expectations within the near to moderate term.

At issuance, DBRS Morningstar shadow-rated two loans investment grade, including One Manhattan West (Prospectus ID#1, 10.0% of the pool) and MGM Grand & Mandalay Bay (Prospectus ID#3, 10.0% of the pool). The One Manhattan West loan is also on the servicer’s watchlist for reporting a low DSCR but according to the YE2021 financials, the loan reported a DSCR of 2.96x.With this review, DBRS Morningstar confirms the performance for both loans remains in line with the investment grade shadow ratings.

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Classes X-A, X-B, X-D, X-FG, and X-H are interest-only (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.

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.

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. 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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