DBRS Morningstar Confirms Ratings on All Classes of BX Commercial Mortgage Trust 2020-VKNG

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

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The loan is secured by a portfolio of industrial and logistics properties totalling approximately 8.2 million square feet across six states—Minnesota, Colorado, California, New Jersey, Georgia, and New York. The issuance whole loan of $645.0 million consisted of $600.0 million of senior debt held in the Trust and $45.0 million of mezzanine debt held outside of the Trust. The interest-only loan includes an initial two-year term maturing in October 2022, with three one-year extension options. According to the servicer’s response, the borrower has indicated that it is planning to exercise its extension option; however, no formal notice has been provided yet. In total, 20 properties have been released to date, reducing the transaction balance by 25.5% since issuance, with the July 2022 remittance report reflecting a trust balance of $447.0 million.

The loan has a partial pro rata/sequential-pay structure, which allows for pro rata paydowns for the initial 30.0% of the unpaid principal balance. The loan also has release provisions where the prepayment premium to release individual assets is 105.0% of the allocated loan balance until the outstanding principal balance has been reduced to $420.0 million, at which point, the release premium will increase to 110.0%. The sponsors, Blackstone Real Estate Partners IX and certain co-investment and managed vehicles under common control, purchased the property through several transactions from October 2019 to March 2020.

The portfolio reported a trailing 12-month ended March 31, 2022 (T-12 March 2022), occupancy rate of 93.1%, compared with year-end (YE) 2021, YE2020, and issuance occupancy rates of 92.1%, 90.5%, and 90.0%, respectively. Accounting for the released properties, the updated DBRS Morningstar net cash flow (NCF) was $33.8 million. According to the T-12 March 2022 financials, the loan reported NCF of $37.3 million, well above the updated DBRS Morningstar NCF. The T-12 March 2022 consolidated portfolio debt service coverage ratio (DSCR) was reported at 3.14 times (x), compared with DBRS Morningstar DSCR of 3.23x at issuance. The stable performance of the collateral since issuance coupled with the minimal variances when accounting for the released properties support the rating confirmations.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) 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.

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 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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