DBRS Morningstar Confirms All Classes of BBCMS 2020-BID Mortgage Trust

DBRS, Inc. (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2020-BID issued by BBCMS 2020-BID Mortgage Trust as follows:

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

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The underlying mortgage loan for the subject transaction is collateralized by the borrower’s fee-simple interest in a 506,000 square foot Class A office building on the Upper East Side of Manhattan. According to the May 2022 rent roll, the building remains 100% leased to Sotheby’s, one of the world’s largest auction houses, and has served as the company’s global headquarters since 1980. The tenant is an affiliate of the borrower, which is indirectly owned by BidFair USA, Inc. The building benefits from the long-term tenancy of Sotheby's, which executed a new 15-year triple net lease with three 10-year extension options in concurrence with the closing of the mortgage loan. In addition to having been at the property for more than 40 years, Sotheby's has reportedly invested more than $50 million in its space in 2018–19 alone. At closing, DBRS Morningstar noted that the subject property is well positioned to take advantage of captive demand from a cluster of major medical office space users including New York-Presbyterian/Weill Cornell Medical Center and the Hospital for Special Surgery in the unanticipated event that Sotheby’s space needs change, as the subject is well located in the area of Manhattan known as “Hospital Row.”

The trust loan of $423.5 million along with $60.0 million of mezzanine debt (held outside of the trust) and $10.7 million of borrower equity refinanced existing debt and funded reserves at issuance. The interest-only (IO) loan has a floating interest rate and was structured with an initial two-year term with three one-year extension options. As of the August 2022 remittance report, the loan is on the servicer’s watchlist for the upcoming initial maturity in October 2022. The borrower was contacted for an update and a response is currently pending. Based on the YE2021 financials, the loan reported a net cash flow (NCF) of $41.5 million and a debt service coverage ratio of 2.48 times on the senior debt, compared with the YE2020 NCF of $33.0 million and the DBRS Morningstar NCF of $33.8 million at issuance.

Based on the issuance appraised value of $830.0 million, the loan has a relatively low loan-to-value ratio of 51.0% on the senior debt, with the property benefiting from a substantial floor value based on its desirable location on the Upper East Side. The appraiser's concluded land value was approximately $485 million, or at least $1,100 per square foot, which covers the entire whole loan balance, including the $60 million mezzanine loan, and provides additional downside protection.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
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.

Class X-EXT is an IO certificate that references 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 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 the 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 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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