DBRS Morningstar Confirms Ratings on All Classes of Benchmark 2020-IG3 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2020-IG3 issued by Benchmark 2020-IG3 Mortgage Trust as follows:

-- Class A2 at AAA (sf)
-- Class A3 at AAA (sf)
-- Class A4 at AAA (sf)
-- Class ASB at AAA (sf)
-- Class AS at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class XA at AAA (sf)

-- Class 825S-A at A (low) (sf)
-- Class 825S-B at BBB (low) (sf)
-- Class 825S-C at BB (low) (sf)
-- Class 825S-D at B (low) (sf)

-- Class T333-A at AA (low) (sf)
-- Class T333-B at A (low) (sf)
-- Class T333-C at BBB (low) (sf)
-- Class T333-D at BB (high) (sf)

-- Class BX-A at A (low) (sf)
-- Class BX-B at BBB (low) (sf)
-- Class BX-C at BB (high) (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 since the last rating action. The transaction is a pooled securitization of 21 fixed-rate, noncontrolling (with the exception of 1501 Broadway) pari passu senior notes with an aggregate cut-off pooled balance of $608.5 million. The collateral consists of nine mortgage loans across 144 properties, with significant concentrations in California (nine properties; 47.7% of the pool), New York (four properties; 17.8% of the pool), and Washington (one property; 13.1% of the pool). All of the loans in the transaction, with the exception of 825 South Hill (Prospectus ID#8; 9.3% of the pool), are interest only (IO) during their entire loan terms and there has been 0.7% collateral reduction since issuance.

Eleven classes are loan-specific certificates, or rake bonds. Classes 825S-A, 825S-C, and 825S-D are loan-specific certificates associated with the subordinate component of the 825 South Hill loan. Classes T333-A, T333-B, T333-C, and T333-D are loan-specific certificates associated with the subordinate component of the Tower 333 loan. Classes BX-A, BX-B, and BX-C are loan-specific certificates associated with the subordinate component of the BX Industrial Portfolio loan.

At issuance, DBRS Morningstar noted the pool’s high concentration of investment-grade assets. All nine loans that serve as the collateral for the pooled component of the transaction are shadow-rated investment grade and exhibit investment-grade credit characteristics on a stand-alone basis. With this review, DBRS Morningstar confirms that the performance of the all nine loans remain consistent with investment-grade characteristics.

As of the January 2023 remittance report, three loans, representing 20.5% of the pool, are on the servicer’s watchlist and have remained there since DBRS Morningstar’s previous rating action. However, the servicer is monitoring all of these loans for informational reasons rather than credit concerns. The previous largest loan on the watchlist was the City National Plaza loan (13.3% of the pool), secured by two Class A, LEED Platinum certified, 52-story office towers totaling 2.5 million square feet (sf) in Los Angeles. As of February 2022, the loan was being monitored for a decline in the debt service coverage ratio (DSCR) because of rent relief measures and abatement periods for tenants that took occupancy toward the end of 2020, resulting in a YE2020 DSCR of 3.21 times (x), which was substantially lower than the issuance figure of 4.59x. As of April 2022, the loan was removed from the watchlist. Per the financials for the trailing 12 months ended June 30, 2022, base rents had increased by approximately 13.3% from YE2020, resulting in a DSCR of 4.07x.

The largest loans on the servicer’s watchlist are the Chase Center Towers I/II loans (Prospectus IDs #6 and #7; 11.2% of the pool), secured by two Class A office buildings totaling more than 586,000 sf in the Mission Bay district of San Francisco. As the components of the whole mortgage loan are also securitized in another DBRS Morningstar-rated transaction, Benchmark 2020-IG2 Mortgage Trust, please see the press release titled “DBRS Morningstar Confirms Ratings on All Classes of Benchmark 2020-IG2 Mortgage Trust” published on January 24 2023, at www.dbrsmorningstar.com for a detailed analysis of the subject collateral.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no environmental, social, or 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 (May 17, 2022).

Class X-A 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.

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

The principal methodology is North American CMBS Surveillance Methodology (October 3, 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.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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