DBRS Morningstar Confirms Credit Ratings on All Classes of BANK 2020-BNK29

DBRS, Inc. (DBRS Morningstar) confirmed its credit ratings on all classes of Commercial Mortgage Pass Through Certificates, Series 2020-BNK29 issued by BANK 2020-BNK29 as follows:

-- Class A-1 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-3-1 at AAA (sf)
-- Class A-3-2 at AAA (sf)
-- Class A-3-X1 at AAA (sf)
-- Class A-3-X2 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-4-1 at AAA (sf)
-- Class A-4-2 at AAA (sf)
-- Class A-4-X1 at AAA (sf)
-- Class A-4-X2 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-S-1 at AAA (sf)
-- Class A-S-2 at AAA (sf)
-- Class A-S-X1 at AAA (sf)
-- Class A-S-X2 at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class X-D at A (sf)
-- Class X-F at A (low) (sf)
-- Class X-G at BBB (sf)
-- Class X-H at BBB (low) (sf)
-- Class X-J at BB (sf)
-- Class X-K at B (high) (sf)
-- Class D at A (high) (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (high) (sf)
-- Class G at BBB (low) (sf)
-- Class H at BB (high) (sf)
-- Class J at BB (low) (sf)
-- Class K at B (sf)

All trends are Stable.

The credit rating confirmations reflect the transaction’s overall stable performance, which remains in line with DBRS Morningstar’s expectations since the last credit rating action in November 2022. The reported performance metrics for the majority of the loans in the pool have been strong, evidenced by the pool’s healthy weighted-average (WA) debt service coverage ratio of 3.01 times (x). DBRS Morningstar does, however, recognize that there is increased credit risk associated with the pool’s concentration of office properties, which includes eight loans representing more than half of the pool balance, as uncertainty around the future demand for the property type looms. In the analysis for this review, certain loans backed by office properties were analyzed with stressed scenarios to increase the expected losses as applicable, resulting in WA expected loss for the office loans in the pool that is about 25% higher than the pool’s average expected loss.

According to the September 2023 remittance, all of the original 41 fixed-rate loans secured by 89 commercial and multifamily properties remain in the pool, and the trust balance has been reduced nominally by 1.6% to $857.0 million from $871.2 million at issuance. One loan, representing 3.3% of the trust balance, is fully defeased. The transaction is concentrated by property type with eight loans representing 51.6% of the pool secured by office collateral and 13 loans representing 22.2% of the pool secured by retail collateral. No loans are currently reporting delinquent; however, there is one loan (114 Mulberry Street; Prospectus ID#14, 2.0% of the pool) in special servicing and four loans, representing 9.1% of the pool, on the servicer’s watchlist.

The only loan in special servicing, 114 Mulberry Street, is secured by a mixed-use property comprising 23 multifamily units and 6,993 square feet (sf) of commercial space in New York City and transferred to special servicing in June 2022 because the loan sponsor and guarantor filed Chapter 11 bankruptcy. The servicer notes that the borrower has signed the prenegotiation letter and the special servicer and the obligors are currently discussing settlement options. According to the most recent financial reporting, the property occupancy declined to 68% as of YE2022 from 100% at YE2021, and the DSCR declined to 1.15x from 1.48x during the same period. Despite the decline in performance metrics, the most recent appraisal, dated March 2023, valued the property at $25.7 million, suggesting a loan-to-value ratio (LTV) of 67.6%. In its analysis, DBRS Morningstar increased the LTV adjustment given the recent performance declines and the sponsor’s bankruptcy filing.

The largest loan on the servicer’s watchlist, McDonald’s Global HQ (Prospectus ID#6, 5.0% of the pool), is secured by a 575,018-sf, Class A and LEED Platinum certified office property in the Fulton Market submarket of Chicago with more than 90% of the net rentable area leased to McDonald’s through 2033. The loan is being monitored because of a nonmonetary default stemming from the borrower’s failure to comply with lockbox provisions. The recently reported financials are as of March 2021 and indicate a property occupancy of 96% and a DSCR of 1.49x. The loan was shadow-rated investment grade by DBRS Morningstar at issuance. Given the loan’s low leverage (DBRS Morningstar LTV and DBRS Morningstar Balloon LTV of 41.6% and 26.7%, respectively), the long-term in-place lease, building quality, and desirable location, combined with a strong historical performance, DBRS Morningstar maintained the investment-grade shadow rating on the loan with this review.

In addition to McDonald’s Global HQ, The Grace Building (Prospectus ID#4, 8.8% of the pool) and Turner Towers (Prospectus ID#13, 2.7% of the pool) were assigned investment-grade shadow-ratings by DBRS Morningstar at issuance. With this review, DBRS Morningstar confirms the performance for these loans remains consistent with investment-grade characteristics based on their strong credit metrics and continued stable performance.

ENVIRONMENTAL, SOCIAL, 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/416784 (July 4, 2023).

Classes X-A, X-B, X-D, X-F, X-G, X-H, X-J, and X-K 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 credit ratings are subject to surveillance, which could result in credit 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 (March 16, 2023) https://www.dbrsmorningstar.com/research/410912.

Other methodologies referenced in this transaction are listed at the end of this press release.

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 credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

Rating North American CMBS Interest-Only Certificates (December 19, 2022; https://www.dbrsmorningstar.com/research/407577)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 22, 2023; https://www.dbrsmorningstar.com/research/420982)

North American Commercial Mortgage Servicer Rankings (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008)

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