DBRS Morningstar Confirms All Ratings on BANK 2020-BNK30
CMBSDBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates (the Certificates), Series 2020-BNK30 issued by BANK 2020-BNK30 (the Issuer) as follows:
-- Class A-1 at AAA (sf)
-- Class A-2 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 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 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 BBB (high) (sf)
-- Class E at BBB (sf)
-- Class X-F at BBB (low) (sf)
-- Class F at BB (high) (sf)
-- Class X-G at BB (sf)
-- Class G at BB (low) (sf)
All trends are Stable.
The rating confirmations reflect the overall stable performance of the transaction since the last rating action. The pool’s weighted-average (WA) debt service coverage ratio (DSCR) was reported to be 2.83 times (x) as of the October 2023 distribution, compared with the DBRS Morningstar DSCR of 2.75x at issuance. There are no delinquent or specially serviced loans, and while there are three loans on the servicer’s watchlist representing 16.2% of the pool balance, none of the loans are being monitored for performance-related reasons. As of the October 2023 remittance, all 40 original loans remain in the pool, with an aggregate principal balance of $795.7 million, reflecting a collateral reduction of 2.3% since issuance. No loans have defeased since issuance.
The pool has a high concentration of loans secured by office and retail properties, representing 53.4% and 33.8% of the current pool balance, respectively. In general, the office sector has been challenged, given the low investor appetite for the property type and high vacancy rates in many submarkets as a result of the shift in workplace dynamics. In its analysis for this review, DBRS Morningstar adjusted one of the four office loans in the pool with a stressed probability of default (POD) scenario. DBRS Morningstar identified four office-backed loans as exhibiting increased credit risk due to single-tenant exposure, softening submarket conditions and declines in occupancy. In the analysis for this review, DBRS Morningstar analyzed these four loans by applying POD and/or loss given default stresses to increase the expected losses (ELs), resulting in a WA expected loss for these loans that is approximately 1.5x the pool average EL.
The office loan with the highest DBRS Morningstar EL is 80 Grand - CA (Prospectus ID#16, 2.4% of the pool balance), which is secured by an eight-story Class B medical office building located in Oakland, California. According to the September 2023 rent roll, the property was 73.1% occupied, down from 84.0% at YE2022 and 91.4% at YE2021. The most notable tenant departures were the former tenants Beekeeper USA Inc. (previously 11.2% of the net rental area (NRA)) and Columbia Asthma and Allergy Clinic (previously 11.2% of the NRA), both of which vacated in 2022. While there is no rollover risk prior to 2025, leases representing 31.9% of the NRA are scheduled to roll by YE2027. The property’s vacant space, all of which is currently marketed online, may be challenging to backfill given the submarket’s high availability. According to Reis, the Central Business District submarket of Oakland-East Bay reported a Q2 2023 vacancy rate of 15.8%, compared with Q2 2022 vacancy rate of 16.6%. Per the YE2022 financials, the loan reported a net cash flow (NCF) of $1.7 million, compared with $1.8 million at YE2021 and the DBRS Morningstar NCF of $1.5 million at issuance. While current performance remains above the DBRS Morningstar’s issuance expectation, the YE2023 cash flow is likely to decline further from the prior years given continued increasing vacancy. In its analysis, DBRS Morningstar stressed the LTV and POD for this loan, resulting in an expected loss that is almost 3 times higher than the pool’s WA EL.
The largest loan on the servicer's watchlist is McDonald’s Global HQ, which is secured by a 575,018-square-foot, Class A, and LEED Platinum certified office property in Chicago's Fulton Market submarket. The trust loan is a pari passu portion of a senior loan held in the BANK 2020-BNK29 transaction, which is also rated by DBRS Morningstar. The loan is being monitored for a nonmonetary default resulting from the borrower's noncompliance 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, 605 Third Avenue (Prospectus ID#1, 10.0% of the pool) and The Grace Building (Prospectus ID#6, 7.5% 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 in line with the 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, and X-G 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 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 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 Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577
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/North American CMBS Insight Model Version 1.1.0.0 (March 16, 2023), 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
A description of how DBRS Morningstar analyzes structured finance transactions and how the methodologies are collectively applied can be found at https://www.dbrsmorningstar.com/research/417279.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].
ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.