Morningstar DBRS Confirms Credit Ratings on All Classes of COMM 2020-CX Mortgage Trust

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

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

All trends are Stable

The credit rating confirmations reflect the overall stable performance of the transaction, which has remained consistent since the previous Morningstar DBRS credit rating action in April 2024. The transaction, which is secured by the borrower's fee-simple interest in a nine-story, Class A office property in the Kendall Square submarket of Cambridge, Massachusetts, continues to exhibit strong performance metrics, with a YE2023 occupancy rate of 98.0% and debt service coverage ratio (DSCR) of 2.76 times (x). The building, constructed in 2019, is part of the master-planned Cambridge Crossing Development, which comprises 4.5 million square feet (sf) of mixed-use space, including 2.1 million sf of office/lab space, 4,900 residences (including 2,500 existing on-site units), and 100,000 sf of retail.

The $435.0 million fixed-rate, interest-only whole loan, matures in November 2034; however, the anticipated repayment date occurs in November 2030. The whole loan includes $295.0 million of senior debt and $140.0 million of subordinate debt. The trust debt is comprised of $270.0 million of the senior debt and the entirety of the subordinate debt. The loan sponsor is a joint venture partnership between DivcoWest, an experienced developer in the Greater Boston Area, and the California State Teachers Retirement System, the nation's second-largest pension fund.

According to the September 2024 rent roll, the property was 97.6% occupied, with about 95.0% of the NRA leased to the two largest tenants, Philips NV (80.0% of the net rentable area (NRA), lease expiry in November 2034) and Cerevel (15.0% of the NRA, lease expiry in February 2030). There is no near-term rollover risk as the earliest tenant lease expiration occurs in November 2029. The property benefits from long-term investment-grade tenancy from Philips NV, which also retains three five-year extension options in its lease.

According to the most recently reported full-year servicer financials, the YE2023 NCF figure was relatively unchanged from the YE2022 figure; however, the YE2023 NCF represents a 9.0% increase over the Morningstar DBRS figure of $30.0 million derived at issuance. Morningstar DBRS notes the annualized trailing six-month (T-6) NCF for the period ended June 30, 2024, of $34.5 million (DSCR of 2.89x) represents a respective increase of nearly 5.0% and 15.0% over the YE2023 figure and the Morningstar DBRS NCF figure. The continued NCF improvement is because of scheduled tenant rental rate increases and that rental abatement periods have ended.

Given the substantial improvement in NCF since closing and the expected cash flow increase from rental rate increases for in-place tenants, with this review Morningstar DBRS determined an updated Morningstar DBRS property valuation of $477.2 million, based on a 2.0% haircut to the YE2023 NCF figure, and a capitalization rate of 6.75%. The resulting Morningstar DBRS loan-to-value ratio (LTV) is 91.2% for the whole loan. Morningstar DBRS maintained aggregate positive qualitative adjustments of 8.5% to its LTV sizing benchmarks to reflect the property's cash flow stability, superior property quality, and desirable location.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

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 Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

Class X is an interest-only (IO) certificate 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 Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (March 1, 2024; https://dbrs.morningstar.com/research/428798).

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

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.

Morningstar DBRS 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://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (September 19, 2024), https://dbrs.morningstar.com/research/439699
-- Rating North American CMBS Interest-Only Certificates (June 28, 2024), https://dbrs.morningstar.com/research/435294
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.