Morningstar DBRS Confirms Credit Ratings on Natixis Commercial Mortgage Securities Trust 2020-2PAC

DBRS, Inc. (Morningstar DBRS) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-2PAC, Amazon Phase VII Loan Specific Certificates issued by Natixis Commercial Mortgage Securities Trust 2020-2PAC (NCMS 2020-2PAC) as follows:

-- Class AMZ1 at BB (sf)
-- Class AMZ2 at B (sf)
-- Class AMZ3 at B (low) (sf)
-- Class V-AMZ at B (low) (sf)

All trends are Stable.

The rating confirmations reflect performance that remains in line with Morningstar DBRS' expectations, as evidenced by stable occupancy and cash flow reporting. The loan is secured by the borrower's fee-simple interest in Amazon Phase VII, a 12-story, Class A office property in Seattle, Washington. The Amazon Phase VII whole loan of $220.0 million is composed of $160.0 million of senior debt and $60.0 million of junior debt. The fixed-rate, interest-only loan has an anticipated repayment date (ARD) in April 2025, with a final maturity in December 2026. The Amazon Phase VII A note was contributed to the subject trust and split into four components: one senior pooled component with an outstanding principal balance of $100.1 million and three subordinate nonpooled components totaling $59.9 million, which serve as collateral for these rated loan-specific certificates. Morningstar DBRS does not rate the NCMS 2020-2PAC pooled certificates.

The property was constructed in 2015 and was built to suit for Amazon Corporate LLC (Amazon), a subsidiary of Amazon.com, Inc, an investment-grade-rated tenant. The building is LEED Gold certified and totals 318,617 square feet (sf), including 5,651 sf of ground-floor retail space, a four-level subterranean parking garage containing 429 parking spaces, a public plaza, and a landscaped rooftop terrace with sweeping views of Seattle. The property is one of more than 40 office buildings comprising Amazon's corporate headquarters campus in Seattle's South Lake Union submarket. Amazon occupies 98.2% of the net rentable area and its lease is structured with a 9.3% rent increase every three years and is fully guaranteed by the parent company. The lease commenced on September 2015 and expires in August 2031, well beyond the ARD of April 2025 and the final maturity of December 2026. In addition, the lease is structured with two five-year extension options and no early termination options. At issuance, the tenant was paying a rental rate of $33.98 per sf (psf) and the most recent rent step from September 2024 has increased the rate to $40.57 psf.

The property was 100.0% occupied and reported an annualized net cash flow (NCF) figure of $11.8 million, according to a financial statement for the trailing six month period ended June 30, 2024. In comparison, the YE2022 NCF was $11.7 million, and the Morningstar DBRS NCF derived at issuance was $10.9 million. Morningstar DBRS' NCF figure includes a straight-line credit for Amazon's rent over the loan term given its consideration as a long-term credit tenant.

Morningstar DBRS' previous credit rating action, dated April 2024, included an update to the valuation of the asset. For more information regarding the approach and analysis conducted, please refer to the press release titled "Morningstar DBRS Takes Rating Actions on North American Single-Asset/Single-Borrower Transactions Backed by Office Properties," published on April 15, 2024. For purposes of today's credit rating action, Morningstar DBRS maintained the valuation approach from the April 2024 review, which was based on a capitalization rate of 7.25% applied to the Morningstar DBRS NCF of $10.9 million. Morningstar DBRS also maintained positive qualitative adjustments to the LTV Sizing benchmarks totaling 6.0%, reflective of the asset's high quality, good location and expectation for minimal cash flow volatility. The Morningstar DBRS concluded value of $150.4 million represents a -45.3% variance from the issuance appraised value of $275 million and implies an all-in LTV of 146.2%.

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, or 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 (August 13, 2024; https://dbrs.morningstar.com/research/437781).

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.

This press release was amended on January 9, 2025, to correct outdated ratings from a prior rating action in the text only. These ratings did not match the correct ratings published on our website and have now been corrected.

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
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

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