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

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

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

All trends are Stable.

The credit rating confirmations reflect the overall performance of the transaction, which benefits from investment-grade tenancy in Starbucks Corporation (Starbucks) that occupies 89.1% of the collateral property's net rentable area (NRA) and is signed to a long-term lease through 2038, nearly 10 years beyond the loan's final maturity date. Given the investment-grade tenancy with no termination options and significant contractual rent escalations, performance is expected to remain stable.

The loan is secured by the borrower's fee-simple interest in the Starbucks Center, a 1.4 million-square-foot (sf), Class A LEED Gold office building, with retail, storage, and parking components and the adjacent 108,000-sf Home Depot parcel in the SODO submarket of Seattle (two miles south of the Seattle central business district). The collateral also includes two seven-story parking structures.

The $425.0 million whole loan pays interest only (IO) for the entire term and has an anticipated repayment date (ARD) of November 2025 with a final maturity date of November 2028. The ARD structure of the loan, which requires that all net cash flow (NCF) after debt service be applied to the principal during a three-year tail, coupled with Starbucks' lease term relative to the ARD and stated maturity, reduces maturity default risk. Loan proceeds refinanced existing debt of $140.0 million, funded upfront reserves of $88.3 million, and returned $170.2 million of equity to the sponsor. The loan is sponsored by SODO Center, Inc. (SODO Center), and the borrower is indirectly wholly owned by SODO Center.

According to the October 2024 rent roll, the collateral reported an occupancy of 99.9%. The office component serves as the global headquarters for Starbucks and benefits from the long-term, institutional-grade tenancy. Starbucks has been at the property since 1990 and has a lease expiration in September 2038 with three 7.5-year renewal options and no contraction or termination options. Starbucks invested approximately $128.0 million of its own capital on build-outs, lobby renovations, and amenities between 2015 and 2020. Starbucks is currently paying below-market base rent of $10.84 per sf (psf), subject to rent steps that are expected to bring the rental rate to $27.80 psf in October 2025. The collateral's other major tenants include The Home Depot (7.0% of NRA, lease expires January 2029) and Amazon.com Services Inc. (3.1% of NRA, lease expires August 2026).

According to the Q3 2024 financials, the collateral reported an annualized NCF of $16.6 million and a debt service coverage ratio (DSCR) of 1.64 times (x)). Although these figures are currently below the Morningstar DBRS NCF and DSCR of $39.9 million and 3.95x, respectively, which gave credit to the straight-line average of Starbucks' contractual rent obligations, Morningstar DBRS anticipates the property performance will begin to approach issuance expectations later this year after Starbucks' rent increases in October 2025. According to Reis, office properties in the Central Seattle submarket reported an average vacancy rate of 21.0%, an average effective rental rate of $34.24 psf, and an average asking rental rate of $46.25 psf as of Q4 2024, in line with the previous year.

Morningstar DBRS' previous credit rating action in April 2024 included an update to the asset's valuation. 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 this credit rating action, Morningstar DBRS maintained the valuation approach from the April 2024 review, which was based on a capitalization rate of 7.75% applied to the Morningstar DBRS NCF of $39.9 million. Morningstar DBRS maintained positive qualitative adjustments to the loan-to-value ratio (LTV) sizing benchmarks totaling 5.5% to reflect the presence of a long-term investment-grade tenant, the property's quality, and its location within the Central Seattle submarket. The Morningstar DBRS value of $514.8 million represents a -37.2% variance from the issuance appraised value of $819.8 million and implies a whole loan LTV of 82.6%.

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 credit 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 factor(s) 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 (August 13, 2024), https://dbrs.morningstar.com/research/437781.

Class X is an IO certificate that references a single rated tranche or multiple rated tranches. The IO credit 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 (February 28, 2025), https://dbrs.morningstar.com/research/448963.

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

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 info-DBRS@morningstar.com.

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

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448962

-- 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

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279.

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