DBRS Morningstar Confirms Ratings on Benchmark 2020-IG2 Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-IG2 issued by Benchmark 2020-IG2 Mortgage Trust as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-M at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class UBR-B at AA (low) (sf)
-- Class UBR-C at A (low) (sf)
-- Class UBR-D at BBB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The transaction is a pooled securitization of 11 fixed-rate noncontrolling (with the exception of 1501 Broadway) pari passu senior notes with an aggregate cut-off pooled balance of $639.1 million. The collateral consists of 11 mortgage loans across 79 properties, with significant concentrations in California (nine properties; 49.2% of the pool) and New York (five properties; 27.8% of the pool). All 11 of the loans in the transaction are interest-only (IO) during their entire loan terms.

There are also three classes of loan-specific certificates in Classes UBR-B, UBR-C, and UBR-D that are collateralized by two subordinate companion notes in an aggregate amount of $155 million on the Chase Center Tower I/II properties. The loan-specific certificates are an asset of the issuing entity but are not being pooled with the other mortgage loans and are only entitled to payments of interest and principal from the subordinate companion notes.

The pool benefits from the high concentration of investment-grade assets. All 11 of the senior notes that serve as the collateral for the pooled component of the transaction are shadow-rated investment grade and exhibit investment-grade credit characteristics on a stand-alone basis. The weighted-average (WA) credit profile of the underlying collateral is approximately A (sf)/A (low) (sf).

At issuance, the pool had a WA in-trust DBRS Morningstar Loan-to-Value Ratio (LTV) of 59.5% and an Issuer LTV of 35.5%, both of which are substantially below the leverage point of traditional pools. The DBRS Morningstar LTV is for the senior note components that serve as the collateral for this transaction. The trust collateral includes one portfolio loan, Stonemont Net Lease Portfolio (Prospectus ID#5; 8.8% of the pool), consisting of 66 properties. Additionally, the transaction benefits from a lack of exposure to lodging properties and very limited exposure to retail properties (only representing 1.4% of the pool), both of which remain particularly sensitive to ongoing risks related to the Coronavirus Disease (COVID-19) pandemic.

As of the April 2021 remittance report, there are three loans, representing 41.1% of the pool, on the servicer’s watchlist. However, the servicer is monitoring these loans for informational reasons rather than credit concerns. The largest loans on the servicer’s watchlist are the Chase Center Towers I/II loans. The loans are secured by two Class A office buildings totaling more than 586,000 square feet in the Mission Bay district of San Francisco. Each of the 11-story buildings was constructed in 2019 and have achieved LEED Gold certification. The buildings are part of the larger Chase Center/Golden State Warriors Complex, which includes the Chase Center and a 18,000-seat indoor arena that serves as the new home for the Golden State Warriors NBA team. Both office buildings were entirely leased to Uber in March 2018 with rent commencement for Tower II and Tower I in September and October of 2019, respectively, on 20-year terms.

The loans went on the servicer’s watchlist in January 2021 because of outstanding landlord obligation reserve funds, with the final due date for obligations detailed in the loan agreement of September 2020. At loan closing, a landlord obligation reserve was put in place, totaling $62.7 million. Of that figure, $15.2 million was allocated for outstanding repairs and $47.5 million was tagged for a tenant improvement allowance. As of April 2021, the remaining balance in the reserve account was $6.6 million, suggesting the work to be done is substantially complete. According to servicer commentary, the borrower is working with the servicer to finish the remaining projects.

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/373262.

Class X-A is an IO certificate that references 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 ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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@dbrsmorningstar.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577