DBRS Morningstar Confirms All Ratings on Benchmark 2020-IG3 Mortgage Trust

DBRS, Inc. (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2020-IG3 issued by Benchmark 2020-IG3 Mortgage Trust as follows:

-- Class A2 at AAA (sf)
-- Class A3 at AAA (sf)
-- Class A4 at AAA (sf)
-- Class ASB at AAA (sf)
-- Class AS at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (sf)
-- Class XA at AAA (sf)

-- Class 825S-A at A (low) (sf)
-- Class 825S-B at BBB (low) (sf)
-- Class 825S-C at BB (low) (sf)
-- Class 825S-D at B (low) (sf)

-- Class T333-A at AA (low) (sf)
-- Class T333-B at A (low) (sf)
-- Class T333-C at BBB (low) (sf)
-- Class T333-D at BB (high) (sf)

-- Class BX-A at A (low) (sf)
-- Class BX-B at BBB (low) (sf)
-- Class BX-C at BB (high) (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 21 fixed-rate, noncontrolling (with the exception of 1501 Broadway) pari passu senior notes with an aggregate cut-off pooled balance of $608.5 million. The collateral consists of nine mortgage loans (considering the Chase Center Tower I/II loans are crossed) across 144 properties, with significant concentrations in California (seven properties; 48.1% of the pool by loan balance), New York (four properties; 17.7% of the pool), and Washington (one property; 13.0% of the pool).

Classes 825S-A, 825S-B, 825S-C, and 825S-D are loan-specific certificates associated with the 825 South Hill loan. Classes T333-A, T333-B, T333-C, and T333-D are loan-specific certificates associated with the Tower 333 loan. Classes BX-A, BX-B, and BX-C are loan-specific certificates associated with the BX Industrial Portfolio loan.

The pool benefits from a high concentration of investment-grade assets. All nine of the loans 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 credit profile of the underlying collateral is approximately A (sf)/A (low) (sf).

The deal is very young in its lifecycle and most loans have not yet reported meaningful financials. As of the April 2021 remittance report, the servicer is monitoring four loans totaling 34.2% of the pool balance on its watchlist. The Moffett Towers Buildings A, B, and C loan is the largest loan on the watchlist and represents 13.2% of the pool balance. This 951,498-square-foot Class A office property is in Sunnyvale, California, and is 86% leased to Google through 2030. Comcast is the second-largest tenant, representing 12% of the gross leasable area on a lease through 2027. While awaiting full-year financials, the servicer projected a drop in the 2020 debt service coverage ratio (DSCR) to 1.28 times (x) based on the year-to-date September 2020 financials compared with the issuer’s underwritten level of 2.09x; however, this is not unexpected as Google had staggered lease commencement dates throughout 2020. The 825 South Hill loan, which represents 9.9% of the pool balance, is backed by a 498-unit newly constructed multifamily building in Los Angeles. As of December 2020, the DSCR was 0.80x compared with the issuer’s underwritten level of 1.27x. However, the building opened in 2019 and has not had sufficient time to reach stabilization as the Coronavirus Disease (COVID-19) pandemic began in early 2020. In spite of this, occupancy reached 93% as of December 2020, which is above the issuer’s expectation of 88% and speaks to the desirability of the building. Finally, the Chase Center Towers I/II loans are being monitored for a nonperformance matter as the borrower is working to complete required property repairs that were outlined in the loan agreement and funded in reserve accounts when the loan closed.

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.

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 issuer and servicer 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 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 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.

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