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

DBRS Limited (DBRS Morningstar) 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 BBB (low) (sf)
-- Class AMZ2 at BB (low) (sf)
-- Class AMZ3 at B (low) (sf)
-- Class V-AMZ at B (low) (sf)

All trends are Stable.

The rating confirmations reflect DBRS Morningstar’s unchanged credit view of the transaction, which is very early in its lifecycle. Collateral for the underlying loan is secured by the borrower’s fee-simple interest in Amazon Phase VII, a 12-story, Class A office property in Seattle. Built to suit in 2015, the property is 98.2% occupied by Amazon Corporate LLC, a subsidiary of Amazon, an investment-grade 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’s lease, which has a 9.3% rent increase every three years, is fully guaranteed by Amazon. The lease commenced on September 2015 and expires in August 2031, well beyond the loan term. In addition, the lease is structured with two five-year extension options and no early termination options. Furthermore, the current contractual rent is $33.98 per sf, approximately 19.0% below the market rate estimated by the appraiser. The only other tenant at the property is Sam’s Tavern 2.0 Llc (1.8% of the net rentable area), on a lease through January 2026.

The Amazon Phase VII whole loan has an outstanding principal balance of $220.0 million and is evidenced by a senior A note with an outstanding principal balance of $160.0 million and a subordinate B note with an outstanding principal balance of $60.0 million. The five-year whole loan is full-term interest only. 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 totalling $59.9 million, which serve as collateral for these rated loan-specific certificates. DBRS Morningstar does not rate the NCMS 2020-2PAC pooled certificates.

The sponsors cashed out $17.5 million as part of the transaction; however, they still have approximately $68.0 million of implied equity behind the deal based on the issuance appraised value. The borrowing entities for the loan are RF Sidneysea TIC LLC (RFR) and Brazil 7star LLC (TriStar), as tenants in common. RFR is ultimately owned by Aby Rosen and Michael Fuchs while TriStar is ultimately owned by David Edelstein, all of which reported significant financial wherewithal at issuance. RFR is a Manhattan-based, privately controlled real estate investment, development, and management company founded in 1991 by Rosen and Fuchs that operates, develops, leases, and manages a variety of properties. TriStar is a New York-based real estate firm led by Edelstein that builds and invests in both commercial and residential properties.

DBRS Morningstar’s net cash flow (NCF) derived at issuance was $10.9 million. As of YE2020, the servicer reported an NCF of $10.6 million, in line with expectations. DBRS Morningstar assumed a straight-line credit over the loan term for Amazon. The Q4 2020 reporting shows an occupancy rate of 100% for the property.

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 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.

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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