DBRS Morningstar Confirms All Classes of FREMF 2020-K114 Mortgage Trust, Series 2020-K114

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Multifamily Mortgage Pass-Through Certificates, Series 2020-K114 issued by FREMF 2020-K114 Mortgage Trust, Series 2020-K114:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X1 at AAA (sf)
-- Class X2-A at AAA (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. As of the July 2021 remittance, all of the original 59 fixed-rate loans, secured by 55 multifamily properties, three manufactured housing communities, and one assisted living facility, remain in the pool with negligible collateral reduction since issuance. Loans representing 99.0% of the pool reported YE2020 financials with a weighted-average (WA) debt service coverage ratio (DSCR) of 2.15 times (x). The WA DBRS Morningstar DSCR at issuance was 1.52x.

All loans within the transaction are structured with 10-year loan terms, and the pool has an average loan size of approximately $22.1 million. Fifteen loans, representing 30.0% of the pool, are structured with full-term interest-only (IO) payments, and an additional 36 loans, representing 64.2% of the pool, have partial-IO periods ranging from 12 to 96 months. Only eight loans, representing 5.8% of the pool, have full-term amortizing payments, none of which are in the top 15. Furthermore, 53 loans, representing 95.8% of the pool, were structured with an upfront debt service reserve, a feature included in most Freddie Mac K-Series deals issued during the beginning of the Coronavirus Disease (COVID-19) pandemic given the uncertainties surrounding the economic impacts to multifamily properties across the United States. As of July 2021, the servicer’s watchlist was composed of two loans, cumulatively representing 0.8% of the current pool balance. Both loans are being monitored for occupancy declines below 80.0%; however, both loans are performing and reported DSCRs above 1.10x at YE2020. There were no delinquent or specially serviced loans as of the July 2021 remittance.

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.

Classes X1 and X2-A are IO certificates that reference 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 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.

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.

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