DBRS Morningstar Confirms Ratings on All Classes of BBCMS Mortgage Trust 2020-C7

DBRS Limited (DBRS Morningstar) confirmed the ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2020-C7 issued by BBCMS Mortgage Trust 2020-C7 Trust as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (high) (sf)
-- Class E at BB (sf)
-- Class X-F at B (high) (sf)
-- Class F at B (sf)

All trends are Stable. The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar expectations at issuance.

According to the March 2022 remittance, all 49 of the original loans remain in the trust, with a trust balance of $804.2 million. Given the transaction’s recent vintage and limited seasoning, there has been minimal collateral reduction of 0.5% since issuance. Twenty-five loans, representing 64.2% of the pool balance, are interest-only (IO) and will not amortize during their respective loan terms. An additional 12 loans, representing 22.7% of the pool, were structured with partial IO periods, only one of which has begun to amortize. No loans are delinquent or in special servicing, but eight loans, representing 27.0% of the pool balance, are on the servicer’s watchlist, including the largest loan in the pool. Based on the most recent financials provided by the servicer, the pool reported a weighted-average debt service coverage ratio (DSCR) of 2.22 times (x), compared with the DBRS Morningstar DSCR of 2.23x at issuance.

The largest loan, Parkmerced (Prospective ID #1; 7.5% of the pool balance), is secured by a 3,165-unit apartment complex in San Francisco. It was added to the watchlist in March 2021 because of declines in occupancy and net cash flow. According to the annualized financials for the trailing nine months ended September 30, 2021, the loan reported an occupancy rate of 72.6% and a DSCR of 0.63x, compared with 75.9% and 0.86x, respectively, for YE2020. At issuance, the property was 94.3% occupied and the DBRS Morningstar DSCR was 3.95x. The transaction closed in July 2020, and DBRS Morningstar noted at issuance that rent collections for this property had declined to 88.3% as of May 2020 as a result of disruptions related to the pandemic.

The subject is well located, adjacent to San Francisco University’s campus and directly east of Lake Merced and Lake Merced Park. Downtown San Francisco to the northeast and Silicon Valley to the south are within easily commutable distances from the asset. According to Reis, the West San Francisco submarket reported a Q4 2021 vacancy rate of 1.4%, compared with a Q4 2020 vacancy rate of 1.7%. Given the property’s excellent location within a tight submarket and its historically below-market rents, DBRS Morningstar anticipates the long-term outlook for the property, in terms of projected revenues and valuation, to be consistent with the issuance outlook, although re-stabilization following the effects of the pandemic may take longer than originally expected.

At issuance, the Parkmerced loan, along with five other loans in the pool representing a combined 33.5% of the pool, was shadow rated as investment grade. These other loans include 525 Market Street (Prospectus ID#2; 7.5% of the pool), The Cove at Tiburon (Prospectus ID#3; 6.2% of the pool); Acuity Portfolio (Prospectus ID#8; 5.0% of the pool), F5 Tower (Prospectus ID#9; 4.9% of the pool), and 650 Madison Avenue (Prospectus ID#13; 2.7% of the pool). With this review, DBRS Morningstar confirmed that the loans remain consistent with investment-grade loan characteristics.

ESG CONSIDERATIONS
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 X-A, X-B, X-E, and X-F 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Parkmerced (7.5% of the pool)

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 the North American CMBS Surveillance Methodology (March 4, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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.

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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