DBRS Morningstar Confirms Ratings on MOFT Trust 2020-ABC

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

-- Class X-A at A (sf)
-- Class A at A (low) (sf)
-- Class B at BBB (low) (sf)
-- Class C at BB (low) (sf)
-- Class D at B (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 original expectations.

The 10-year interest only (IO) loan is secured by the fee-simple interest in three Class A office buildings totaling more than 950,000 square feet (sf) in Sunnyvale, California. The A, B, and C buildings were built in 2008 by the Jay Paul Company, an affiliate of the loan sponsor, and are a component of the larger Moffett Towers technology office campus. The three buildings are 100% leased to five tenants, including two high-investment-grade tenants, Google LLC (Google) and Comcast Cable Communications (Comcast), accounting for 97.4% of net rentable area (NRA).

The servicer reported a YE2021 net cash flow (NCF) of $35.9 million, resulting in a 1.32 times (x) debt service coverage ratio (DSCR), compared with the YE2020 figures of $34.3 million and 1.26x, respectively. The DBRS Morningstar NCF at issuance was $47.9 million. At issuance it was noted that tenant Google, representing over 85% of the total NRA, had not yet taken occupancy or begun paying rent. Google was expected to take possession of Building C beginning in March 2020, with rent payments commencing in June 2020, and to take possession of Building B in January 2021 with rent commencement in June 2021. The servicer confirmed that Google has taken occupancy, but the full rent on the Building B space did not commence until October 2021, resulting in a lag on rental revenue. The 2022 financial statements will reflect full rental payments, and DBRS Morningstar expects cash flow to stabilize.

According to the December 2021 rent roll, the collateral remains 100% occupied with a high concentration of investment-grade tenants. Google occupies 85.7% of NRA, and the tenant’s parent company, Alphabet, carries a high corporate credit rating. The three Google leases feature staggered lease expiration terms of June 2026, September 2027, and May 2031, respectively, which reduce the rollover risk. The second-largest tenant, Comcast (11.7% of NRA; lease expiration of October 2027), is also an investment-grade entity.

The transaction consists of a $328.0 million participation in a $770.0 million whole mortgage loan. The subject debt includes $1.0 million in senior notes, and all of the $327.0 million junior notes. The remaining $442.0 million of pari passu senior notes are further split between seven CMBS conduit transactions, including Benchmark 2020-IG2 Mortgage Trust and Benchmark 2020-IG3 Mortgage Trust, which are rated by DBRS Morningstar. The whole loan proceeds paid off existing debt totaling $364.0 million, returned $314.1 million of cash equity to the sponsor, covered unfunded sponsor obligations totaling $89.2 million, and paid closing costs of $2.7 million.

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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

The DBRS Viewpoint platform provides additional information on this transaction and the underlying loan 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.

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

The principal methodology is 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 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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