Rating Action: Moody's assigns definitive ratings to eight CMBS classes of DBJPM 2020-C9 Mortgage Trust
Global Credit Research - 28 Aug 2020
Approximately $491.4 million of Structured Securities Affected
New York, August 28, 2020 -- Moody's Investors Service, ("Moody's") has assigned definitive ratings to eight classes of CMBS securities, issued by DBJPM 2020-C9 Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2020-C9
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-5, Definitive Rating Assigned Aaa (sf)
Cl. A-M, Definitive Rating Assigned Aa2 (sf)
Cl. X-A*, Definitive Rating Assigned Aa1 (sf)
* Reflects interest-only classes
The Certificates are collateralized by 30 fixed rate loans secured by 146 properties. The ratings are based on the collateral and the structure of the transaction and the assigned Structured Credit Assessment of:
An SCA of baa2 (sca.pd) was assigned to the Agellan Portfolio loan, which represents approximately 9.7% of the pool balance. The loan is secured by the borrower's fee interest in 46 industrial and office assets, totaling approximately 6.1 million square feet across nine states and 12 markets.
An SCA of aaa (sca.pd) was assigned to the MGM Grand & Mandalay Bay loan, which represents approximately 7.9% of the pool balance. The loan is secured by the borrower's fee interest in two full-service luxury resorts and casinos totaling 9,748 rooms located in Las Vegas, Nevada.
An SCA of baa3 (sca.pd) was assigned to the BX Industrial Portfolio loan, which represents approximately 7.9% of the pool balance. The loan is secured by the borrower's fee interest in 68 industrial properties, totaling 11.1 million square feet across 11 states and 10 markets.
An SCA of baa1 (sca.pd) was assigned to the 1633 Broadway loan, which represents approximately 6.3% of the pool balance. The loan is secured by the borrower's fee interest in a 2.6 million square foot, Class A office tower in New York, New York.
An SCA of a2 (sca.pd) was assigned to the Chase Center Towers I and II loan, which represents approximately 5.4% of the pool balance. The loan is secured by the borrower's fee interest in two, Class A office towers totaling 586,208 square feet located in San Francisco, California.
An SCA of aa1 (sca.pd) was assigned to the Southcenter Mall loan, which represents approximately 4.6% of the pool balance. The loan is secured by the borrower's fee and leasehold interests in a 1.68 million square foot super-regional mall located in Seattle, Washington.
An SCA of baa3 (sca.pd) was assigned to the Kings Plaza loan, which represents approximately 3.2% of the pool balance. The loan is secured by the borrower's fee and leasehold interests in a 1.15 million square foot super-regional mall located in South Brooklyn, New York.
An SCA of aaa (sca.pd) was assigned to the Valley Park Estates Cooperative loan, which represents approximately 2.1% of the pool balance. The loan is secured by the borrower's fee interest in a 430-unit cooperative multifamily property located in Valley Stream, New York.
Moody's approach to rating CMBS deals combines both commercial real estate and structured finance analysis. Based on commercial real estate analysis, Moody's determines the credit quality of each mortgage loan and calculates an expected loss on a loan specific basis. Under structured finance, the credit enhancement for each certificate typically depends on the expected frequency, severity, and timing of future losses. Moody's also considers a range of qualitative issues as well as the transaction's structural and legal aspects.
The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's LTV ratio.
The Moody's Actual DSCR of 3.25x (2.10x excluding SCAs) is higher than the 2019 conduit transaction average of 1.70x (1.56x excluding SCAs). The Moody's Stressed DSCR of 1.26x (0.87x excluding SCAs) is higher than the 2019 conduit transaction average of 0.99x (0.93x excluding SCAs).
The pooled trust loan balance of $630,829,851 represents a Moody's LTV ratio of 93.6% (118.8% excluding SCAs), which is better than the 2019 conduit/fusion transaction average of 115.4% (122.2% excluding SCAs).There are seven loans in the pool structured with additional debt in the form of subordinate debt or mezzanine debt. With the additional debt, the Moody's total debt LTV ratio rises to 120.8% excluding SCAs.
Moody's also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool's loan level Herfindahl score is 19.4 (14.6 excluding SCAs) which is below the 2019 transaction average score of 32.8. With respect to property level diversity, the pool's property Herfindahl score of 32.8 (15.8 excluding SCAs) is well below the 2019 transaction average score of 40.4.
Notable strengths of the transaction include: having eight loans (40.7% of the trust balance) assigned an investment-grade Structured Credit Assessments (SCAs), real estate quality, high multiple-property loan share, major market concentration and loans representing acquisition financing.
Notable concerns of the transaction include: effects of coronavirus, the pool's low loan and property diversity, asset composition and amortization profile.
Moody's also grades properties on a scale of 0 to 5 (best to worst) and considers those grades when assessing the likelihood of debt payment. The factors considered include property age, quality of construction, location, market, and tenancy. The pool's weighted average property quality grade is 1.61 (1.73 excluding credit assessed loans), which is better than 2019 transaction average of 2.35.
The principal methodology used in rating all classes except interest-only classes was "Approach to Rating US and Canadian Conduit/ Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/ Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
Moody's analysis of credit enhancement levels for conduit deals is driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Moody's fuses the conduit results with the results of its analysis of investment-grade structured credit assessed loans and any conduit loan that represents 10% or greater of the current pool balance.
Moody's analysis considers the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology.
Factors that would lead to an upgrade or downgrade of the ratings:
The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan paydowns or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls.
The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of commercial real estate from the collapse in U.S. economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1242124.
The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Stephen L Renna Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Joseph Podvarney, CFA VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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