$303.0 million of structured securities affected
New York, October 26, 2020 -- Moody's Investors Service has assigned a provisional rating to one class
of CMBS securities, issued by BFLD Trust 2020-OBRK,
Commercial Mortgage Pass-Through Certificates, Series 2020-OBRK:
Cl. A, Assigned (P)Aaa (sf)
RATINGS RATIONALE
The certificates are collateralized by a single, floating-rate
loan secured by the borrower's fee simple interest in Oakbrook Center
(the "property"), an open-air, super-regional
mall located in Oak Brook, IL. The collateral for the loan
consists of a 2.20 million SF portion (the "collateral")
of the 2.58 million SF property. Our ratings are based on
the credit quality of the loan and the strength of the securitization
structure.
The property is of Class A quality and well located in Oak Brook,
IL, approximately 20 miles west of downtown Chicago. The
collateral of 2,199,721 SF of net rentable area consists of
(i) 1,854,190 SF of retail, dining and entertainment
space (84.3% of collateral NRA), (ii) 232,339
SF of office space (10.6% of collateral NRA) and (iii) 113,192
SF of hospitality space (5.1% of collateral NRA).
The office space is located across three, on-site office
towers. The hospitality space consists of the Le Meridien Hotel,
which is situated on a long-term, ground-leased outparcel.
The property is anchored by Macy's (non-collateral),
Nordstrom (collateral) and Neiman Marcus (collateral). Junior anchors
include two AMC theatres (total of 16 screens), LifeTime Fitness
and Crate & Barrel. Other noteworthy retailers at the property
include Louis Vuitton, Burberry, Tiffany & Co.,
Tory Burch, Lululemon, Coach, Vera Bradley, Zara,
Amazon 4-Star, Apple, Peloton, Restoration Hardware,
H&M and Urban Outfitters. The subject also contains approximately
32 food venues, including a recently added 14,000 square-foot
food hall ("The District") and 20 full-service restaurants.
Additionally, the property contains an entertainment component including
the two AMC theatres, Pinstripes (bowling / bocce / dinning) and
Putt Shack (mini golf / bar). As of September 1, 2020,
the underwritten occupancy of the collateral was approximately 79.3%
(excluding Macy's). Total underwritten occupancy at the property
(including Macy's) is approximately 82.3%.
Moody's approach to rating this transaction involved the application
of our Large Loan and Single Asset/Single Borrower CMBS methodology.
The rating approach for securities backed by a single loan compares the
credit risk inherent in the underlying collateral with the credit protection
offered by the structure. The structure's credit enhancement is
quantified by the maximum deterioration in property value that the securities
are able to withstand under various stress scenarios without causing an
increase in the expected loss for various rating levels. In assigning
single borrower ratings, we also consider a range of qualitative
issues as well as the transaction's structural and legal aspects.
The credit risk of commercial real estate loans is determined primarily
by two factors: 1) the probability of default, which is largely
driven by the DSCR, and 2) the severity of loss in the event of
default, which is largely driven by the LTV of the underlying loan.
The securitization consists of a single floating-rate, interest-only,
first lien mortgage loan with an outstanding cut-off date principal
balance of $319,000,000 (the "loan" or
"mortgage loan"). The mortgage loan has an initial
two-year term, with one, one-year extension
option.
The Moody's first-mortgage DSCR is 5.45x and Moody's
first-mortgage stressed DSCR (at a 9.25% constant)
is 1.70x. Moody's DSCR is based on our assessment of the
property's stabilized NCF.
The first mortgage balance of $319,000,000 represents
a Moody's LTV of 52.4%. Taking into consideration
the additional $156,000,000 mezzanine loan, the
total debt Moody's LTV would increase to 78.0%.
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 subject received
a property quality grade of 1.50.
Notable strengths of the transaction include: the asset's
trophy qualities, strong location, exceptional tenant roster,
recent renovations, strong NOI margins, in-line sales,
low-leverage debt and experienced sponsorship.
Notable concerns of the transaction include: the effects of the
coronavirus pandemic, tenant rollover, lack of asset diversification,
recent operating performance, subordinate debt and certain credit
negative structure and legal features.
The principal methodology used in this rating was "Moody's Approach to
Rating Large Loan and Single Asset/Single Borrower CMBS" published in
September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1190579.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an aggregation
of adjusted loan level proceeds derived from our Moody's loan level LTV
ratios. Major adjustments to determining proceeds include leverage,
loan structure, and property type. These aggregated proceeds
are then further adjusted for any pooling benefits associated with loan
level diversity, other concentrations and correlations.
Factors that would lead to an upgrade or downgrade of the rating:
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
pay downs 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 coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. 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.
We also regard e-commerce competition as a social risk under our
ESG framework. The rise of e-commerce implies the growing
use of big data and customer data, which can give rise to privacy
and legal issues. However, changes in customer behavior,
notably the shift to online, are challenges for incumbent retailers,
whose market shares are eroding and whose margins are under pressure because
of high fixed costs.
REGULATORY DISCLOSURES
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_1250594.
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 rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is 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.
Gregory Ingaglio
Vice President - Senior 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
