Approximately $284.9 million of structured securities affected
New York, October 28, 2020 -- Moody's Investors Service has assigned definitive ratings to seven
classes of CMBS securities, issued by CSMC 2020-FACT,
Commercial Mortgage Pass-Through Certificates, Series 2020-FACT:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba3 (sf)
Cl. F, Definitive Rating Assigned B3 (sf)
Cl. X-CP*, Definitive Rating Assigned Aaa (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The certificates are collateralized by a first-lien mortgage on
the fee simple interest in The Factory, a 1.1 million SF
mixed-use office property located in Long Island City, NY.
The ratings are based on the collateral and the structure of the transaction.
The Factory is a mixed-use creative office property spanning 1.1
million square feet across 10 stories offering large floorplates and high
ceilings while boasting historic character, all features desired
by many TAMI (technology, advertising, media, and information
technology) tenants. Built in 1920 as a build-to-suit
for Macy's to serve as a furniture warehouse for their Manhattan
retail stores, the property has undergone numerous improvements
over the years including recent renovations totaling $92.5
million by the sponsor to complete the redevelopment of the historic warehouse
into a creative office property.
As part of the redevelopment, the sponsor converted floors from
industrial use to creative office and completed a full facade restoration
as well as a renovation of the lobby resulting in a 18,000 SF open
concept venue with F&B vendors and shared seating. Large,
double-hung windows on four sides provide natural light.
Most of the windows are operable. Sponsorship completed the replacement
of over 2,200 windows with double-pane thermal units and
frames of aluminum with thermal break.
Parking is located on the lower level and accessed on the southeast side
of the building on 31st Street. The garage is monitored by an attendant;
however, the spaces are 'self-park'. There
is currently parking for up to 190 vehicles. The property is well-situated
within the Long Island City office market with excellent access to LIRR
and the 7, E, M, and G subway lines. Sponsorship
also provides a complimentary shuttle service for tenants to expedite
commutes between the Property and nearby public transportation.
Recent capital improvements have included: facade repair and restoration,
window replacement, lobby renovation, elevator modification,
fire alarm replacements, electrical upgrades, and other improvements.
Amenities include a tenant lounge and coffee bar known as the Breakroom
@ Factory, along. The Factory Sponsorship has also added
several tenants to the property, offering nearby shopping to employees
of other tenants and the general public.
Moody's approach to rating this transaction involved the application
of both our Large Loan and Single Asset/Single Borrower CMBS methodology
and our IO Rating 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) and the severity of loss in the event
of default, which is largely driven by the LTV of the underlying
loan.
The whole loan first mortgage balance of $300,000,000
represents a Moody's LTV of 125.3%. The Moody's
First Mortgage Actual DSCR is 1.90X and Moody's First Mortgage
Actual Stressed DSCR is 0.78X.
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 Factory received
a property quality grade of 1.50.
Notable strengths of the transaction include: location, recent
capital improvements, tenant strength, limited lease roll
over, and sponsorship.
Notable concerns of the transaction include: effects of coronavirus,
new supply, and interest only amortization profile.
The principal methodology used in rating all classes except interest-only
classes 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.
The methodologies used in rating interest-only classes were "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
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 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.
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
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 U.S. 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.
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_1251128.
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.
David Fine
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
Blair Coulson
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