Morningstar DBRS Confirms Credit Ratings on All Classes of MOFT 2020-B6 Mortgage Trust

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2020-B6 issued by MOFT 2020-B6 Mortgage Trust as follows:

-- Class A at BBB (high) (sf)
-- Class B at BB (high) (sf)
-- Class C at B (sf)
-- Class D at B (sf)

All trends are Stable.

The credit rating confirmations reflect the overall stable performance of the underlying collateral, a 314,400-square-foot (sf) Class A, LEED Gold-certified office building in Sunnyvale, California. The transaction continues to benefit from the collateral property's full occupancy by a single investment-grade rated entity, with a lease expiring in 2029.

The transaction is secured by the borrower's fee-simple interest in Moffett Place-Building 6, one of six identical buildings that make up the Moffett Place campus. The campus is located within the greater Moffett Park development, an approximately 519-acre office park, which has been redeveloped over the past 15 years and includes world-leading software, technology, and creative tenants including Alphabet Inc., Amazon.com, Inc. (Amazon), Microsoft Corporation, Yahoo! Inc., and Meta Platforms, Inc. The loan is sponsored by an affiliate of Jay Paul Company, a privately held real estate development firm with a focus on the acquisition and development of high-end office projects for large Silicon Valley technology firms.

The $67.4 million subject transaction is part of a $200.0 million whole loan and consists of two junior notes totalling $66.9 million, and $0.5 million of senior debt. Seven senior pari passu notes totalling $132.6 million are securitized in the BMARK 2020-B20 and BMARK 2020-B19 transactions (not rated by Morningstar DBRS), and there is $49.0 million in mezzanine financing. The fixed-rate loan is interest only throughout the 10-year term and is scheduled to mature in August 2030.

The building is 100.0% leased to Google LLC (Google), whose parent company, Alphabet Inc., is publicly rated investment grade by S&P Global Ratings and Moody's Investor Service, Inc. Google's lease is scheduled to expire in January 2029, prior to loan maturity; however, the leases include two seven-year extension options, each at 100.0% of the fair-market value, and no termination options are available. Should Google fail to provide a renewal notice 20 months prior to lease expiration, the loan is structured with a cash flow sweep that is expected to generate $12.3 million (approximately $40.00 per square foot (psf)) for future re-leasing costs. At issuance, Google was paying a base rental rate of $50.0 psf; however, the lease is structured with annual rent steps of approximately 2.0%, and a renewal would be at market rental rates. Although Google has made approximately 1.5 million square feet (sf) of space across at least seven buildings near its global headquarters in Mountain View, California, available for sublease (including several buildings within the Moffett Park development), Morningstar DBRS did not locate any information showing the subject property has been included in any publicly reported sublease listings by Google to date. Google currently requires employees to work in the office three days a week and in late 2024, following an announcement by Amazon that it would be requiring employees to be in the office full-time, Google reportedly assured employees it would not be following suit, and a hybrid policy would be maintained.

According to the financial reporting for the trailing nine-month period ended September 30, 2024, the property generated annualized net cash flow (NCF) of $16.5 million (a debt service coverage ratio (DSCR) of 1.65 times (x)), compared with the YE2023 NCF of $17.2 million (a DSCR of 1.74x), and the Morningstar DBRS issuance NCF of $14.6 million (a DSCR 1.82x). Per the September 2024 rent roll, Google is paying an average rental rate of $52.7 psf, compared with the Reis reported average asking rent of $50.13 for the Santa Clara/Sunnyvale submarket, as of Q4 2024. The submarket's vacancy rate is projected to remain elevated, at more than 20.0%, through to loan maturity in 2030.

In the analysis for this review, Morningstar DBRS maintained the 7.25% cap rate applied at the previous credit rating action in April 2024, resulting in a Morningstar DBRS value of $200.9 million, a variance of -44.0% from the issuance appraised value of $358.6 million. The Morningstar DBRS value implies a loan-to-value (LTV) ratio of 99.5%, compared with the LTV of 55.8% on the issuance appraised value, when excluding mezzanine debt. In addition, Morningstar DBRS maintained positive qualitative adjustments totaling 7.0% in the LTV sizing benchmarks to reflect the low cash flow volatility, Class A property quality, and general desirability of the Moffett Park development, which is conveniently located near major freeways, including the U.S Route 101, a number of VTA light rail stops that provide mass transit access throughout the region, and major attractions such as Levi's Stadium.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS  
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.
 
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings at https://dbrs.morningstar.com/research/437781 (August 13, 2024).

All credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448963.

Other methodologies referenced in this transaction are listed at the end of this press release.

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-DBRS@morningstar.com.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- North American Single-Asset/Single-Borrower Ratings Methodology (February 28, 2025), https://dbrs.morningstar.com/research/448962

-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024), https://dbrs.morningstar.com/research/439702

-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064

-- North American Commercial Mortgage Servicer Rankings (August 23, 2024), https://dbrs.morningstar.com/research/438283

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279 (July 17, 2023).

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.