Morningstar DBRS Confirms Credit Ratings on All Classes of BBCMS 2020-BID Mortgage Trust

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

-- Class A at A (high) (sf)
-- Class B at BBB (sf)
-- Class C at BB (low) (sf)
-- Class X-EXT at B (sf)
-- Class D at B (low) (sf)
-- Class E at CCC (sf)
-- Class HRR at CCC (sf)

The trends on all Classes remain Negative, with the exception of Classes E and HRR, which have credit ratings that do not typically carry a trend in commercial mortgage-backed securities (CMBS) transactions.

During the prior credit rating action in July 2024, Morningstar DBRS downgraded its credit ratings on all classes, based on the updates to its Loan-to-Value (LTV) Sizing and resulting LTV Sizing Benchmarks. Those results suggested downward pressure across the capital stack, following a revision to the Morningstar DBRS Value for the underlying collateral. The loan is secured by a 506,000-square-foot (sf), Class A office building in Manhattan's Upper East Side submarket. Senior debt of $423.5 million (structured on a floating-rate, interest-only (IO) basis) is held in the trust, while $60.0 million of mezzanine debt is held outside the trust. At issuance. the building was fully leased to Sotheby's, one of the world's largest auction houses, through September 2035. However, in June 2023, Sotheby's announced its acquisition of the Breuer Building with plans to relocate to that property in 2025. Sotheby's subsequently amended its lease in order to re-lease floors five through nine (approximately 53.0% of the net rentable area) to Weill Cornell Medicine (Cornell), reportedly for use as a research lab. Although the current credit ratings continue to reflect Morningstar DBRS' overall outlook for the transaction, refinance risk remains elevated as the loan's fully extended maturity date approaches in October 2025. Given the remainder of the Sotheby's space is expected to be dark in the near to moderate term, these factors supported the persisted Negative trends with this review.

According to the servicer, the borrower is working toward a refinancing ahead of the loan's October 2025 maturity date; however, as of the date of this press release, an agreement has yet to be finalized. The transaction is exposed to affiliate lease risk given the borrower under the mortgage loan (Bidfair USA) has leased the property to an affiliated tenant. While a true lease opinion was provided in connection with the transaction at issuance, Morningstar DBRS noted that there is still a possibility that the lease could be recharacterized as financing in the event of a bankruptcy proceeding.

Sotheby's began relocating to the Breuer building in 2024 with plans to open to the public toward the end of 2025. According to the servicer, Sotheby's is expected to remain at the subject in some capacity through at least loan maturity, given that the tenant's back-end operations are housed at the property. It was previously noted that Cornell may also elect to lease the 10th floor, ultimately occupying up to 313,000 sf; however, as of the December 2024 rent roll, the 10th floor continues to be leased by Sotheby's.

Cornell entered a 30-year triple-net lease for the space, which includes 15 months of free rent and will pay a rental rate of $68.50 per square foot (psf) starting in May 2025 for floors five and six, with the first rent step to $74.50 psf occurring in November 2030, which is well beyond loan maturity. The servicer confirmed that the buildout for the floors turned over to Cornell, presumably floors five and six, remains ongoing. The rent commencement date for floors seven through nine is unknown at this time, but the starting rental rate will also be $68.50 psf for the first five years. In comparison, Sotheby's was paying $79.04 psf for its space and will continue to pay that rate on the remaining space until its lease expiration in September 2035. The servicer confirmed that, per the terms of the lease modification, Sotheby's will cover the 15-month free-rent period for floors five and six of Cornell's space; however, it is uncertain if Sotheby's will also continue to pay rent on floors seven through nine until Cornell starts paying rent on those floors. A leasing reserve of $5.0 million was established to cover buildout costs for Cornell's space while the tenant is expected to fund any remaining costs out of pocket. According to the servicer, the borrower has spent approximately $1.9 million toward its obligations under the lease to date.

As part of the analysis for the prior credit rating action, the Morningstar DBRS Net Cash Flow (NCF) was updated to account for the amendment to Sotheby's lease and the signing of Cornell for the re-leased space. Morningstar DBRS gave long-term credit-tenant treatment (LTCT) to Cornell as it is currently rated investment grade by Moody's Investor Services and Standard and Poor's. The concluded Morningstar DBRS NCF was $26.1 million, which is approximately 44.0% below the YE2024 NCF of $46.4 million and 23.0% below the Morningstar DBRS NCF at issuance of $33.8 million. The overall reduction in rental revenue was the primary reason for the variance between the updated Morningstar DBRS NCF and the Morningstar DBRS NCF at issuance. In addition, Morningstar DBRS removed LTCT treatment for Sotheby's, with the conservative approach warranted given Sotheby's is expected to largely vacate the property soon. Although the property is generally well positioned to capture demand from hospitals and biomedical research institutions in the area given its proximity to Hospital Row, large floorplates, and freight infrastructure, Morningstar DBRS notes that tenant improvement costs will likely be considerable to convert the space for medical use, a factor that may limit the sponsor's commitment to the asset and/or lower investor demand should a sale of the property be pursued.

Morningstar maintained the cap rate of 8.0%, resulting in a Morningstar DBRS Value of $326.8 million compared with the issuance Morningstar DBRS Value of $519.7 million (cap rate of 6.5%) and issuance appraised value of $830.0 million. It is worthy to note that at issuance, the appraiser determined a go-dark value of $575.0 million; however, considering the shift in the economic landscape and interest rate environment, Morningstar DBRS believes that the dark value has likely declined. The implied LTV based on the updated Morningstar DBRS Value and the trust debt is 130.0%. Morningstar DBRS maintained positive qualitative adjustments totalling 4.0% to account for the generally favourable property quality and market fundamentals as well as the overall stable cash flows, considering the long-term leases in place.

Morningstar DBRS' credit ratings assigned to Classes A through D are higher than the results implied by the LTV Sizing Benchmarks by three or more notches. The variances are warranted given the long-term leases in place, which extend well beyond loan maturity, as well as the positive leasing momentum as the borrower secured a backfill for a portion of Sotheby's space in a relatively short amount of time.

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 credit 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 (May 16, 2025): https://dbrs.morningstar.com/research/454196.

Class X-EXT is an interest-only (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 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 rating was initiated at the request of the rated entity.

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

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

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 600
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

-- Interest Rate Stresses for U.S. Structured Finance Transactions (March 27, 2025):
https://dbrs.morningstar.com/research/450750

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.

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