BANK 2020-BNK26 - DBRS Morningstar
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PRESALE REPORT BANK 2020-BNK26 FEBRUARY 2020 STRUCTURED FINANCE: CMBS
Table of Contents Capital Structure 3 Transaction Summary 4 Rating Considerations 5 DBRS Morningstar Credit Characteristics 7 Largest Loan Summary 8 DBRS Morningstar Sample 9 Transaction Concentrations 11 Loan Structural Features 12 FTERE Bronx Portfolio 3 16 Bravern Office Commons 21 560 Mission Street 25 200 West 57th Street 29 545 Washington Boulevard 34 55 Hudson Yards 39 AD1 Global Portfolio 44 1633 Broadway 51 Bellagio Hotel and Casino 56 K Street and F Street Office Portfolio 62 Marriott Richmond Dual Brand 67 Steeples Apartments 71 Coral Sky Plaza 75 Embassy Suites – Charlotte 80 Prince William Square 85 Transaction Structural Features 89 Methodologies 91 Surveillance 91 Glossary 92 Definitions 92 Jake Noeldner Dan Kastilahn Senior Financial Analyst Senior Vice President +1 312 332-9576 +1 312 332-9444 jake.noeldner@dbrsmorningstar.com dan.kastilahn@dbrsmorningstar.com Kevin Mammoser Erin Stafford Managing Director Managing Director +1 312 332-0136 +1 312 332-3291 kevin.mammoser@dbrsmorningstar.com erin.stafford@dbrsmorningstar.com
Presale Report | BANK 2020-BNK26
Capital Structure
Description Rating Action Balance ($) Subordination (%) DBRS Morningstar Trend
Rating
Class A-1 New Rating - Provisional 27,400,000 30.000 AAA (sf) Stable
Class A-2 New Rating - Provisional 95,000,000 30.000 AAA (sf) Stable
Class A-SB New Rating - Provisional 38,600,000 30.000 AAA (sf) Stable
Class A-3 New Rating - Provisional 150,000,000- 30.000 AAA (sf) Stable
295,000,000
Class A-4 New Rating - Provisional 342,064,000- 30.000 AAA (sf) Stable
487,064,000
Class X-A New Rating - Provisional 798,064,000 -- AAA (sf) Stable
Class A-S New Rating - Provisional 131,111,000 18.500 AAA (sf) Stable
Class B New Rating - Provisional 49,879,000 14.125 AA (high) (sf) Stable
Class X-B New Rating - Provisional 226,593,000 -- A (high)(sf) Stable
Class C New Rating - Provisional 45,603,000 10.125 A (sf) Stable
Class X-D New Rating - Provisional 48,454,000 -- BBB (high) (sf) Stable
Class D New Rating - Provisional 27,078,000 7.750 BBB (high) (sf) Stable
Class E New Rating - Provisional 21,376,000 6.875 BBB (sf) Stable
Class X-F New Rating - Provisional 19,952,000 -- BBB (low) (sf) Stable
Class F New Rating - Provisional 19,952,000 4.125 BB (high) (sf) Stable
Class X-G New Rating - Provisional 11,401,000 -- BB (low) (sf) Stable
Class G New Rating - Provisional 11,401,000 3.125 B (high) (sf) Stable
Class X-H New Rating - Provisional 35,628,248 -- NR n/a
Class H New Rating - Provisional 35,628,248 -- NR n/a
RR Interest New Rating - Provisional 60,004,855 -- NR n/a
1. NR = Not Rated.
2. Class X-D, Class X-F, Class X-G, Class X-H, Class D, Class E, Class F, Class G, Class H, and Class-RR, will be privately placed.
3.The exact initial principal balances of the Class A-3, Class A-3-X1, Class A-3-X2, Class A-4, Class A-4-X1, and Class A-4-X2 trust components (and consequently, the exact
aggregate initial certificate balance of the Class A-3 Exchangeable Certificates and of the Class A-4 Exchangeable Certificates) are unknown and will be determined based
on the final pricing of the certificates. However, the initial principal balances, weighted average lives, and principal windows of the Class A-3 and Class A-4 trust components
are expected to be within the applicable ranges reflected in the following chart. The aggregate initial principal balance of the Class A-3 and Class A-4 trust components
is expected to be approximately $637,064,000, subject to a variance of plus or minus 5%. The Class A-3-X1 and Class A-3-X2 trust components will have initial notional
amounts equal to the initial principal balance of the Class A-3 trust component. The Class A-4-X1 and Class A-4-X2 trust components will have initial notional amounts equal
to the initial principal balance of the Class A-4 trust component.
4. The Class X-A, Class X-B, Class X-D, Class X-F, Class X-G, and Class X-H certificates (collectively referred to as the Class X certificates) are notional amount certificates
and will not be entitled to distributions of principal. The notional amount of the Class X-A certificates will be equal to the aggregate certificate or principal balance of the
Class A-1, Class A-2, and Class A-SB certificates and the Class A-3 and Class A-4 trust components. The notional amount of the Class X-B certificates will be equal to
the aggregate certificate or principal balance of the Class A-S trust component and the Class B and Class C certificates. The notional amount of the Class X-D certificates
will be equal to the aggregate certificate balance of the Class D and Class E certificates. The notional amount of each class of the Class X-F, Class X-G, and Class X-H
certificates will be equal to the certificate balance of the class of principal balance certificates that, with the addition of “X-,” has the same alphabetical designation as the
subject class of Class X certificates.
5. The Class X-A, Class X-B, Class X-D, Class X-F, Class X-G, and Class X-H balances are interest-only (IO) certificates that reference a single rated tranche or multiple rated
tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.
February 2020 3
Presale Report | BANK 2020-BNK26
Transaction Summary
P OOL CHARACTE RI S TI CS
Trust Amount ($) 1,200,097,104 Wtd. Avg. Interest Rate (%) 3.502
Number of Loans 75 Wtd. Avg. Remaining Term 116
Number of Properties 101 Wtd. Avg. Remaining Amortization 358
Average Loan Size ($) 16,001,295 Total DBRS Morningstar Expected Amortization2 11528.8
DBRS Morningstar LTV (%) 1 55.3/63.1 DBRS Morningstar Balloon LTV (%) 1 51.9/58.5
Appraised LTV (%)1 55.3/63.1 Appraised Balloon LTV (%)1 51.9/58.5
Wtd. Avg. DBRS Morningstar DSCR1 3.14/2.34 Wtd. Avg. Issuer Term DSCR1 3.14/2.34
Top 10 Loan Concentration (%) 0.5 Avg. DBRS Morningstar NCF Variance (%) -12.8
1. The second metric excludes shadow-rated and co-op loans.
2. For certain ARD loans, expected amortization may include amortization expected to occur after the ARD but prior to single/major tenant expiry.
PA RTICIPANTS
Depositor Bank of America Merrill Lynch Commercial Mortgage, Inc.
Mortgage Loan Sellers Morgan Stanley Mortgage Capital Holdings LLC (MSMCH - 23 loans, 39.1% of pool)
Bank of America, National Association (BANA - 19 loans, 36.1% of pool)
Wells Fargo Bank, National Association (WFB - 19 loans, 20.4% of pool)
National Cooperative Bank, N.A. (NCB - 14 loans, 4.3% of pool)
Trustee Wilmington Trust, National Association
Master Servicer Wells Fargo Bank, National Association
Special Servicer LNR Partners, LLC
Certificate Administrator Wells Fargo Bank, National Association
and Custodian
Operating Advisor Park Bridge Lender Services LLC
February 2020 4
Presale Report | BANK 2020-BNK26 Rating Considerations The collateral consists of 75 fixed-rate loans secured by 101 commercial and multifamily properties. The transaction is a sequential-pay pass-through structure. DBRS Morningstar analyzed the conduit pool to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. Five loans, representing 23.1% of the pool, are shadow-rated investment grade by DBRS Morningstar. When DBRS Morningstar measured the cut- off loan balances against the DBRS Morningstar Stabilized NCF and their respective actual constants, the initial DBRS Morningstar WA DSCR for the pool was 2.74x. The WA DSCR is elevated because 23.1% of the pool is shadow-rated investment grade and the concentration of low-leverage residential co-operative loans represent 4.3% of the pool. These residential co-operative loans have very low loan-level credit enhancement at the AAA level and near-zero loan-level credit enhancement at the BBB (low) level. Only three loans in the pool—The Hub Shopping Center, 18 West 25th Street, and Lockaway Storage-Boerne—had a DBRS Morningstar Term DSCR below 1.30x, a threshold indicative of a higher likelihood of mid-term default. The WA DBRS Morningstar LTV of the pool at issuance was 55.3%, and the pool is scheduled to amortize down to a WA DBRS Morningstar LTV of 51.9% at maturity. The pool includes 19 loans, representing 24.8% of the pool by allocated loan balance, with issuance LTVs equal to or higher than 67.1%, a threshold historically indicative of above- average default frequency. Forty-two loans, representing 38.9% of the pool balance, were originated in connection with the borrower’s refinancing of an existing mortgage loan. Twenty-six loans, representing 38.0% of the pool, were originated in connection with the borrower’s acquisition of the related mortgage property. The remaining seven loans, representing 23.1% of the pool, were originated in connection with the recapitalization of the related property. STRENGTHS – The transaction includes five loans, representing 23.1% of the total pool balance, that are shadow-rated investment grade by DBRS Morningstar, including Bravern Office Commons, 560 Mission Street, 55 Hudson Yards, 1633 Broadway-NY, and Bellagio Hotel and Casino. Bravern Office Commons exhibits credit characteristics consistent with a AA (high) shadow rating, 560 Mission Street exhibits credit characteristics consistent with a AA shadow rating, 55 Hudson Yards exhibits credit characteristics consistent with a BBB shadow rating, 1633 Broadway-NY exhibits credit characteristics consistent with a BBB (high) shadow rating, and the Bellagio Hotel and Casino exhibits credit characteristics consistent with a AAA shadow rating. For more information on Bravern Office Commons, 560 Mission Street, 55 Hudson Yards, 1633 Broadway and Bellagio Hotel and Casino, please see pages 21, 25, 39, 51 and 56, respectively. – Fourteen loans in the pool, representing 4.3% of the transaction, are backed by residential co-operative loans. Residential co-operatives tend to have minimal risk, given their low leverage and low risk to residents if the co-operative associations default on their mortgages. The WA DBRS Morningstar LTV for these loans is 14.5%. – Sixteen loans, representing an extremely high 40.3% of the aggregate pool balance, are in highly dense urbanized areas (e.g., New York City or San Francisco) with DBRS Morningstar Market Ranks of 7 and 8. These markets benefit from increased liquidity driven by consistently strong investor demand; therefore, these markets tend to benefit from lower default frequencies than less-dense suburban, tertiary and rural markets. – Thirty-three loans, representing 56.3% of the pool, have collateral located in MSA Group 3, which represents the best- performing group in terms of historical CMBS default rates among the top 25 MSAs. MSA Group 3 has a historical default rate of 17.25%, which is nearly 40% lower than the overall CMBS historical default rate of approximately 28.00%. – Thirty-five loans, representing 41.7% of the pool by allocated loan balance, exhibit issuance LTVs of equal to or less than 59.3%, a threshold historically indicative of relatively low-leverage financing and generally associated with far below- average default frequency. – Only four loans had property quality deemed to be Average (-) while none had property quality deemed Below Average or Poor. Additionally, 12 loans, representing 33.7% of the pool balance, exhibited Average (+), Above Average or Excellent property quality. One of the top 10 loans, the Bellagio Hotel and Casino, is secured by collateral that had property quality which DBRS Morningstar deemed to be Excellent. February 2020 5
Presale Report | BANK 2020-BNK26
CHALLENGES AND CONSIDERATIONS
– Three loans, representing 7.6% of the pool (one of which, Bravern Office Commons, is in the top 10 loans), are secured by
properties that are either fully or partially leased to a single tenant.
– Based on its low leverage, Bravern Office Commons, the second-largest loan in the pool, is shadow-rated investment grade
by DBRS Morningstar. Additionally, the tenant at Bravern Office Commons is rated investment grade by DBRS Morningstar.
– The WA issuance LTV for the four properties leased to single tenants is 42.7%, which is considered to be low-leverage
financing and generally associated with below-average default probability.
– The DBRS Morningstar IO DSCR for Bravern Office Commons is higher than 4.00x. The remaining two loans, 6410 Halsey
and Safeway-VA, have DBRS Morningstar DSCRs of 1.85x and 1.67x, respectively.
– The pool has a relatively high concentration of loans secured by office properties as 11 loans, representing 37.4% of the
pool by allocated loan balance, are secured by this property type. DBRS Morningstar considers office properties to be a
riskier property type with a generally above-average historical default frequency.
– Four of the 11 office loans (Bravern Office Commons, 560 Mission Street, 55 Hudson Yards, and 1633 Broadway-NY),
comprising 20.1% of the pool balance, are shadow-rated investment grade by DBRS Morningstar.
– Seven office properties, totaling 27.7% of the pool balance, have DBRS Morningstar DSCRs higher than 2.00x, while the
remaining four office loans, totaling 9.7% of the pool balance, have DBRS Morningstar DSCRs higher than 1.45x.
– Five office loans, representing 59.8% of the office concentration, are secured by office properties in areas characterized as
extremely dense and desirable urban gateway markets, which have a DBRS Morningstar Market Rank of 8.
– Thirty-five loans, representing 67.6% of the pool by allocated loan balance, are structured with full-term IO periods.
– Of these 35 loans, eight loans, representing 40.2% of the pool by allocated loan balance, are in areas with a DBRS
Morningstar Market Rank of 6, 7, or 8. These markets benefit from increased liquidity even during times of economic stress.
– Five of the 35 identified loans (Bravern Office Commons, 560 Mission Street, 55 Hudson Yards, 1633 Broadway- NY,
and Bellagio Hotel and Casino), representing 23.1% of the total pool balance, are shadow-rated investment grade by
DBRS Morningstar.
– The collateral pool has a moderate MSA and property-type concentrations compared with recent conduit/fusion
transactions. Of the loans in the pool, 26.1% are in the top MSA of New York-Northern New Jersey-Long Island, NY-NJ-PA.
New York/multifamily assets also have the top MSA/property-type concentration of 5.7%.
– This MSA has historically performed quite well as it benefits from a diverse economy and has attracted substantial capital
from institutional and foreign investors over time.
February 2020 6
Presale Report | BANK 2020-BNK26
DBRS Morningstar Credit Characteristics
D BRS MO RNINGS TAR D S CR
% of the Pool % of the Pool
DSCR (Trust Balance) (Trust Balance)1
0.00-0.90 0.0 0.00
0.90-1.00 0.0 0.00
1.00-1.15 0.0 0.00
1.15-1.30 0.0 0.00
1.30-1.45 0.0 0.00
1.45-1.60 5.3 7.3
1.60-1.75 3.5 4.8
>1.75 91.2 87.9
Wtd. Avg. (x) 3.14 2.3
Note: Includes pari passu debt, but excludes subordinate debt.
1. Excludes shadow-rated and co-op loans.
D BRS MO RNINGS TAR LTV ( % ) D B R S MO R N IN G STA R B A L L O O N LT V ( %)
% of the Pool % of the Pool % of the Pool % of the Pool
LTV (%) (Trust Balance) (Trust Balance)1 Balloon LTV (%) (Trust Balance) (Trust Balance)1
0.0-50.0 33.2 8.0 0.0-50.0 39.0 16.0
50.0-55.0 7.3 10.0 50.0-55.0 8.8 12.2
55.0-60.0 1.2 1.7 55.0-60.0 8.8 12.1
60.0-65.0 23.9 32.9 60.0-65.0 25.7 35.4
65.0-70.0 24.8 34.2 65.0-70.0 17.6 24.3
70.0-75.0 9.6 13.2 70.0-75.0 0.0 0.0
>75.0 0.0 0.0 >75.0 0.0 0.0
Wtd. Avg. (%) 55.3 63.1 Wtd. Avg. (%) 51.9 58.5
Note: Includes pari passu debt, but excludes subordinate debt. Note: Includes pari passu debt, but excludes subordinate debt.
1. Excludes shadow-rated and co-op loans. 1. Excludes shadow-rated and co-op loans.
February 2020 7
Presale Report | BANK 2020-BNK26
Largest Loan Summary
LOAN DETAIL
DBRS DBRS DBRS DBRS
Trust Balance Morningstar Morningstar Morningstar Morningstar
Loan Name ($) % of Pool Shadow Rating LTV (%) Balloon LTV (%) DSCR (x)
FTERE Bronx Portfolio 3 76,680,000 6.4 n/a 67.3 67.3 2.06
Bravern Office Commons 75,000,000 6.2 AA (high) 37.7 37.7 4.53
560 Mission Street 70,000,000 5.8 AA 35.6 35.6 5.23
200 West 57th Street 70,000,000 5.8 n/a 62.2 62.2 1.93
545 Washington Boulevard 60,000,000 5.0 n/a 61.4 61.4 2.50
55 Hudson Yards 56,700,000 4.7 BBB 39.4 39.4 3.54
AD1 Hotel Portfolio 48,000,000 4.0 n/a 65.8 53.8 1.89
1633 Broadway 40,000,000 3.3 BBB (high) 41.7 41.7 3.84
Bellagio Hotel and Casino 35,000,000 2.9 AAA 39.3 39.3 8.42
K Street and F Street Office Portfolio 31,200,000 2.6 n/a 63.4 63.4 2.08
Marriott Richmond Dual Brand 29,900,000 2.5 n/a 53.2 41.5 2.73
Steeples Apartments 28,300,000 2.4 n/a 69.7 69.7 1.85
Coral Sky Plaza 26,125,000 2.2 n/a 65.6 65.6 2.47
Embassy Suites - Charlotte 25,500,000 2.1 n/a 47.2 47.2 4.96
Prince William Square 25,000,000 2.1 n/a 64.8 64.8 3.07
P R OPERTY DETAI L
DBRS Loan per Maturity
Morningstar Year SF/Units Balance per
Loan Name Property Type City State Built SF/Units ($) SF/Units ($)
FTERE Bronx Portfolio 3 Multifamily Various NY Various 526 145,779 145,779
Bravern Office Commons Office Bellevue WA 2009 749,694 304 304
560 Mission Street Office San Francisco CA 2002 668,149 449 449
200 West 57th Street Office New York NY 1917 171,395 671 671
545 Washington Boulevard Office Jersey City NJ 2001 866,706 290 290
55 Hudson Yards Office New York NY 2018 1,431,212 660 660
AD1 Hotel Portfolio Limited-Service Hotel Various Various Various 708 67,797 55,494
1633 Broadway Office New York NY 1972 2,561,512 391 391
Bellagio Hotel and Casino Full-Service Hotel Las Vegas NV 1997 3,933 426,189 426,189
K Street and F Street Office Portfolio Office Various DC Various 124,667 250 250
Marriott Richmond Dual Brand Limited-Service Hotel Richmond VA 2014 210 142,381 110,941
Steeples Apartments Multifamily Houston TX 1982 409 69,193 69,193
Coral Sky Plaza Retail Royal Palm Beach FL 1999 232,727 112 112
Embassy Suites - Charlotte Limited-Service Hotel Charlotte NC 1989 274 93,066 93,066
Prince William Square Retail Woodbridge VA 1986 232,957 107 107
February 2020 8
Presale Report | BANK 2020-BNK26
DBRS Morningstar Sample
D BRS MO RNINGS TAR S AM PLE RE S U LTS
DBRS DBRS DBRS
DBRS Morningstar Morningstar Morningstar
Prospectus Morningstar NCF Variance Major Variance Property
ID Loan Name % of Pool NCF ($) (%) Drivers Quality
1 FTERE Bronx Portfolio 3 6.4 4,878,670 -16.4 Controllable Expenses; Average -
Vacancy, Real Estate Taxes
2 Bravern Office Commons 6.2 29,916,552 -10.8 TI/LC; GPR; Vacancy Above Average
3 560 Mission Street 5.8 34,524,255 -16.2 TI/LC; Straight-line rent Average
4 200 West 57th Street 5.8 6,700,587 -15.6 Vacancy; TI/LC; Rent Steps Average
5 545 Washington Boulevard 5.0 17,676,252 -18.5 Vacancy; TI/LCs; Rent Steps Average +
6 55 Hudson Yards 4.7 85,005,411 -15.0 TI/LC; Rent Steps; Vacancy Above Average
7 AD1 Hotel Portfolio 4.0 4,002,650 -22.2 RevPAR; FF&E Average
8 1633 Broadway 3.3 92,393,880 -20.8 TI/LC; Rent Steps Above Average
9 Bellagio Hotel and Casino 2.9 426,559,931 -6.0 RevPAR; FF&E Excellent
10 K Street and F Street Office 2.6 1,881,333 -21.2 TI/LC; Management Fee Average
Portfolio
11 Marriott Richmond Dual Brand 2.5 4,036,606 -7.1 RevPAR Average +
12 Steeples Apartments 2.4 1,897,409 -8.1 Controllable Expenses; Average -
Operating Expenses;
Management Fee
13 Coral Sky Plaza 2.2 2,189,235 -10.1 Reimbursements; GPR; Average
Management Fee
14 Embassy Suites - Charlotte 2.1 3,940,901 -11.0 RevPAR; FF&E Average
15 Prince William Square 2.1 2,376,905 -10.4 Rent Markdown; Vacancy, TI/LC Average
16 Pacific Plaza Tacoma 1.9 1,908,748 -12.7 TI/LC; GPR; Management Fee Average +
17 OSU Hotel Portfolio 1.9 2,850,068 -7.4 RevPAR; FF&E Above Average
18 Residence Inn - Amelia Island 1.8 2,248,405 -5.3 RevPAR; FF&E Average +
20 Forsyth Multifamily Portfolio 1.6 1,190,910 -8.3 Controllable Expenses; Vacancy Average +
21 Giant Anchored Portfolio 1.5 7,539,893 -9.3 Vacancy Average
23 University Marketplace 1.4 1,525,230 -7.9 Vacancy; Rent Markdown; TI/LC Average -
28 Ayres Hotel Orange 1.0 1,974,281 -11.3 RevPAR; FF&E Average +
32 Bradenton Cascade Office 0.9 876,167 -15.0 TI/LC; Variable Expenses; Average
Portfolio Management Fee
38 Courtyard - Charlotte Matthews 0.7 1,028,495 -12.3 RevPAR; FF&E Average
39 Ayres Hotel Spa Mission Viejo 0.7 1,079,510 -7.2 RevPAR; FF&E Average +
41 18 West 25th Street 0.6 420,386 -36.5 RevPAR; FF&E Average -
54 Long Beach Storage Center 0.4 410,828 -11.0 Vacancy; Management Fee; Average
Real Estate Taxes
55 Grand Oaks Plaza 0.4 479,010 -4.7 TI/LC; Replacement Reserves Average
February 2020 9
Presale Report | BANK 2020-BNK26
DBRS MORNINGSTAR SITE INSPECTIONS DBRS Morningstar Sampled Property Quality
The DBRS Morningstar sample included 28 of the 75 loans
# of % of
in the pool, representing 73.0% of the pool by allocated loan Loans Sample
balance. DBRS Morningstar performed site inspections Excellent 1 4.0
on 45 of the 102 properties in the deal, comprising 68.6% Above Average 4 22.2
of the pool by allocated loan balance. DBRS Morningstar Average + 7 19.9
conducted meetings with an on-site property manager, a Average 12 39.1
leasing agent, or a representative of the borrowing entity Average - 4 14.7
for 20 loans, which represent 66.0% of the pool by allocated Below Average 0 0.0
loan balance. Poor 0 0.0
DBRS MORNINGSTAR CASH FLOW ANALYSIS
DBRS Morningstar completed a cash flow review and a cash flow stability and structural review on 28 of the 75 loans,
representing 73.0% of the pool by loan balance. For loans not subject to an NCF review, DBRS Morningstar applied the
average NCF variance of its respective loan seller.
DBRS Morningstar generally adjusted cash flow to current in-place rent and, in some instances, applied an additional
vacancy or concession adjustment to account for deteriorating market conditions or tenants with above-market rent. In
most instances, DBRS Morningstar accepted contractual rent bumps if they were within 12 months and market levels.
Generally, DBRS Morningstar recognized most expenses based on the higher of historical figures or the borrower’s
budgeted figures. Real estate taxes and insurance premiums were inflated if a current bill was not provided. Capex was
deducted based on the higher of the engineer’s inflated estimates or the DBRS Morningstar standard, according to property
type. Finally, leasing costs were deducted to arrive at the DBRS Morningstar NCF. If a significant upfront leasing reserve
was established at closing, DBRS Morningstar reduced its recognized costs. DBRS Morningstar gave credit to tenants not
yet in occupancy if a lease had been signed and the loan was adequately structured with a reserve, LOC, or holdback earn-
out. The DBRS Morningstar sample had an average NCF variance of -12.8% and ranged from -36.5% (18 West 25th Street)
to -4.7% (Grand Oaks Plaza).
DBRS Morningstar Sampled Property Type
60.0% 40.0
35.0
50.0%
30.0
40.0%
25.0
30.0% 20.0
15.0
20.0%
10.0
10.0%
5.0
0.0% 0.0
Full Service Industrial Limited Service Multifamily Office Self Storage Retail Unanchored Mixed Use Other Manufactured
Hotel Hotel Retail Housing
Excellent Above Average Average + Average Average - Below Average Poor Pool (%)
February 2020 10Presale Report | BANK 2020-BNK26
Transaction Concentrations
DBRS Morningstar Property Type Geography
# of % of # of % of
Property Type Loans Pool State Properties Pool
Office 11 37.4 CA 5 8.3
Retail 14 16.0 IL 2 1.8
Multifamily 18 16.1 NY 19 26.6
Mixed Use 2 1.4 NC 5 5.1
Industrial 4 1.7 OH 3 3.2
Full-Service Hotel 1 2.9 FL 4 5.8
Self-Storage 5 2.7 All Others 63 49.3
Unanchored Retail 9 4.9
Limited-Service Hotel 11 17.0
Manufactured Housing 0 0.0
Other 0 0.0
Loan Size DBRS Morningstar Market Types
# of % of # of % of
Loan Size Loans Pool Market Type Properties Pool
Very Large 18 63.8 1 2 1.7
(>$20.0 million) 2 14 14.9
Large 15 17.9 3 18 13.0
($10.0-$20.0 million)
4 9 7.6
Medium 20 11.8
($5.0-$10.0 million) 5 11 15.8
Small 18 5.9 6 5 6.7
($2.0-$5.0 million) 7 4 13.9
Very Small 4 0.6 8 12 26.4
(Presale Report | BANK 2020-BNK26
Loan Structural Features
Pari Passu Notes: Eight loans, representing 35.4% of the pool, have pari passu debt and are identified in the table below.
PA RI PASSU NO T E S
% of % of Total
Property Name Balance ($) Pool Deal ID Pari Passu Loan Controlling Piece (Y/N)
Bravern Office Commons 75,000,000 6.2 BANK 2020-BNK26 32.9 N
50,000,000 n/a BAMLL 2020-BOC 21.9 N
103,000,000 n/a BAMLL 2020-BOC 45.2 N
228,000,000 n/a n/a 100.0 n/a
560 Mission Street 70,000,000 5.8 BANK 2020-BNK26 23.3 N
60,000,000 n/a GSMS 2020-GC45 20.0 N
30,000,000 n/a Benchmark 2020-B16 10.0 Y
20,000,000 n/a Benchmark 2020-IG1 6.7 N
25,000,000 n/a DBR Investments Co. Limited 8.3 N
15,000,000 n/a Benchmark 2020-B16 5.0 N
30,000,000 n/a Bank of America, N.A. 10.0 N
50,000,000 n/a BANK 2020-BNK25 16.7 N
300,000,000 n/a n/a 100.0 n/a
200 West 57th Street 70,000,000 5.8 BANK 2020-BNK26 60.9 Y
45,000,000 n/a MSBNA 39.1 N
115,000,000 n/a n/a 100.0 n/a
545 Washington Boulevard 60,000,000 5.0 BANK 2020-BNK26 23.8 N
81,285,000 n/a BANK 2020-BNK25 32.3 Y
60,000,000 n/a MSC 2020-L4 23.8 N
50,321,250 n/a BBCMS 2020-C6 20.0 N
251,606,250 n/a n/a 100.0 n/a
55 Hudson Yards 56,700,000 4.7 BANK 2020-BNK26 6.0 N
510,500,000 n/a Hudson Yards 2019-55HY 54.0 Y
100,000,000 n/a BANK 2019-BNK24 10.6 N
100,000,000 n/a BANK 2020-BNK25 10.6 N
54,000,000 n/a WFB 5.7 N
34,450,000 n/a DBRI 3.6 N
52,450,000 n/a Benchmark 2020-IG1 5.6 N
36,900,000 n/a MSC 2020-L4 3.9 N
945,000,000 n/a n/a 100.0 n/a
February 2020 12Presale Report | BANK 2020-BNK26
PA RI PASSU NO T E S
% of % of Total
Property Name Balance ($) Pool Deal ID Pari Passu Loan Controlling Piece (Y/N)
1633 Broadway 40,000,000 3.3 BANK 2020-BNK26 4.0 N
1,000,000 n/a BWAY 2019-1633 0.1 N
110,000,000 n/a CGCMT 2020-GC46 11.0 N
60,000,000 n/a GSMS 2020-GC45 6.0 N
122,500,000 n/a Goldman Sachs Bank USA 12.2 N
45,000,000 n/a Benchmark 2020-B16 4.5 N
170,000,000 n/a DBR Investments Co. Limited 17.0 N
64,650,000 n/a Benchmark 2020-IG1 6.5 N
JPMorgan Chase Bank, National
177,850,000 n/a 17.8 N
Association
100,000,000 n/a BANK 2020-BNK25 10.0 N
Wells Fargo Bank, National
40,000,000 n/a 4.0 N
Association
70,000,000 n/a WFCM 2020-C55 7.0 N
1,001,000,000 n/a n/a 100.0 n/a
Bellagio Hotel and Casino 35,000,000 2.9 BANK 2020-BNK26 2.1 N
716,000,000 n/a BX 2019-OC11 42.7 Y
360,200,000 n/a Third Party 21.5 N
100,000,000 n/a MSBNA 6.0 N
100,000,000 n/a BANK 2020-BNK25 6.0 N
60,000,000 n/a GSMS 2020-GC45 3.6 N
65,000,000 n/a MSC 2020-L4 3.9 N
55,000,000 n/a Benchmark 2020-IG1 3.3 N
60,000,000 n/a Benchmark 2020-B16 3.6 N
20,000,000 n/a CREFI 1.2 N
61,250,000 n/a JPMCB 3.7 N
43,750,000 n/a BBCMS 2020-C6 2.6 N
1,676,200,000 n/a n/a 100.0 n/a
Giant Anchored Portfolio 18,500,000 1.5 BANK 2020-BNK26 19.1 N
38,500,000 n/a CGCMT 2019-C7 39.7 Y
10,000,000 n/a Citi Real Estate Funding Inc. 10.3 N
30,000,000 n/a BANK 2019-BNK24 30.9 N
97,000,000 n/a n/a 100.0 n/a
February 2020 13Presale Report | BANK 2020-BNK26
Additional Debt: Four loans — Bravern Office Commons, 55 Hudson Yards, 1633 Broadway-NY, and Bellagio Hotel and
Casino — representing 17.2% of the pool have additional debt in the form of a B-note. Seven loans — 560 Mission Street,
545 Washington Boulevard, 1633 Broadway, Bellagio Hotel and Casino, Steeples Apartments, Forsyth Multifamily Portfolio,
and Vesta Lofts Apartments — representing 22.4% of the pool are permitted to incur mezzanine debt in the future if certain
LTV, debt yield, and/or DSCR thresholds are met and there is a lender-approved Intercreditor Agreement.
SU BO RDINATE DEBT
Mezz/
Unsecured Future Mezz/
Trust Balance Pari Passu B-Note Debt Balance Unsecured Total Debt
Loan Name ($) Balance ($) Balance ($) ($) Debt (Y/N) ($) Balance ($)
Bravern Office Commons 75,000,000 153,000,000 76,000,000 0 N 304,000,000
55 Hudson Yards 56,700,000 888,300,000 300,000,000 0 N 1,245,000,000
1633 Broadway 40,000,000 961,000,000 249,000,000 0 Y 1,250,000,000
Bellagio Hotel and Casino 35,000,000 1,641,200,000 1,333,800,000 0 Y 3,010,000,000
325 W. 45th Street Owners Corp. 8,201,000 0 0 1,000,000 Y 9,201,000
400 East 77th Street Owners, Inc. 6,738,086 0 0 500,000 Y 7,238,086
113-14 Owners Corp. 6,350,000 0 0 500,000 Y 6,850,000
36 Hamilton Avenue Tenants Corp. 4,500,000 0 0 300,000 Y 4,800,000
Chester Hill Apartment Corporation 4,500,000 0 0 500,000 Y 5,000,000
759 Hillside Avenue Owners, Inc. 4,000,000 0 0 350,000 Y 4,350,000
214 Clinton St./147 Pacific St. 2,800,000 0 0 2,000,000 Y 4,800,000
Owners Corp.
Fountain Terrace Owners, Inc. 2,500,000 0 0 500,000 Y 3,000,000
Haven Equities, Inc. 2,246,167 0 0 250,000 Y 2,496,167
110 Thompson St. Owners Corp. 2,246,104 0 0 500,000 Y 2,746,104
Hartsdale Towers Owners Corp. 1,896,720 0 0 250,000 Y 2,146,720
Wildwood Tenants Corporation 1,497,494 0 0 500,000 Y 1,997,494
Interest Only DBRS Morningstar Expected Amoritization (%)
# of % of # of % of
Loans Pool Loans Pool
Full IO 35 67.8 0.0 35 67.8
Partial IO 13 14.0 0.0-5.0 0 0.0
Amortizing 27 18.2 5.0-10.0 0 0.0
10.0-15.0 0 0.0
15.0-20.0 0 0.0
20.0-25.0 0 0.0
>25.0 40 32.2
Note: For certain ARD loans, expected amortization may include amortization
expected to occur after the ARD but prior to single/major tenant expiry.
February 2020 14Presale Report | BANK 2020-BNK26
Leasehold: Three properties, Wyndham Garden Tallahassee Capitol, Bellagio Hotel and Casino and Pacific Plaza Tacoma,
representing 5.5% of the pool balance, are fully or partially secured by the borrower’s leasehold interest. Wyndham Garden
Tallahassee Capitol has a ground lease with an initial expiration date in December 2115. Bellagio Hotel and Casino has
a ground lease with an initial expiration date of April 2033 and two 20-year renewal option. Pacific Plaza Tacoma has a
ground lease with an initial expiration date of August 2109.
R E SERVE REQ UIRE M E N T B O R R O W ER ST R U C T U R E
Type # of Loans % of Pool Type # of Loans % of Pool
Tax Ongoing 56 63.1 SPE with Independent Director 15 56.6
and Nonconsolidation Opinion
Insurance Ongoing 22 24.7 SPE with Independent 3 5.9
Director Only
Capex Ongoing 49 68.1 SPE with Nonconsolidation 1 1.9
Opinion Only
Leasing Costs Ongoing1 26 57.9 SPE Only 27 31.2
1. Percent of office, retail, industrial, and mixed-use assets based on
DBRS Morningstar property types.
Sponsor Strength: DBRS Morningstar considers the DBRS Morningstar Sponsor Strength
sponsorship of four of the top 15 loans, representing 13.5%
# of % of
of the pool, to be Strong because of the sponsors’ extensive Loans Pool
experience in the commercial real estate sector and Strong 4 13.5
significant financial wherewithal. Additionally, five loans, Average 66 75.9
representing 10.6% of the pool, were considered Weak by Weak 5 10.6
DBRS Morningstar. Bad/Litigious 0 0.0
Property Release: Seven loans, representing 18.4% of the
pool, allow for the release or defeasance of one or more
properties or a portion of the mortgaged property, subject to release prices in an amount generally equal to 110.0% to
125.0% of the allocated loan amounts of the respective properties and/or certain leverage tests prescribed in the individual
loan agreements.
Property Substitution: No loans in the pool allow for the substitution of properties.
Terrorism Insurance: Terrorism insurance is required and in place for all loans.
February 2020 15Presale Report | BANK 2020-BNK26
FTERE Bronx Portfolio 3
Bronx, New York
Loan Snapshot
Seller
MSMCH
Ownership Interest
Fee Simple
Trust Balance ($ Millions)
76.7
Loan PSF/Unit ($)
145,779
Percentage of the Pool
6.4
Loan Maturity/ARD
March 2030
Amortization CO LLATE RA L SU MMA RY
Interest Only
DBRS Morningstar
Multifamily Year Built/Renovated Various
DBRS Morningstar DSCR (x) Property Type
2.06
City, State Bronx, NY Physical Occupancy (%) 99.4
DBRS Morningstar LTV (%)
67.3 Units/SF 526 Physical Occupancy Date January 2020
DBRS Morningstar Balloon
LTV (%) The loan is secured by the borrower’s fee simple interest in a multifamily portfolio
67.3 comprised of eight rent-stabilized and/or rent controlled properties located in various
DBRS Morningstar neighborhoods in the borough of the Bronx, Bronx County, New York. The portfolio
Property Type
Multifamily
includes a total of 526 residential units. The 10-year, fixed-rate loan is IO for the
DBRS Moringstar
entire loan term and represents a 67.3% LTV based on the combined appraised value
Property Quality of $114.0 million ($216,730 per unit). The loan proceeds of $76.7 million ($145,779
Average - per unit) were used by the sponsor to refinance the existing debt of $73.5 million
Debt Stack ($ Millions) encumbering the collateral and pay $1.2 million in closing costs. There is a holdback of
Trust Balance $2.6 million, that will be released in full or in part, subject to the approval of additional
76.7 J-51 abatements and other stipulations.
Pari Passu
0.0 The collateral properties are largely six-story Class B or Class C buildings. Overall,
B-Note the portfolio’s residential occupancy is 99.4% and has historically operated at or near
0.0 100% occupancy. The overall age of the properties ranges from 91 years to 98 years
Mezz with an average age of 94 and a median age of 93. Overall, the sponsor has invested
0.0
$12,684,000 across the eight properties since 2016, which equates to $24,114 per unit. On
Total Debt
a per unit basis, 2500 University received the highest amount of capital expenditure, at
76.7
$1,926,000 ($33,789 per unit). The property with the least amount of capex investment
Loan Purpose is 1945 Loring Place ($10,237 per unit). The cited uses are varied and include re-piping,
Refinance
bath and kitchen upgrades, brickwork, new windows, and roof upgrades.
Equity Contribution/
(Distribution) ($ Millions)
0.5
February 2020 16Presale Report | BANK 2020-BNK26
FTERE BRONX PORTFOLIO 3 – BRONX, NEW YORK
T E NANT SUMMARY
Cut-Off
Date Loan % of Loan City, Property No of % of Occupancy
Property Amount ($) Amount State Type Units Units Year Built (%)
1270 Gerard Avenue 15,200,000 19.8 Bronx, NY Multifamily 108 20.5 1927 99.1
3018 Heath Avenue 10,900,000 14.2 Bronx, NY Multifamily 86 16.4 1927 100.0
1576 Taylor Avenue 10,760,000 14.0 Bronx, NY Multifamily 71 13.5 1929 100.0
1299 Grand Concourse 10,360,000 13.5 Bronx, NY Multifamily 66 12.6 1922 100.0
2500 University Avenue 8,610,000 11.2 Bronx, NY Multifamily 57 10.8 1922 100.0
2505 Aqueduct Avenue 8,540,000 11.2 Bronx, NY Multifamily 48 9.1 1928 97.9
2785 Sedgwick Avenue 6,590,000 8.6 Bronx, NY Multifamily 48 9.1 1928 97.9
1945 Loring Place South 5,720,000 7.5 Bronx, NY Multifamily 42 8.0 1927 99.4
Total/Wtd. Avg. 77,700,000 100.0 Bronx, NY Multifamily 526 100.0 1922-1929 99.4
The eight properties are mostly spread north to south in the West Bronx. One property, 1576 Taylor Avenue, is in Parkchester
to the east. From north to south, two properties are in Kingsbridge, two properties are in Fordham Manor, one property
is adjacent to Bronx Community College, and two properties are in High Bridge. The distance from the northernmost
property to the southernmost property is 3.1 miles, or 25 minutes by transit.
Reis data indicates an average rent of $1,384 per unit for the submarket, while in-place gross potential rent for the
overall portfolio was concluded at $1,430 per unit per month. This was concluded based on the rent roll provided dated
January 1, 2020. Demand for affordable housing far exceeds supply as evidenced by the Reis current submarket vacancy
rate of 3.8% and the five-year vacancy rate of 2.5% for the submarket. Historically, it has been difficult to track and discern
market rents in the Bronx given that it has a large amount of government subsidized housing, that is either subject to some
form of rent regulation (either rent control, rent stabilization, or Section 8). However, that has changed over the past couple
of years as developers are starting to develop large market-rate housing in the borough.
All properties have or are in the process of applying for J-51 tax abatements and J-51 exemptions. The J-51 tax incentive
program is a New York City program that reduces landlord real estate taxes and freezes property assessments for building
owners completing major capital repairs and upgrades to their residential properties. Rent-stabilization laws limit the
percentage the landlord can raise rents for one- and two- year rent-stabilized leases. Annual rent increases are established
by the Rent Stabilization Board (RSB), which votes annually on rent increases. As a result, the units in the portfolio tend to
maintain a level of affordability; as a result many tenants remain in place, which helps the portfolio maintain high occupancy
levels. The RSB recently implemented 1% rent increases for one-year leases for 2020 and 2.5% increases for two-year leases.
These minimal increases can hamper landlords’ ability to meet rising building expenses.
SPONSORSHIP
The sponsor is Finkelstein Timberger East Real Estate (FTERE), a real estate firm that owns and manages residential
apartment buildings in Bronx County, New York. FTERE is run by Steven Finkelstein, Richard Timberger, and Anthony
East. Steven Finkelstein has over 38 years of experience in the management of apartment buildings. Richard Timberger and
Anthony East both manage FTERE’s portfolio, which contains 70 properties totaling more than 4,200 units.
February 2020 17Presale Report | BANK 2020-BNK26 FTERE BRONX PORTFOLIO 3 – BRONX, NEW YORK DBRS MORNINGSTAR ANALYSIS SITE INSPECTION SUMMARY DBRS Morningstar toured the interior and exterior of 5 of the 8 properties in the portfolio February 5, 2020, from 10:00 a.m. to 12:15 p.m. Based on the site inspection, DBRS found the properties’ quality to be Average (-). Overall, the properties are in highly dense residential neighborhoods. Most of the surrounding buildings are single-family, two-story homes, with some larger buildings, similar to the collateral, scattered between. The exteriors and interiors of the properties are similar, and they are relatively consistent with most of the buildings in their respective neighborhoods. There are many retail options in the surrounding area, including pharmacies, salons, barbershops, houses of worship, laundromats, and businesses that specialize in money transfer and check cashing. The retail portion of the collateral was not open in the morning hours during which DBRS Morningstar conducted its inspection. Transit is easily accessible from most of the properties in the portfolio, with many bus stops in the surrounding vicinity. With regards to subways, the property with the longest walk to the closest subway is 1576 Taylor Avenue, with a .5 mile walk to the East 180th Street Station. Most properties are slightly closer than this; for instance; 1945 Loring Place South is .4 miles to the Burnside Avenue Station. The property closest to a subway station is 1270 Gerard Avenue, with a 0.2 mile walk to the 170th Street Station. Compared to other Bronx multifamily inventory, the units observed were of similar quality, with one asset perhaps slightly higher. That asset, 1270 Gerard Avenue, has a newly renovated lobby which was modern and aesthetically pleasing. Across the collateral, DBRS Morningstar observed largely clean hallways that were well lit. There are no amenities and no onsite laundry rooms. One resident was observed to have installed a small washer/dryer in their bathroom. The property manager stated that the landlord’s “advertising” was the white window panes they install in all their Bronx properties, which are more suburban-looking than typical windows used in the Bronx, and therefore more appealing to potential tenants. There was evidence of deferred maintenance, such as cracked brick work at 3018 Heath Avenue and 1299 Grand Concourse. Handrails leading to entrances were rusting at 3018 Heath Avenue. Debris was generally prominent on the streets, although a superintendent was observed sweeping in the morning outside 3018 Heath Avenue. 2500 University Avenue had discolored concrete outside the entrance, which significantly decreased the curb appeal of the property. With the exception of 1270 Gerard Avenue, which has a bush-lined entrance pathway, properties had extremely minimal or no landscaping. Kitchens across the collateral were small but functional. All had white, slightly-dated-looking refrigerators and ovens, and light-brown wooden cabinets, which also looked somewhat dated. Bathrooms were small, yet functional with newer- looking basic tile flooring.. All observed bathrooms had mirrors above the sink, which was not the case with Bronx multifamily inventory DBRS Morningstar has inspected in other Bronx multifamily transactions. However, one bathtub February 2020 18
Presale Report | BANK 2020-BNK26
FTERE BRONX PORTFOLIO 3 – BRONX, NEW YORK
at 2785 Sedgwick was observed to be heavily peeling on the bottom. Bedrooms were sizable, with some bedrooms fitting
two beds into a single bedroom. Bedrooms which did not have their curtains drawn received plenty of natural light. Living
rooms were of a comfortable size, and also received adequate natural light. Living rooms had the same wood flooring as
bedrooms, which looked a bit dated. Bathrooms had tiling on the floor which looked newer, but not high-end.
During the course of the site inspection, DBRS Morningstar learned that many Bronx multifamily properties have
childhood daycare centers in residents’ apartments. Although operators need a license, regulations state that so long as
the care provider lives in the apartment, it is not considered commercial usage. DBRS Morningstar observed one such
day care in 2500 University Avenue. There were approximately six children at the daycare the time of the visit. The living
room of the unit was decorated with cubbies, colorful signs, and inspirational quotes. The children were said to have
come from the surrounding neighborhood. According to the property manager, the New York City government pays the
resident care-giver $1,200 per month per child to provide pre-kindergarten services, in conjunction with the Universal
Pre-Kindergarten program.
DBRS MORNINGSTAR NCF SUMMARY
N C F ANALYSIS
DBRS
Morningstar NCF Variance
2018 2019 Sponsor Budget Issuer NCF NCF ($) (%)
GPR ($) 8,366,018 8,628,632 8,559,472 8,570,065 8,534,928 -0.4
Other Income ($) 0 0 244,320 337,609 247,872 -26.6
Vacancy & 0 0 -176,075 -187,274 -451,534 141.1
Concessions ($)
EGI ($) 8,366,018 8,628,632 8,627,717 8,720,400 8,331,266 -4.5
Expenses ($) 2,605,960 2,678,010 2,769,355 2,733,446 3,288,725 20.3
NOI ($) 5,760,058 5,950,622 5,858,362 5,986,954 5,042,541 -15.8
Capex ($) 0 0 0 152,466 163,872 7.5
NCF ($) 5,760,058 5,950,622 5,858,362 5,834,488 4,878,670 -16.4
The DBRS Morningstar NCF is based on the DBRS Morningstar North American Commercial Real Estate Property Analysis
Criteria. The resulting DBRS Morningstar NCF was $4,878,670, a variance of -16.4% from the Issuer’s NCF of $5,834,488.
The main drivers of the variance are operating expenses, residential vacancy, and real estate taxes. Controllable expenses
were increased by $600 per unit, which brings the overall expense ratio to 39.5%, in line with Bronx multifamily inventory,
which lacks amenities. Residential vacancy was concluded at 5.0%, which is slightly higher than the Reis submarket vacancy
of 3.8%. Real estate taxes were concluded at the average tax load through the loan term, which takes into account J-51 tax
exemptions and abatements.
DBRS MORNINGSTAR VIEWPOINT
The transaction is structured as a refinance and is modestly leveraged with an Issuer LTV of 68.2% based on the $114.0 million
appraised value. The 10-year loan is full term IO, so refinance risk is elevated given the lack of amortization; however, given
the inherent value which comes from a New York City location, appraised values in the immediate area are expected to
remain stable or increase over the loan term .
The properties are slightly higher in quality than other Bronx multifamily DBRS Morningstar has seen due to the
numerous renovations, including new windows across the properties, the renovated lobby at 1270 Gerard Avenue, and
$12,684,000 in capex spent across the portfolio since 2011, which equates to $24,114 per unit. These upgrades include
February 2020 19Presale Report | BANK 2020-BNK26 FTERE BRONX PORTFOLIO 3 – BRONX, NEW YORK brickwork, re-piping, façade upgrades, and extensive unit improvements. The in-place rent of this collateral at $1,364 per unit exceed comparable properties in the DBRS Morningstar database. Demographics in the Bronx are not as strong as other New York City boroughs (the median household income in the Bronx is $38,085). However, market rents have been slowly increasing upward, from $1,164 in 2014 to $1,325 in 2017, and $1,384 in the current period (Q2 2019), according to Reis. Collateral occupancy of 99.4% depicts the assets as fulfilling a specific need at the price point as a result of rents being below-market due to rent-stabilized properties. The properties have historically had a low vacancy rate. According to Reis, the submarket has a vacancy rate of 3.8%. The vacancy rate has been slowly trending upward since 2011 but remains below 4.0%. The five-year average vacancy rate is 2.5%, according to Reis. DBRS Morningstar concluded a WA residential vacancy of 5% across the eight properties. DBRS Morningstar expects the loans to perform on the basis of high demand for rent- stabilized workforce housing in the historically high-occupancy Bronx market. DOWNSIDE RISKS – A J-51 tax abatement for the portfolio will expire during the loan term increasing refinance risk. STABILIZING FACTORS – The sponsor is well-capitalized and has over 38 years of experience in the Bronx submarket. Furthermore, the borrower appears to be a long-term owner, having acquired the properties between 1988 and 2011, and has invested over $12.6 million in improvements since 2011. February 2020 20
Presale Report | BANK 2020-BNK26
Bravern Office Commons
Bellevue, Washington
Loan Snapshot
Seller
BANA
Ownership Interest
Fee Simple
Trust Balance ($ Millions)
75.0
Loan PSF/Unit ($)
304
Percentage of the Pool
6.2
Loan Maturity/ARD
January 2027
Amortization CO LLATE RA L SU MMA RY
Interest Only
DBRS Morningstar
Office Year Built/Renovated 2009
DBRS Morningstar DSCR (x) Property Type
4.53
City, State Bellevue, WA Physical Occupancy (%) 100.0
DBRS Morningstar LTV (%)
37.7 Units/SF 749,694 Physical Occupancy Date March 2020
DBRS Morningstar Balloon
LTV (%) This loan is secured by the borrower’s fee-simple interest in the Bravern Office
37.7 Commons, two towers totaling 749,694 sf of Class A office space in downtown Bellevue,
DBRS Morningstar Washington. Bravern Building One (Tower 1) is 13 stories and Bravern Building Two
Property Type
Office
(Tower 2) is 23 stories. At Level 2, the in-line retail steps back providing an exterior
DBRS Moringstar
overlook plaza which connects the two office towers. The towers development was
Property Quality completed in 2009. The property is located along I-405 on the intersection of NE 8th
Above Average Street and 112th Avenue NE in Bellevue.
Debt Stack ($ Millions)
Trust Balance The Property consists of the fee-simple interest in three of the six condominium units
75.0 comprising the condominium known as The Bravern. The three condominium units
Pari Passu that make up the Property include Office Tower Unit One, Office Tower Unit Two, and
153.0 Garage Unit. In addition to the units which comprise the Property, The Bravern also
B-Note includes the following three other condominium units, which are not collateral for the
76.0 Loan: Retail Unit, Residential Tower Unit North, and Residential Tower Unit South.
Mezz
0.0
Whole-loan proceeds of $304.0 million and $301.9 million of sponsor equity financed
Total Debt
the $595.7 million purchase price, covered $7.7 million of upfront reserves, and funded
304.0
$2.5 million of closing costs associated with the transaction. The upfront reserves
Loan Purpose are dedicated to outstanding TI and bridge rent obligations. The seven-year loan
Acquisition
is full-term IO and represents an issuance LTV of 37.7% on the A note based on the
Equity Contribution/
(Distribution) ($ Millions) November 2019 appraised value of $605.0 million. The $75.0 million trust loan is a
301.9 non-controlling pari passu in a $304.0 million whole loan. The remining $153.0 million
of pari passu A notes and $76.0 million of B note debt was securitized in the BAMLL
2020-BOC transaction. This single-tenant office complex is 100.0% leased to Microsoft
Corporation (Microsoft) and is Microsoft’s single largest lease commitment in the
February 2020 21Presale Report | BANK 2020-BNK26
BRAVERN OFFICE COMMONS – BELLEVUE, WASHINGTON
Puget Sound region. The tenant has invested over $181 million ($241 psf ) of its own capital into the property. Microsoft
does not have any termination options prior to lease expiry.
T E NANT SUMMARY
Investment
Lease
% of DBRS Base % of Total DBRS Grade?
Tenant SF Total NRA (%) Rent PSF ($) Base Rent (%) Expiry (Y/N)
Microsoft Corporation 749,694 100.0 53.60 100.0 8/31/2025 Y
Total/Wtd. Avg. 749,694 100.0 53.60 100.0 8/31/2025 Y
SPONSORSHIP
The sponsor for the transaction is QSuper, a superannuation fund in Queensland, Australia. Founded in 1912, QSuper and
is a superannuation benefits fund with approximately AUD 113 billion (USD 77.5 billion) in assets under management as
of June 30, 2019. The firm provides its services to employees of Queensland Government departments, authorities, and
enterprises. The firm invests in public equity, fixed-income markets, cash, and properties in Australia and around the
globe. QSuper is based in Brisbane, Australia. Invesco is currently acting as investment advisor on behalf of the Borrower
pursuant to an investment advisory and management agreement. Invesco Ltd. (NYSE:IVZ) is an independent investment
management firm that manages $1.2 trillion in assets worldwide (as of September 30, 2019).
Property management is provided by an affiliate of the sponsor with a contractual management fee of 1.5% of EGI.
DBRS MORNINGSTAR ANALYSIS
SITE INSPECTION SUMMARY
DBRS Morningstar toured the interior and exterior of the property on Friday, February 7, 2020, at approximately 9:00 a.m.
Based on the site inspection, DBRS Morningstar found the property quality to be Above Average.
The collateral comprises two single-tenant Class A office towers totaling 749,694 sf and a subterranean parking garage
containing 3,130 spaces. Located in Bellevue, approximately 10 miles east of Seattle on the east shore of Lake Washington.
The property is situated along NE 8th Street and benefits from its proximity to roads serving as primary arteries to the
surrounding area, including I-405. The property’s surrounding area is urban, within the Bellevue CBD, and consists of high-
density multifamily, high-rise office buildings, and numerous retail developments. The retail component at the base of the
Bravern is home to high-end names such as Neiman Marcus, Hermes, and Louis Vuitton. The property is near other similar
large single-tenant tech offices, including Salesforce, Concur, and Amazon. With I-405 and I-90 nearby, the property has
February 2020 22Presale Report | BANK 2020-BNK26
BRAVERN OFFICE COMMONS – BELLEVUE, WASHINGTON
good access to greater Seattle via the freeway system. The East Link light rail, once complete in 2023, will drop off right in
front of the Bravern complex and link to Microsoft’s Redmond campus.
Management identified several competitive office properties near the property but described the collateral as having a
competitive advantage because of its recent development, abundant parking, and IT infrastructure. Microsoft has been
fully occupying the property since competition in 2009. The interior of the space featured grand lobbies with modern
lighting and flooring. Most floors entirely featured privacy-glass offices. Each tower has its own subsidized food hall and
dining area. Overall, all of the tenant spaces were visually appealing and consistent with a Class A office product. A majority
of the offices were occupied at the time of the tour. Microsoft appeared to use all of their respective spaces, and common
areas were well maintained.
DBRS MORNINGSTAR NCF SUMMARY
N C F ANALYSIS
DBRS Morningstar NCF
Sponsor Budget Issuer NCF ($) NCF Variance (%)
GPR ($) 28,329,149 29,736,732 28,329,149 -4.7
Recoveries ($) 10,468,147 10,445,629 10,445,629 0.0
Other Income ($) 7,133,146 7,205,699 7,133,146 -1.0
Vacancy ($) 0 -2,009,118 -2,908,108 44.7
EGI ($) 45,930,442 45,378,942 42,999,815 -5.2
Expenses ($) 10,498,351 10,520,202 10,952,965 4.1
NOI ($) 35,432,091 34,858,740 32,046,850 -8.1
Capex ($) 0 187,424 -1,822,055 -1072.2
TI/LC ($) 0 1,122,150 3,952,353 252.2
NCF ($) 35,432,091 33,549,166 29,916,552 -10.8
The DBRS Morningstar NCF is based on the DBRS Morningstar North American Commercial Real Estate Property Analysis
Criteria. The resulting DBRS Morningstar NCF was $29,916,552, representing a -10.8% variance from the Issuer’s NCF
of $33,549,166. The primary drivers of the variance include TI/LCs, straight-line rent credit for the tenants in place,
and vacancy.
DBRS Morningstar’s TIs were based on comparable recently securitized buildings’ TI assumption of $60 psf for new
tenants and $30 psf for renewing tenants, with 10-year lease terms and 70% renewal probability. Although Microsoft
received significant TIs from the previous owner and also made its own investments in its spaces, the DBRS Morningstar’s
TI assumptions are in line with the market and the competitive set. DBRS Morningstar assumed a vacancy factor of 7.5%,
whereas the Issuer assumed a 5.0% vacancy rate. Finally, since Microsoft’s lease expires within the loan term, the lease does
not qualify for LTCT treatment, and DBRS Morningstar only gave rent step credit for 12 months. In comparison, the Issuer
included the average rent over the entire term of Microsoft’s lease term.
DBRS MORNINGSTAR VIEWPOINT
The collateral benefits from its location, its proximity to Seattle and high concentration of large technology companies.
Microsoft, which carries a high investment-grade credit rating, is in place through 2025 and has made a significant
commitment to the property in terms of capex since 2010, a sign that Microsoft is dedicated to this space. In the event
that Microsoft vacates this space, Bellevue is a sought-after area for technology companies given its proximity to Seattle,
Redmond, and the east Puget Sound region. The single tenant rolling prior to loan maturity gives the loan an elevated level
February 2020 23Presale Report | BANK 2020-BNK26 BRAVERN OFFICE COMMONS – BELLEVUE, WASHINGTON of refinance risk; however, the transaction has a low issuance LTV of 37.7% on the A note. Higher-leveraged loans tend to exhibit higher default frequencies historically. In addition, the area is popular with institutional investors looking for long- term credit-rated technology tenants because of their low risk and high cash flow stability. DOWNSIDE RISKS – The property exhibits risk from a single tenant with a lease expiring prior to the loan maturity date. This elevates the risk of maturity default. In addition, loans secured by single-tenant properties have been found to have higher loss severities in the event of a default. STABILIZING FACTORS – The property is Microsoft’s single largest lease commitment in the Puget Sound region and Microsoft has invested over $181 million ($241 psf ) of its own capital into the property, which is a significant commitment to the property and may signal its desire for long-term tenancy. As of loan closing, the borrower contributed $301.9 million of equity in the transaction (50.5% of the total cost). Additionally, the loan has low leverage, as evidenced by a relatively low LTV of 37.7% and loan- to-dark value of 52.3% based on the appraised value of $605.0 million and dark value of $436.3 million, respectively. February 2020 24
Presale Report | BANK 2020-BNK26
560 Mission Street
San Francisco, California
Loan Snapshot
Seller
BANA
Ownership Interest
Fee Simple
Trust Balance ($ Millions)
70.0
Loan PSF/Unit ($)
449
Percentage of the Pool
5.8
Loan Maturity/ARD
December 2029
Amortization CO LLATE RA L SU MMA RY
Interest Only
DBRS Morningstar Property Type Office Year Built/Renovated 2002
DBRS Morningstar DSCR (x)
City, State San Francisco, CA Physical Occupancy (%) 98.4
5.23
DBRS Morningstar LTV (%) Units/SF 668,149 Physical Occupancy Date October 2019
35.6
DBRS Morningstar Balloon The loan is secured by the borrower’s fee simple interest in 560 Mission, a Class A
LTV (%)
668,149 sf office building with ground-floor retail located in the Financial District of
35.6
San Francisco. Loan proceeds of $300 million were used to return $295.5 million in
DBRS Morningstar
Property Type cash equity to the sponsor, cover $2.4 million in closing costs, and fund an upfront TI/
Office LC Reserve of $2.2 million. The trust holds a $70.0 million pari passu piece of the larger
DBRS Moringstar whole loan. The ten-year loan term is structured as IO throughout.
Property Quality
Average
560 Mission was developed by CalPERs in 2002, the largest pension fund in the United
Debt Stack ($ Millions) States. The subject is LEED platinum certified and has won several awards for its
Trust Balance design, including BOMA Earth Awards in 2010 and 2011. Since 2014, the Sponsor has
70.0 invested a total of $2.5 million to improve the building’s infrastructure and common
Pari Passu
areas. Improvements include upgrades to the lobby, plaza furniture, restrooms and
230.0
shower areas, and garage and bike area. The sponsor has succeeded in leasing and
B-Note
re-leasing a combined 90,621 sf of leased space since 2014, securing major tenants such
0.0
as TIAA-CREF (21,661 sf ), Delta Dental (21,698 sf ), and EY (14,525 sf ).
Mezz
0.0
Total Debt The collateral benefits from a diversified rent roll with reliable income-producing
300.0 tenants. The subject property is 98.4% leased to 13 tenants that come from a wide array
of industries, such as technology, financial services, insurance, law, and consulting. Five
Loan Purpose
tenants either have investment-grade credit ratings or are ranked b in the AmLaw 100
Recapitalization
Equity Contribution/
and occupy approximately 69% of the property’s NRA. The rent roll currently has a
(Distribution) ($ Millions) weighted average of 7.0 years remaining for the lease term. The five largest tenants are
(295.5) J.P. Morgan (36.6% of NRA), United States’ largest bank as ranked by S&P; EY (18.4%
of NRA), one of the United States’ four major accounting firms; TIAA-CREF (18.4% of
NRA) a Fortune 100 financial services company; ARUP (7.5% of NRA), a provider of
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