KBRA Downgrades Six Ratings and Affirms All Other Ratings for JPMCC 2020-NNN

KBRA downgrades six ratings and affirms all other outstanding ratings for JPMCC 2020-NNN, a CMBS single-borrower transaction. We also remove the ratings of classes B-FX, C-FX, D-FX, E-FX, F-FX, and G-FX from Watch Downgrade where they were placed in May 2024. The rating actions follow a surveillance review of the transaction and are driven by a meaningful increase in KLTV, concentrated exposure to the weak office sector, and impending loan maturity in January 2025. Conditions for refinancing office loans are unfavorable and are made more difficult for the sponsor by the lease expirations in 2027 and 2028 of tenants that generate 71.8% of base rent.

Since closing, 25 collateral properties have been released, decreasing the number to 41 from 66, and reducing the outstanding trust balance to $514.7 million and the whole loan balance to $664.7 million as of August 2024. The decrease in the trust balance was due to a paydown of the floating-rate loan component.

At securitization, the transaction was secured by a $775.0 million portion of a $925.0 million non-recourse, first-lien mortgage loan consisting of fixed-rate ($647.6 million) and floating-rate ($277.5 million) components. The fixed-rate loan was split into a senior loan component totaling $296.3 million and a subordinate component totaling $351.3 million. The collateral for this transaction includes $146.3 million of the senior fixed-rate component, the entire subordinate fixed-rate component, and the entire floating-rate component, which has been paid down significantly since closing. The remaining $150.0 million portion of the senior fixed-rate loan is not collateral for this trust.

The loan is secured by the borrowers’ fee simple (98.7% of allocated loan amount) and leasehold interests (1.3%) in 41 single-tenant properties (based on the April 2024 rent roll). The portfolio has nearly 3.9 million sf of office (90.7% of ALA) and retail (9.3%) space in 13 states, with concentrations in Illinois (23 properties, 34.1% of collateral sf), New Jersey (two, 12.9%), and Virginia (two, 11.6%).

KBRA analyzed the cash flow for the properties utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $36.6 million and a KBRA value of $385.7 million ($100 per sf). The resulting in-trust KLTV is 172.3%, up from 151.2% at last review and 125.7% at securitization. KBRA maintains the loan’s K-LOC status and its KPO of Underperform.

Details concerning classes with rating changes are as follows:

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