KBRA Downgrades Seven Ratings and Affirms One Rating for BFLD 2020-EYP

KBRA downgrades the ratings of seven classes and affirms the rating of one class of BFLD 2020-EYP, a CMBS SASB transaction. KBRA also simultaneously removes all ratings from Watch Downgrade (DN) where they were placed in December 2024, after interest shortfalls affected all rated certificates below class A. The rating actions follow a surveillance review of the transaction and are driven by a deterioration in collateral performance and property value caused by declines in property occupancy and net cash flow. KBRA also considered the new appraised value ($150.0 million), the loan’s status with the special servicer, the outstanding servicer advances, and the appraisal reduction amount of $170.0 million. The weak office fundamentals in the Downtown Los Angeles submarket and the poor outlook for a rebound for office demand in the near term were other factors we considered. Further, interest shortfalls have the potential to affect class A as the special servicer works to resolve the loan.

The transaction collateral is a $275.0 million ($283 per sf) non-recourse, first-lien mortgage loan. It was structured with an initial two-year term and three one-year extension options. The floating-rate loan requires monthly interest-only payments based on one-month term SOFR plus a spread of 2.857%. The loan sponsor, Brookfield DTLA Holdings LLC (Brookfield DTLA), an affiliate of Brookfield Property Partners, L.P. (Brookfield), notified the servicer in early April 2023 that it would cease paying debt service on the loan. The loan transferred to special servicing that same month and a receiver was appointed in May. The borrower also did not repay or extend the loan when it matured in October 2023. It is 90+ days delinquent and reported as matured non-performing with total outstanding servicer advances of $21.3 million as of February 2025. The special servicer reports that the current workout strategy is a discounted pay off. The most recent as-is appraised value (August 2024) was $150.0 million ($154 per sf), resulting in an appraisal LTV of 183.3%. The prior appraised value was $210.7 million (December 2023).

The loan is secured by the borrower’s fee simple interest in Ernst & Young Plaza, a 41-story, 953,878-sf Class-A, LEED Platinum-certified office tower in downtown Los Angeles. According to the December 2024 rent roll, the building was 68.6% leased, down from 71.5% at last review and 78.4% at issuance. Leases that generate 31.2% of total base rent will expire this year (25.4%) and next (5.8%).

KBRA analyzed the cash flow for the property utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $12.2 million and a KBRA value of $122.3 million ($126 per sf), which considers an as-is distressed liquidation of the property. The resulting in-trust KLTV is 224.9%, compared to 159.8% at last review and 110.5% at securitization. Based on KBRA’s value, the trust is likely to incur principal losses upon final disposition of the collateral asset. A broker began marketing the property for sale in December 2024.

KBRA maintains the loan’s K-LOC designation and KPO of Underperform.

Details regarding the classes with rating changes are as follows:

To access ratings and relevant documents, click here.

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