DBRS Morningstar Confirms Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust 2019-OSB

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-OSB issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2019-OSB:

-- Class A at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (sf)
-- Class X-B at AA (low) (sf)
-- Class C at A (high) (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (sf)
-- Class HRR at BBB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. The collateral for the underlying loan is secured by the borrower’s leasehold interest in Osborn Triangle, a collection of three Class A office and laboratory buildings totalling 676,947 square feet (sf) and a 650-space parking garage. The three buildings, 610 Main Street North (278,738 sf), One Portland Street (229,330 sf), and 700 Main Street (168,879 sf) are in the East Cambridge/Kendall Square submarket of Boston, less than 500 feet from Massachusetts Institute of Technology’s (MIT) main campus.

Sponsorship for the loan is a joint venture between Harrison Street Real Estate Capital LLC (Harrison; 94.5%); The Bulfinch Companies, Inc. (Bulfinch; 0.5%); and MIT (5.0%). Harrison is a leading real estate investment management firm headquartered in Chicago with a portfolio of approximately $32.0 billion in assets under management as of December 21, 2020. Bulfinch focuses on the acquisition, management, and leasing of commercial properties within the Boston area, offering specialized local expertise to the sponsorship team. As the seller of the collateral’s leasehold interest via this transaction, MIT’s continued interest in the property is indicative of its commitment to the innovation potential of the collateral’s tenants focused on research and development (R&D).

Whole loan proceeds of $575.0 million along with $581.9 million of cash equity were primarily used to finance the sponsors’ $1.15 billion acquisition of the collateral from the Massachusetts Institute of Technology Investment Management Company, which, along with its 5.0% interest in the collateral, retains ownership of the underlying ground. The trust loan represents $395.0 million of the whole loan amount, with five companion notes held across five other commercial mortgage-backed securities transactions, two of which are rated by DBRS Morningstar: BMARK 2019-B12 and BMARK 2019-B15. The 10-year loan is full-term interest only (IO) and represents a relatively low loan-to-cost ratio of 49.7%.

The year-end 2020 servicer reporting shows an occupancy rate of 100% for the collateral. The properties benefit from strong tenancy with 88.5% of total net rentable area (NRA), representing 91.5% of total DBRS Morningstar base rent, leased to investment-grade-rated tenants Pfizer Inc. (Pfizer; 73.8% of the NRA) and Novartis International AG (Novartis; 14.7% of the NRA). Pfizer leases 100% of the One Portland Street building through January 2024 and 100% of the 610 Main North Street building through December 2031. Although Pfizer subleases 130,844 sf (48.5% of the building) at the 610 North Main Street building, the tenant has reportedly continued to invest significant capital into its space. Novartis leases 99,883 sf (59.1% of the building) of the 700 Main Street building on a lease through July 2024. Each tenant has two five-year renewal options available. The loan is structured with a cash sweep to occur if, among other requirements, either Pfizer or Novartis provides notice of nonrenewal or vacates or abandons its respective premises for 90 consecutive days.

Both Pfizer and Novartis use their respective spaces at the property to house critical R&D departments focused on using cutting-edge scientific research to pursue potential medical breakthroughs and new drug discoveries. In addition to providing proximity to MIT’s main campus and a highly educated labour force, the collateral offers both Pfizer and Novartis proximity to LabCentral, which leases 32,988 sf of space at the 700 Main Street building and subleases additional space from Pfizer at 610 Main Street North. LabCentral is an incubator space geared toward high-potential life sciences and biotechnology start-ups, many of which spill over from the neighbouring MIT campus.

DBRS Morningstar’s net cash flow derived at issuance was $46.3 million. As of year-end 2020, the servicer reported an net cash flow of $46.7 million, in line with expectations.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A and X-B are IO certificates that reference 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 ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 26, 2021), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that 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

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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