DBRS Morningstar Confirms Eight Classes of CAMB Commercial Mortgage Trust 2019-LIFE, Discontinues One Class

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2019-LIFE issued by CAMB Commercial Mortgage Trust 2019-LIFE as follows:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (sf)
-- Class X-NCP at A (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (low) (sf)
-- Class G at B (low) (sf)

DBRS Morningstar discontinued the rating on Class X-CP as the bond has exceeded its stated maturity date of June 2020 and is no longer receiving interest payments. 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 $1.17 billion trust mortgage loan is secured by the sponsor’s leasehold interest in eight life sciences office and laboratory buildings, totaling approximately 1.3 million square feet in Cambridge, Massachusetts. The senior mortgage loan has an initial two-year term with five one-year extensions options, resulting in a fully extended maturity date of December 9, 2025. The loan pays floating-rate interest of Libor plus 2.0444% on an interest-only (IO) basis throughout the term. Additionally, the capital stack includes mezzanine debt of $130.0 million subordinate to and held outside of the trust. The mezzanine note pays an interest rate of Libor plus 4.1% on a full-term IO basis and is secured by the interest in the equity of the borrowing entities. Loan proceeds, along with $448.7 million of borrower cash equity, facilitated the acquisition of the portfolio properties by the sponsorship group, Brookfield Asset Management.

All eight properties are on the campus of the Massachusetts Institute of Technology (MIT) within the Cambridge submarket, which has limited available land for development and high barriers to entry. Cambridge has the largest concentration of life sciences researchers in the U.S. and strong historical occupancy driven by the high demand for specialized laboratory space by institutional tenants. As of YE2020, the properties were 100% occupied. The properties have reported an average physical occupancy of 97.8% since 2008, which indicates a long-term, “sticky” tenant roster. Only 34.2% of the DBRS Morningstar base rent expires during the fully extended loan term, with no more than 12.8% expiring in any single year. As of YE2020, the loan reported a net cash flow of $95.2 million, representing a 13.5% increase from the YE2019 cash flow of $83.9 million.

The portfolio benefits from a high concentration of institutional-quality tenants, with approximately 90.7% of the DBRS Morningstar base rent derived from public companies or major research institutions. Furthermore, 44.8% of the DBRS Morningstar base rent is tied to investment-grade tenants. The largest tenant, Millennium Pharmaceuticals, Inc., occupies 31.7% of the net rentable area (NRA) and plans to spend $11 million of its own funds to improve its space at the 40 Landsdowne Street property as part of its early renewal for its leases. Other large tenants include Blueprint Medicines Corporation (13.6% of NRA), Agios Pharmaceuticals (14.3% of NRA), and Brigham and Women’s Hospital (9.3% of NRA). Other investment-grade tenants include Takeda Vaccines, Inc. (6.0% of NRA) and Sanofi Pasteur Biologics Co. (4.1% of NRA). Most of the in-place tenants have invested a considerable amount of their own capital into their space build-outs.

Each property operates subject to a ground lease from MIT with maturity dates ranging from 2061 to 2076 and base rent and percentage rent components. The base rent for each of the properties is fixed for the entire term of the ground lease, while the percentage rent components are calculated based on the product of 15% and the gross revenue from the given property over a specified threshold. The threshold for each is subject to increases or decreases based on changes (on a dollar-for-dollar basis) in the deemed debt service due under the loan secured by the applicable property. The deemed debt service is calculated based on a maximum 75.0% loan-to-value ratio (LTV) (i.e., no debt service exceeding 75.0% LTV is to be considered) and an assumed fixed debt service equivalent stipulated in accordance with the lease documents. Additionally, the ground lessor has a right of first refusal with respect to a sale of the properties by the borrower and/or future proposed mortgage or mezzanine refinancing.

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.

Class X-NCP is an 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 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 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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