DBRS Morningstar Confirms Ratings on CAMB Commercial Mortgage Trust 2019-LIFE

DBRS, Inc. (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)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since last review, with the collateral properties showing healthy cash flow growth from issuance. 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 had an initial two-year term with five one-year extension 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. 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 YE2021, the servicer reported the properties were 100% occupied; this figure is in line with historical performance as the portfolio has reported an average physical occupancy rate near 98% since 2008. The December 2021 rent roll shows the tenant roster in place at issuance remains largely intact with no significant near-term lease rollover.

As of YE2021, the loan reported a net cash flow (NCF) of $118.6 million, representing a 34.9% increase from the YE2020 cash flow of $87.8 million and an increase of 33.5% from the DBRS Morningstar NCF figure of $88.8 million derived when ratings were assigned to the transaction in July 2020. The YE2020 NCF figure was generally in line with the DBRS Morningstar NCF figure, with the significant increase in 2021 driven by a year-over-year increase of $15.8 million or 15.2% in base rent, as well as $10.5 million in parking income as no parking income was reported for 2020. According to the December 2021 rent roll, the average rental rate was $84.66 per square foot, compared with CB Richard Ellis’s Q1 2022 Boston Metro Lab figures, which reported an asking rental rate in the Cambridge submarket of $119.88 with less than 1% vacancy. The in-place cover for this floating rate loan is quite healthy, with the servicer reporting a YE2021 debt service coverage ratio (DSCR) of 4.65 times (x), up from the Issuer’s DSCR of 1.76x. There was an Interest Rate Cap Agreement in place at issuance that ran through December 15, 2020, which is required to be extended in conjunction with maturity date extension options being exercised.

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. As of the December 2021 rent roll, the largest tenant, Millennium Pharmaceuticals, Inc., occupies 31.7% of the net rentable area (NRA). Other large tenants include Agios Pharmaceuticals (15.8% of NRA), Blueprint Medicines Corporation (12.5% 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 with 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.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

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.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 4, 2022), 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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.

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

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