DBRS Morningstar Confirms All Ratings on COMM 2020-CX Mortgage Trust

DBRS Limited (DBRS Morningstar) confirmed the ratings on the Commercial Mortgage Pass-Through Certificates issued by COMM 2020-CX Mortgage Trust as follows:

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

All trends are Stable.

The rating confirmations reflect the transaction’s overall stable performance, which remains in line with DBRS Morningstar’s expectations. The certificates are backed by a $410.0 million portion of a $435.0 million whole loan that features a 10-year term through November 2030, followed by a four-year anticipated repayment date period. The loan is secured by the borrower’s fee-simple interest in a Class A life sciences office building in the Kendall Square submarket of Cambridge, Massachusetts. The building was delivered to market in 2019 as one of the first components of the larger master-planned Cambridge Crossing Development (CX), which is currently being constructed by the sponsor, DivcoWest. When fully built out, CX will consist of approximately 2.1 million square feet (sf) of science and technology space, 2.4 million sf of residential space, and 100,000 sf of retail space. In total, approximately 1.8 million sf of office and laboratory space is under construction, the bulk of which is leased.

According to the March 2022 rent roll, the occupancy rate remains unchanged from YE2021 at 97.8% but marginally higher than the YE2020 figure of 96.8%. The two largest tenants, Philips Electronics (Philips) and Cerevel Therapeutics, LLC (Cerevel), account for 94.7% of the net rentable area (NRA). Phillips has made the subject its North American headquarters, leasing 80.4% of the NRA through various leases, all of which expire in November 2034. Cerevel occupies 14.3% of the NRA on leases through February 2030. Ultimately, the building benefits from long-term, institutional-grade tenancy in place on long-term leases.

According to the annualized Q1 2022 financial reporting, the net cash flow (NCF) and debt service coverage ratio (DSCR) of $32.0 million and 2.73x, respectively, were relatively in line with the issuer’s underwritten NCF and DSCR figures of $32.7 million and 2.75x, and higher than the DBRS Morningstar NCF and DSCR figures at issuance of $30.0 million 2.52x. Cash flow has improved since YE2020 ($10.7 million) and YE2021 ($22.0 million) because of the expiration of rent abatements granted to Phillips, which began paying full rent in May 2021.

The borrower sponsor for the transaction is a joint venture between DivcoWest and the California State Teachers Retirement System (CalSTRS). DivcoWest is an experienced developer, owner, and operator of real estate throughout the United States, with significant expertise in Boston, having invested in and managed more than 22 commercial properties in the area, including offices in the Seaport, Financial District, and East Cambridge submarkets. CalSTRS is the country’s second-largest public pension fund, with an investment portfolio totalling $311.7 billion as of July 21, 2022.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929.

Class X is an interest-only (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 loan 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 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.

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

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