DBRS Morningstar Confirms All Classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-1MEM

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of Commercial Mortgage Pass-Through Certificates issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-1MEM:

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

All trends are Stable. The rating confirmations and Stable trends reflect the static performance of this transaction since last year’s issuance and the collateral that benefits from its location and stable, long-term, investment-grade tenancy.

The collateral consists of the borrower’s fee-simple interest in One Memorial Drive, a 409,000-square foot (sf), Class A office building and five-story parking garage in Cambridge, Massachusetts. The property is in close proximity to the Massachusetts Institute of Technology (MIT) with unobstructed views of the Charles River and Downtown Boston and is less than a quarter mile from the Red Line Kendall/MIT transit stop. In 2018, the property received capital improvements totalling $49.0 million in 2018, which included upgrading and modernizing the interior and exterior of the property as well as $27.4 million in tenant improvements. The loan sponsors, Metropolitan Life Insurance Company, a global insurance provider, and Norges Bank Investment Management, a sovereign wealth fund, have partnered on several investments in Class A office properties across the United States.

Whole loan proceeds of $414.0 million include six senior A notes totalling $299.3 million and one junior B note totalling $114.7 million. The subject transaction totals $255.8 million and consists of one senior note with an aggregate principal balance of $141.5 million and the junior note with an aggregate principal balance of $114.7 million. Loan proceeds were used to acquire the property and pay closing costs. The loan is interest-only (IO) throughout its 10-year loan term with a scheduled loan maturity in October 2031.

The property benefits from its location and stable, long-term investment-grade tenancy. The two largest tenants are InterSystems Corporation (InterSystems; 58.5% of net rentable area (NRA)) and Microsoft Corporation (Microsoft; 38.3% of NRA). InterSystems has been at the property since October 1987, has renewed several times, and has expanded to occupy 10 times its original space. InterSystems has a scheduled lease expiration in March 2028, with four five-year extension options. Microsoft’s lease commenced in June 2007 and has a scheduled lease expiration in June 2028, with one 10-year extension option. Microsoft is rated AAA by multiple rating agencies. While both tenants have lease expirations before the scheduled loan maturity, DBRS Morningstar notes that both have been at the property for extended periods and are likely more apt to renew than to relocate.

The subject property is in the Kendall Square submarket, the global hub of research and development for the life sciences industry, with 18 of the 20 largest pharmaceutical companies and 11 of the largest 15 biotechnology companies in the world having a presence in the submarket. This concentration of life sciences companies has led to a significant concentration of technology firms as well, with Apple and Google as well as Microsoft having a presence in the submarket. According to Reis, similar properties within a one-mile radius reported average rental and vacancy rates of $66 per sf and 6.0%, respectively. The subject’s average rents are in line with these figures while the in-place vacancy rate of 2.5% is outperforming properties within a one-mile radius.

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 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 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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