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

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of Commercial Mortgage Pass-Through Certificates issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2019-OSB as follows:

-- 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 performance of the transaction since last review. The collateral continues to benefit from its 100% occupancy rate, healthy submarket dynamics, and strong tenancy, a majority of which comprises investment-grade tenants on long-term leases that have invested heavily in their respective spaces.

The underlying loan is a pari passu portion of a first mortgage loan secured by the borrower’s leasehold interest in Osborn Triangle, a collection of three Class-A office and laboratory buildings totaling 676,947 square feet (sf) and a 650-space parking garage. The three buildings, known as 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, all clustered directly across from the 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 $55.0 billion in assets under management as of December 31, 2022. Bulfinch focuses on the acquisition, management, and leasing of commercial properties within the Boston area, offering specialized local expertise to the sponsorship team.

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 MIT, which, along with its 5.0% interest in the collateral, retains ownership of the underlying ground. The subject transaction holds $395.0 million of the whole loan amount, with five companion notes held across five other commercial mortgage-backed securities multi-borrower transactions, two of which are rated by DBRS Morningstar (Benchmark 2019-B12 Commercial Mortgage Trust and Benchmark 2019-B15 Mortgage Trust). The 10-year loan is full-term interest-only (IO) through its maturity in July 2029.

Per the September 2022 rent roll, the property is 100% occupied by seven tenants. The 610 Main Street building is fully leased through December 2031 to investment-grade tenant Pfizer (73.8% of total net rentable area (NRA)), which subleases 48.5% of its space to four tenants, including CRISPR Therapeutics AG, Casebia Therapeutics LLP, KSQ Therapeutics, Inc., and LabCentral. The building also contains 5,683 sf of ground-floor retail space, which is occupied by three restaurants and a salon. In addition, Pfizer also fully occupies the One Portland St. building, with a lease renewal signed last year that extended the lease by 10 years to January 2034.

The 700 Main St. building is occupied by two tenants—LabCentral (10.2% of total NRA, lease expiring March 2027) and Novartis (14.8% of total NRA, lease expiring July 2024). The loan is structured with a cash flow sweep that will be triggered if Novartis does not renew within 12 months of the lease expiry date; however, DBRS Morningstar notes Novartis uses its space to house critical research and development departments, suggesting that the likelihood of a renewal is high.

According to the September 2022 rent roll, the average rental rate at the property (excluding the retail portion) was $67.80 per square foot (psf). According to Reis, as of February 2023, research and development/flex space within a one-mile radius of the property reported average rental and vacancy rates of $43.80 psf and 1.0%, respectively. According to the September 2022 financials, annualized net cash flows (NCF) increased by 7.2% to $50.6 million (reflecting a debt service coverage ratio (DSCR) of 2.29 times (x)), up from the YE2021 figure of $47.2 million (reflecting a DSCR of 2.13x). Reported cash flows over the last few years have compared favorably with the DBRS Morningstar NCF of $46.3 million. The increase in cash flows from YE2021 was primarily driven by an increase in expense reimbursements and a decrease in repairs and maintenance expenses. Given the synergistic relationship among the collateral’s biotechnology tenants, the loan’s strong sponsorship, a large portion of investment-grade tenants, and the collateral’s prime location, DBRS Morningstar expects performance will remain in line with issuance expectations.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental, Social, and 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/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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.

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

The principal methodology is North American CMBS Surveillance Methodology (October 3, 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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