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 DBRS Morningstar’s ongoing expectations for the underlying portfolio, which has reported year-over-year 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 floating-rate loan pays interest only (IO) 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 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 YE2022, 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 2022 rent roll shows that the tenant roster in place at issuance remains relatively intact with no significant near-term lease rollover.

The portfolio benefits from a high concentration of institutional-quality tenants, with the overwhelming majority of the tenants being public companies and/or major research institutions. As of the December 2022 rent roll, the largest tenant was Takeda Pharmaceuticals U.S.A., Inc. with 31.73% of the net rentable area (NRA), while Takeda Vaccines, Inc. occupies 5.98% of the NRA. Other major tenants include Agios Pharmaceuticals, Inc. (15.34% of the NRA), Blueprint Medicines Corporation (12.55% of the NRA), and Brigham & Women’s Hospital Inc. (9.3% of the NRA). Most of the in-place tenants have invested a considerable amount of their own capital into their space build-outs, demonstrating their commitment to the property.

As of September 2022, the servicer reported annualized net cash flow (NCF) of $124.9 million, which represents an increase of 5.4% from the YE2021 NCF of $118.6 million, a 42.2% increase from the YE2020 cash flow of $87.8 million, and an increase of 40.6% from the DBRS Morningstar NCF figure of $88.8 million derived when ratings were assigned in July 2020. The improvement is primarily driven by increases to base rent and parking income. According to the December 2022 rent roll, the average rental rate was $92.29 per square foot, up from $84.66 as of December 2021, and below the market when compared with CB Richard Ellis’s Q4 2022 Boston Metro Lab figures, which reported an asking rental rate in the Cambridge submarket of $115.96 with a 2.1% vacancy rate and a sublease rate of 3.9%.

Improvements in cash flow are somewhat tempered by interest rate volatility combined with the loan’s near-term maturity. The loan is currently scheduled to mature in December 2023, with two one-year extension options remaining. 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. Given the current interest rate environment, DBRS Morningstar has inquired about whether the borrower purchased a replacement interest rate cap or negotiated alternative hedging.

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 (May 17, 2022).

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.

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

The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American Single-Asset/Single-Borrower Ratings Methodology (February 23, 2023;
https://www.dbrsmorningstar.com/research/410191/north-american-single-assetsingle-borrower-ratings-methodology)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008/legal-criteria-for-us-structured-finance)

Rating North American CMBS Interest-Only Certificates (December 19, 2022;
https://www.dbrsmorningstar.com/research/407577/rating-north-american-cmbs-interest-only-certificates)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022;
https://www.dbrsmorningstar.com/research/402646/dbrs-morningstar-north-american-commercial-real-estate-property-analysis-criteria)

North American Commercial Mortgage Servicer Rankings (September 8, 2022;
https://www.dbrsmorningstar.com/research/402499/north-american-commercial-mortgage-servicer-rankings)

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022;
https://www.dbrsmorningstar.com/research/402153/interest-rate-stresses-for-us-structured-finance-transactions)

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