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

DBRS Limited (DBRS Morningstar) confirmed its 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 overall stable performance of the collateral, which remains in line with DBRS Morningstar’s expectations, as illustrated by the strong occupancy rate and net cash flow (NCF) trends.

The loan is secured by the borrower’s fee-simple interest in 222 Jacobs Street, 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 completed, 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. According to a November 2022 article published by Commercial Property Executive, approximately 1.9 million sf of office and laboratory space was completed.

The $435.0 million whole loan consists of $295.0 million of senior debt and $140.0 million of subordinate debt, of which $270.0 million of the senior debt and the entirety of the subordinate debt is held in the trust. The loan proceeds were used to refinance an existing $320.6 million loan, return $80.0 million of equity to the sponsor, fund upfront reserves of $31.6 million, and pay closing costs. The loan features a 10-year term through November 2030, followed by a four-year anticipated repayment date period.

According to the March 2023 rent roll, the property was 97.1% occupied, in line with historically reported figures since issuance. The two largest tenants, Philips Electronics (Philips) and Cerevel Therapeutics, LLC (Cerevel), account for 94.7% of the net rentable area (NRA). Philips, an investment-grade tenant, has made the subject its North American headquarters, leasing 80.4% of the NRA through various leases that expire in November 2034. Cerevel occupies 14.3% of the NRA with a lease expiration in February 2030. There is no near-term rollover risk as the earliest lease expiration on the tenant roster is in November 2029. According to Q1 2023 reporting from CB Richard Ellis, the Cambridge-East submarket recorded an office vacancy rate of 11.1%, higher than historical averages; however, the life sciences market remains resilient, with a laboratory/research and development vacancy rate of only 1.9%. As of March 2023, the average base rental rate at the property was $71.73 per square foot (psf), and the average gross rental rate was $99.10 psf. In comparison, office properties in the Cambridge-East submarket reported an average gross asking rent of $87.47 psf.

According to the YE2022 financial reporting, the NCF and debt service coverage ratio (DSCR) of $32.9 million and 2.76 times (x), respectively, were above the DBRS Morningstar NCF and DSCR figures of $30.0 million and 2.52x at issuance. In addition, NCF has improved significantly when compared with the YE2021 and YE2020 figures of $21.8 million and $10.6 million; however, DBRS Morningstar expected these improvements as rent abatements granted to Philips burned off and full rent commenced in May 2021.

The sponsor 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. CalSTRS is the country’s second-largest public pension fund, with an investment portfolio totalling more than $300 billion.

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/416784 (July 4, 2023).

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 credit ratings are subject to surveillance, which could result in credit 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 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 credit rating was initiated at the request of the rated entity.

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

This is a solicited credit rating.

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

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit 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)

Rating North American CMBS Interest-Only Certificates (December 19, 2022;
https://www.dbrsmorningstar.com/research/407577)

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022;
https://www.dbrsmorningstar.com/research/402646)

North American Commercial Mortgage Servicer Rankings (September 8, 2022;
https://www.dbrsmorningstar.com/research/402499)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023;
https://www.dbrsmorningstar.com/research/415687)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008)

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