DBRS Morningstar Confirms Ratings on All Classes of CAMB 2021-CX2

DBRS Limited (DBRS Morningstar) confirmed its ratings on all classes of the Commercial Mortgage Pass-Through Certificates issued by CAMB 2021-CX2 as follows:

-- 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 HRR at BB (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations. Although there has been relatively limited seasoning with minimal updates to the financial reporting since the transaction closed in November 2021, the underlying property remains fully occupied, with the servicer-reported financials for YE2022 remaining consistent with DBRS Morningstar’s expectations at issuance.

The loan is secured by the borrower’s fee-simple interest in 350 and 450 Water Street, two newly constructed, Class A, LEED Gold certified, life-sciences office buildings totaling 916,233 square feet (sf) in Cambridge, Massachusetts. The subject properties are the newest component of the larger master-planned Cambridge Crossing Development (CX), which the sponsor, DivcoWest, is developing. Upon completion of the master plan, CX will include 17 buildings consisting of more than 2.1 million sf of science and technology space, approximately 2.4 million sf of residential space, and 100,000 sf of retail space. At issuance, the properties were still under construction but were delivered to market in Q2 2022. According to a November 2022 article published by Commercial Property Executive, approximately 1.9 million sf of office and laboratory space within the larger CX development was completed.

The $1.2 billion whole loan consists of $814.0 million of senior debt and $411.0 million of junior debt. The entirety of the junior debt and $285.0 million of the senior debt are secured in the trust. The remaining $529.0 million of senior debt is secured in several commercial mortgage-backed securities transactions, including BANK 2022-BNK39, which is rated by DBRS Morningstar. The fixed rate interest-only (IO) loan features a 10-year term with an anticipated repayment date in November 2031 and final loan maturity date in November 2036. The transaction benefits from strong, experienced institutional sponsorship in the form of a joint venture partnership between DivcoWest, the California State Teachers Retirement System, and Teacher Retirement System of Texas.

The sole tenant at the collateral buildings is Aventis, Inc. (Aventis), a subsidiary of the French healthcare conglomerate, Sanofi, which is rated investment-grade by Moody’s and S&P Global Ratings. The subject properties serve as Aventis’ North American research headquarters pursuant to two 15-year triple-net leases that are co-terminous with the loan’s fully extended maturity date in November 2036. Aventis’ leases, which are guaranteed by Sanofi, had a blended starting rental rate of $71.50 per square foot with 2.5% annual escalations and two 10-year renewal options at fair market value. Sanofi guarantees Aventis’ leases. Aventis’ laboratory space is at 350 Water Street, which can accommodate a mix of 60% laboratory and 40% office space, typical of other laboratory buildings in the market. The tenant’s office space is located at 450 Water Street. Per 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%.

According to the YE2022 financial reporting, the property remains 100.0% occupied by Sanofi and generated net cash flow (NCF) of $71.4 million, resulting in a debt service coverage ratio of 2.06 times. At issuance, DBRS Morningstar derived a value of $1.2 billion based on a capitalization rate of 6.5% and DBRS Morningstar NCF of $77.6 million, resulting in a DBRS Morningstar loan-to-value ratio (LTV) of 102.6% compared with the LTV of 62.7% based on the appraised value at issuance of $2.0 billon. In its net cash flow analysis at issuance, DBRS Morningstar straight lined Aventis’ rent steps over the loan term given its long-term credit tenant status. DBRS Morningstar expects that NCF will trend upward as rent steps are realized.

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 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)

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/417279.

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