DBRS Morningstar Downgrades Four Classes and Discontinues Two Classes of JPMBB Commercial Mortgage Securities Trust 2015-C29

DBRS Limited (DBRS Morningstar) downgraded its ratings on four classes of the Commercial Mortgage Pass-Through Certificates, Series 2015-C29 issued by JPMBB Commercial Mortgage Securities Trust 2015-C29 as follows:

-- Class X-D to B (low) (sf) from BBB (sf)
-- Class D to CCC (sf) from BBB (low) (sf)
-- Class E to C (sf) from BB (low) (sf)
-- Class F to C (sf) from B (sf)

In addition, DBRS Morningstar confirmed its ratings on the following classes:

-- Class A-3A1 at AAA (sf)
-- Class A-3A2 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class X-C at A (sf)
-- Class C at A (low) (sf)
-- Class EC at A (low) (sf)

DBRS Morningstar also discontinued its ratings on Classes X-E and X-F as the reference obligations, Classes E and F, were downgraded to C (sf).

All trends are Stable with the exception of Classes X-C, C, EC, and X-D, which carry Negative trends, and Classes D, E, and F, which do not carry trends. The Negative trends and rating downgrades reflect the continued distressed performance of some of the underlying collateral and the possibility for significant losses upon resolution for One City Centre (Prospectus ID#2, 8.6% of the pool). Three loans, representing 16.4% of the pool, have transferred to special servicing since December 2020. In total, the transaction contains six loans, representing 24.7% of the pool, that are currently specially serviced and 12 loans, representing 26.3% of the pool, that are being monitored on the servicer’s watchlist. As of the May 2021 remittance, 54 of the original 63 loans remain in the pool, representing a collateral reduction of 29.5% since issuance via loan payoffs and amortization; there have been no losses to date.

The main driver for the rating actions is the One City Centre loan, which has seen a significant drop in occupancy following the departure of its largest tenant and is pari passu with a piece held in the JPMBB Commercial Mortgage Securities Trust 2015-C30 transaction, which is also rated by DBRS Morningstar. The loan, secured by a 602,122-square-foot Class A office building in the Houston central business district (CBD), has been monitored on the servicer’s watchlist since August 2018 after its largest tenant, Waste Management (40.5% of net rentable area), gave notice that it would vacate at lease expiry in December 2020. The loan ultimately transferred to special servicing in April 2021 for imminent monetary default, and the borrower has stated that it will no longer fund shortfalls on the loan. Occupancy has fallen to 28% and there are no prospective tenants or leasing updates in regards to the vacant space, although the loan reports $9.1 million across all reserves. The subject had struggled with maintaining market occupancy levels prior to 2020, as it has been only 68% occupied since 2018. The Houston CBD submarket remains soft, as Reis reports an average vacancy rate of 21.9% as of Q1 2021. DBRS Morningstar has identified six office loans within the Houston metropolitan statistical area that have reported value changes since 2020. Value declines for these properties range from 38% to 83% (average of 68%), with values per square foot (psf) from $14 to $141 (average of $67 psf). DBRS Morningstar analyzed this loan with a liquidation scenario, which resulted in a loss severity in excess of 65%.

The Alta Woodlake Square loan (Prospectus ID#6, 4.4% of the pool), secured by a multifamily property also in Houston, has been monitored on the servicer’s watchlist since September 2018 and transferred to special servicing in December 2020 as a result of a mezzanine loan default. The property was 88% occupied as of YE2020 and reported a debt service coverage ratio (DSCR) of 0.83 times (x), down from 1.19x as of YE2019. The loan’s workout strategy entails an assumption of the senior loan via an equity enforcement action taken by the mezzanine lender as well as a loan modification, all of which is in the closing process. DBRS Morningstar analyzed this loan with an elevated probability of default.

Marriott – Pittsburgh (Prospectus ID#12, 3.3% of the pool), secured by a 402-key, full-service hotel in downtown Pittsburgh, transferred to special servicing in March 2021 because of payment default. The borrower had previously requested Coronavirus Disease (COVID-19)–related relief and the special servicer granted its request, allowing the borrower to use reserves to pay debt service through August 2020. Debt service payments were late again from October 2020 through December 2020 and, as of May 2021, the loan remains more than 120 days delinquent. A loan modification is currently being negotiated and could include an interest-only (IO) payment extension with upfront principal reduction. The YE2020 occupancy and DSCR were reported at 17% and -0.77x, respectively, compared with the YE2019 figures of 67% and 1.61x. DBRS Morningstar analyzed this loan with an elevated probability of default.

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/373262.

Classes X-A, X-B, X-C, and X-D 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.

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. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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 info@dbrsmorningstar.com.

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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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