DBRS Morningstar Downgrades Ratings on Three Classes and Withdraws One Rating of JP Morgan Chase Commercial Mortgage Securities Trust 2011-C5

DBRS, Inc. (DBRS Morningstar) downgraded its ratings on three classes of Commercial Mortgage Pass-Through Certificates, Series 2011-C5 issued by JP Morgan Chase Commercial Mortgage Securities Trust 2011-C5 as follows:

-- Class E to CCC (sf) from B (sf)
-- Class F to C (sf) from B (low) (sf)
-- Class G to C (sf) from CCC (sf)

In addition, DBRS Morningstar confirmed the rating on the remaining classes as follows:

-- Class D at BB (sf)

DBRS Morningstar withdrew its rating for Class X-B as the interest-only (IO) certificate references classes that are projected to realize principal losses. The ratings for Classes B and C were also discontinued as those classes were repaid as of the August 2021 remittance report.

The trend for Class D remains Negative, while Classes E, F, and G have ratings that do not carry trends. The Negative trend for Class D reflects the increasing projected losses related to the Asheville Mall loan (Prospectus ID#3 – 69.5% of the trust balance).

The downgrades consider the increased risk of principal losses across various classes as the remaining loans in the pool are in special servicing. At issuance, the trust comprised 44 loans secured by 209 commercial properties with a trust balance of $1.03 billion. As of the August 2021 remittance report, two loans secured by four properties remain in the trust with a trust balance of $86.6 million, representing a 91.6% collateral reduction since issuance. The Asheville Mall loan is secured by a regional mall in Asheville, North Carolina that is sponsored by CBL & Associates Properties, Inc. (CBL or the Sponsor). The Sponsor filed for Chapter 11 bankruptcy in November 2020 following the impacts of the Coronavirus Disease (COVID-19) pandemic and the special servicer plans to liquidate the loan from the trust. In addition, the second remaining loan, LaSalle Select Portfolio (Prospectus ID#9 - 30.5% of the trust balance), is secured by three suburban office properties in the Atlanta area and remains real estate owned (REO) by the trust.

The Asheville Mall loan transferred to special servicing in June 2020 at CBL’s request, as CBL wanted to negotiate a potential loan restructure. Loan payments were last made in February 2021 as of the August 2021 reporting date. Most recently, the servicer has confirmed that a receiver has been installed in Jones Lang LaSalle, and the borrower has withdrawn the request for a loan modification and is instead cooperating with a sale of the property out of receivership. CBL’s reorganization plan was approved by the U.S. Bankruptcy Court in August 2021 and is scheduled to go into effect on November 1, 2020.

The collateral was reappraised in July 2020 for a value of $42.0 million, down 65.9% from the $123.0 million appraised value at issuance. This figure implies a 151.0% loan-to-value ratio based on the trust’s exposure of $63.4 million as of the August 2021 remittance. The mall is anchored by a noncollateral Belk, Dillard’s, and JCPenney. A former Sears anchor was closed in 2018 and that space remains vacant. As of the July 2021 rent roll, the mall was 94.9% occupied, slightly down from the March 2020 occupancy rate of 96.3%. The largest collateral tenants include Barnes & Noble (11.1% of collateral net rentable area (NRA); lease expiration of January 2024), H&M (6.8% of collateral NRA; lease expiration of January 2025), and Old Navy (5.4% of collateral NRA; lease expiration of January 2022). Upcoming lease expiration consists of 12 tenants (6.8% of NRA) with lease expirations in 2021 and an additional 17 tenants (20.3% of NRA) with lease expirations in 2022. An accounts receivable aging report dated July 2021 showed $1.1 million of rent and common area maintenance reimbursements that were 120-plus days past due. With this review, DBRS Morningstar applied a haircut to the July 2020 value for a liquidation scenario that resulted in a loss severity in excess of 65.0%.

The LaSalle Select Portfolio loan is secured by 5707 Peachtree Parkway (35.2% of NRA), 3585 Engineering Drive (34.2% of NRA), and 6625 The Corners Parkway (30.6% of NRA). The loan transferred to special servicing in December 2017 for imminent default and has been REO since August 2018. The servicer has advised that the collateral is under contract for sale, with the due-diligence phase ongoing as of the date of this press release. The sales price cannot be disclosed, but DBRS Morningstar notes the portfolio was appraised in December 2020 at a value of $46.2 million.

A July 2021 rent roll showed an occupancy rate of 49.0% with an average gross rent of $19.56 per square foot (psf). The largest tenants are Carmax Auto Superstores (25.1% of NRA; lease expiration of February 2030), Fleetcor Technologies Operating Company (8.4% of NRA; lease expiration of August 2025), and Market Force Information (7.4% of NRA; lease expiration of January 2031). Upcoming lease rollover is minimal with only one tenant, totaling 0.7% of NRA, having a lease expiration through 2022. As of the Q2 2021 Reis data, the Peachtree Corners submarket had an average asking rent of $18.53 psf and an average vacancy rate of 29.8%. Reis projects the average asking rent to decrease to $18.44 psf and for the average vacancy rate to increase to 31.2% by Q4 2022. No new inventory is scheduled to be delivered to the submarket through 2022. DBRS Mornigstar considered a liquidation scenario for this loan based on a haircut to the most recent appraised value, which suggested minimal losses when the loan is disposed.

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.

Class X-B 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.

The DBRS Morningstar 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 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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