DBRS Morningstar Confirms All Classes of JPMBB Commercial Mortgage Securities Trust 2015-C28, Maintains Negative Trends on Six Classes

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2015-C28 issued by JPMBB Commercial Mortgage Securities Trust 2015-C28 as follows:

-- Class A-3 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)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class X-E at BB (sf)
-- Class E at BB (low) (sf)
-- Class X-F at B (sf)
-- Class F at B (low) (sf)

Classes D, E, F, X-D, X-E, and X-F continue to carry Negative trends as a reflection of the potential for further declines in the outlook for the loans in the pool in special servicing and on the servicer’s watchlist, as further detailed below. The trends on all other classes are Stable. In addition to loans representing 12.2% of the pool being in special servicing as of the August 2021 remittance, DBRS Morningstar also notes that the pool has a high concentration of retail properties, representing approximately half of the pool balance. Retail property types saw some of the worst of the initial effects of the Coronavirus Disease (COVID-19) pandemic with forced closures and capacity limitations, and while things have improved incrementally over the last year, there remain significant risks as the pandemic’s effects continue to linger.

As of the August 2021 remittance, 60 of the original 67 loans remained in the pool, with a collateral reduction of 20.4% since issuance. Four loans, representing 2.6% of the current pool balance, are fully defeased. The second-largest loan, The Shops at Waldorf Center, transferred to special servicing in July 2020 for imminent default related to the coronavirus pandemic and remained delinquent as of the August 2021 remittance. The loan is secured by a 497,000-square-foot anchored retail property in Waldorf, Maryland, approximately 30 miles south of Washington, D.C. In addition to the trust loan, there is a $10 million mezzanine loan. The collateral property’s occupancy rate has fallen precipitously over the last few years but cash flows had previously remained relatively healthy, with a YE2019 debt service coverage ratio (DSCR) of 1.59 times (x) and an occupancy rate of 81.0%. At March 2020, occupancy was reported at 76.0%, with a granular rent roll that showed the largest tenant as Christmas Tree Shops with 7.1% of the collateral net rentable area. Other top five tenants included LA Fitness, Bob’s Discount Furniture, and Michaels.

Discussions regarding the workout strategy between the special servicer, borrower, and the mezzanine holder are ongoing; however, the extended delinquency and lack of material updates on the property’s performance since the first quarter of 2020 suggest there are significantly increased risks from issuance for this loan. As such, DBRS Morningstar analyzed this loan with an elevated probability of default, significantly increasing the expected loss for this review.

The other three loans in special servicing are notably backed by anchored retail, full-service hotel, and unanchored retail property types. The second-largest loan in special servicing is the Horizon Outlet Shoppes Portfolio (Prospectus ID#12, 2.9% of the pool), a pari passu loan that transferred to special servicing in March 2020, prior to the onset of the pandemic. According to a March 2020 appraisal obtained by the special servicer, the collateral portfolio of three outlet malls in Wisconsin, Washington, and Indiana was valued at $39.1 million, down from the issuance value of $87.4 million and well below the total senior loan balance of $51.5 million. As of the August 2021 remittance, the loan remained delinquent, and a receiver was appointed at all three properties in August 2020. The special servicer reports that discussions regarding a potential deed in lieu have been held, with a foreclosure strategy also being dual-tracked. The collateral properties are in tertiary and rural markets, and the servicer reported a YE2019 DSCR of 0.91x. Given the sharp value decline from issuance and the likelihood that the trust will eventually own the collateral properties, this loan was analyzed with a liquidation scenario that implied a loss severity in excess of 60.0%.

According to the August 2021 remittance, 11 loans are on the servicer’s watchlist, representing 23.5% of the current pool balance. These loans are being monitored for various reasons, including low DSCRs or occupancy rates, tenant rollover risk, and/or pandemic-related forbearance requests.

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, X-D, X-E, and X-F are interest-only (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.

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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