DBRS Morningstar Confirms All Ratings on JPMBB Commercial Mortgage Securities Trust 2014-C21

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-C21 issued by JPMBB Commercial Mortgage Securities Trust 2014-C21 as follows:

-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class EC at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (low) (sf)
-- Class E to B (high) (sf)
-- Class X-D to B (sf)
-- Class F to B (low) (sf)

Classes D, X-C, E, X-D, and F carry Negative trends. All other trends remain Stable.

DBRS Morningstar’s loss expectations remain in line with the prior review. The Negative trends are primarily driven by two loans backed by underperforming regional malls, one of which is an REO asset. At issuance, the transaction consisted of 73 fixed-rate loans secured by 84 commercial and multifamily properties, with a trust balance of $1.26 billion. As of the February 2022 remittance, 60 loans remain within the transaction with a trust balance of $1.01 billion, reflecting collateral reduction of 20.3% since issuance. Two loans, representing 3.1% of the pool, are currently in special servicing and 12 loans, representing 27.2% of the pool, are on the servicer’s watchlist.

The largest DBRS Morningstar Hotlist loan, Westminster Mall (Prospectus ID#6; 4.7% of the pool), is secured by a 771,884-square-foot (sf) portion of a 1.2 million-sf regional mall in Orange County, California. The property has experienced year-over-year cash flow declines since issuance. The property’s anchors include two collateral tenants on ground leases, Target (22.7% of net rentable area (NRA)) and JCPenney (20.3% of the collateral NRA) and non-collateral tenant Macy’s. Sears, a prior non-collateral anchor, closed in August 2018 and its space remains vacant. The property was 89.6% occupied as of September 2021, in line with 90% at year-end (YE)2020 but down slightly from 95% at YE2019 and 92% at issuance. Based on the annualized September 2021 figures, effective gross income (EGI) has declined 54.6% since issuance. The debt service coverage ratio (DSCR) as of September 2021 was 0.28 times (x), compared with 0.89x at YE2020, 1.34x at YE2019, and 1.89x at issuance. DBRS Morningstar expects that some of this decline is attributable to co-tenancy clauses as well as rent relief that was likely provided to tenants during the Coronavirus Disease (COVID-19) pandemic. According to the September 2021 rent roll, leases representing 24.4% of the collateral NRA are scheduled to expire by YE2022, posing near-term tenant rollover risk. Despite depressed performance, the loan remains current. DBRS Morningstar remains concerned with the property’s declining cash flows, future upcoming rollover, and uncertainty surrounding the sponsor’s plans for stabilization ahead of the scheduled 2024 loan maturity. The mall is owned and operated by Washington Prime Group, which emerged from bankruptcy in October 2021 and has recently categorized a number of its underperforming malls as noncore assets.

The largest specially serviced loan, and largest contributor to DBRS Morningstar’s loss projections for the pool, Charlottesville Fashion Square (Prospectus ID#16; 2.6% of the pool), is secured by a 360,249-sf leasehold portion of a 576,749-sf regional mall in Charlottesville, Virginia. The loan transferred to the special servicer in October 2019 for imminent monetary default following the departure of collateral anchor Sears. The closure of two additional anchor spaces in 2020, including non-collateral tenant JCPenney, and one of two collateral Belk stores, further stressed performance at the property. Occupancy at the property has declined to 60.1% as of the April 2021 rent roll, a substantial decline from 78.1% at YE2020 and 91.0% at issuance. The only remaining anchor is a consolidation of two former anchor stores, Belk Women’s and Belk Men & Home, which represents 16.75% of the NRA and has a lease expiry in January 2024. Leases representing 13% of the NRA are set to roll within the next 12 months. The special servicer has not provided a 2021 OSAR, however DBRS Morningstar expects performance has declined further from the YE2020 DSCR of 0.85x based on recent additional vacancies.

The asset became REO in October 2021, and efforts to sell the property continue. According to the most recent appraisal, conducted in August 2020, the property’s as-is value was $7.5 million while the stabilized value was $15.0 million. Both figures are significantly below the issuance value and current whole-loan balance of $83.9 million and $43.0 million, respectively. Based on the liquidation scenario assumed by DBRS Morningstar as part of this review, a loss severity approaching 100% is expected at disposition.

DBRS Morningstar shadow-rates one loan—Miami International Mall (Prospectus ID#3; 5.9% of the pool)—investment grade, supported by the loan’s strong credit metrics, strong sponsorship strength, and historically stable collateral performance. With this review, DBRS Morningstar confirms that the characteristics of this loan remains consistent with the investment-grade shadow-rating.

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 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.

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.

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/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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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