DBRS Morningstar Confirms Ratings on All Classes of JPMCC Commercial Mortgage Securities Trust 2014-C20

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-C20 issued by JPMCC Commercial Mortgage Securities Trust 2014-C20 as follows:

-- Class A-4A1 at AAA (sf)
-- Class A-4A2 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 BBB (high) (sf)
-- Class EC at BBB (high) (sf)
-- Class D at CCC (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class G at C (sf)

All trends are Stable, with the exceptions of Classes D, E, F, and G, which have ratings that do not carry a trend.

As of the March 2023 remittance, 21 of the original 37 loans remain in the trust, with an aggregate balance of approximately $496.2 million, representing a collateral reduction of 43.5% since issuance. Five loans are fully defeased, representing 9.9% of the pool balance. One loan is with the special servicer, representing 8.3% of the pool balance. Four loans are on the servicer’s watchlist, representing 19.2% of the pool balance. The transaction is concentrated by property type with 49.0% of the loans in the pool collateralized by retail properties and 27.9% of the pool backed by office properties. Loans backed by office properties were generally stressed given the proximity to maturity and low investor appetite for the property type, with a resulting weighted-average expected loss that was approximately 60% higher than the expected loss for the pool as a whole.

The Lincoln Town Center loan (Prospectus ID#4, 8.3% of the pool balance) is in special servicing and is backed by a regional mall in the northern Chicago suburb of Lincolnwood, Illinois. The property became real estate owned (REO) in August 2021. The largest tenants at the subject include Kohl’s (24.2% of the net rentable area (NRA), lease expiry in January 2024) and The Room Place (20.0% of the NRA, lease expiry in August 2029). The most recent appraisal reported by the servicer, dated May 2022, valued the property at $15.2 million, a drastic decline from the issuance value of $89.1 million. DBRS Morningstar’s liquidation scenario for this loan, which assumed a 20% haircut to the May 2022 value and considered outstanding and expected future advances, suggested a loss in excess of 100% could be realized at disposition.

The largest loan on the servicer’s watchlist is 200 West Monroe (Prospectus ID#6, 9.5% of the pool balance), which is secured by a 23-story, Class B office property in Chicago. The loan has been monitored for performance declines related to occupancy losses over the last several years. According to the September 2022 rent roll, the property was 70.1% occupied, down from 84.2% at issuance, with a debt service coverage ratio (DSCR) at Q3 2022 of 0.98 times (x). The subject benefits from a granular tenant roster, with no tenant representing more than 6.3% of the NRA and near-term rollover is limited with tenants representing less than 10.0% of the NRA scheduled to expire in the next year. Per a Reis report from Q4 2022, office properties within the Central Loop submarket reported a vacancy rate of 14.2% with a projected five-year vacancy rate of 13.7%. DBRS Morningstar analyzed this loan with an elevated probability of default (POD) penalty and loan-to-value ratio (LTV), reflecting the increased risks since issuance. The resulting expected loss was approximately 180% higher than the pool average.

The Westminster Mall pari passu loan (Prospectus ID#11, 4.6% of the pool balance) is secured by a regional mall in Orange County, California, and is on the servicer’s watchlist for performance declines following the loss of former noncollateral anchor Sears. The empty noncollateral anchor boxes have reportedly been acquired by Shopoff Realty and Investments’ (Shopoff), with the Westminster City Council reported to have approved new framework for the redevelopment of those two sites as of December 2022. The mall is in a densely populated area that should support a variety of options for those parcels.

According to the September 2022 rent roll, the collateral portion of the property reported an occupancy rate of 87.2%, slightly below the YE2021 occupancy rate of 90.5%. At YE2019, prior to the Coronavirus Disease (COVID-19) pandemic, the property reported an occupancy rate of approximately 95.0%. There is a moderate amount of rollover risk of 8.1% in the next 12 months. According to the most recent financial reporting, the loan reported a trailing nine-month ended September 30, 2022, DSCR of 0.16x compared with YE2021, YE2020, and YE2019 DSCRs of 0.37x, 0.89x, and 1.21x, respectively. Despite the low cash flows, the loan has been kept current; DBRS Morningstar expects the sponsor’s commitment is likely related to the redevelopment value for the property given the Shopoff acquisition and plans for the vacant anchor spaces. However, the near-term maturity will likely require the sponsor, Washington Prime Group, to come out of pocket to repay the trust loan and it is unclear what the sponsor’s financial position is given the firm was taken private after filing for bankruptcy in 2021. Given these risks, DBRS Morningstar analyzed this loan with a significantly stressed POD penalty, with the resulting expected loss almost three times the pool average.

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/396929 (May 17, 2022).

Classes X-A and X-B 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.

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

The principal methodology is the 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 info@dbrsmorningstar.com.

The rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this 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 rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. lease 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.

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

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 (August 30, 2022 https://www.dbrsmorningstar.com/research/402153)

Legal Criteria for U.S. Structured Finance (December 7, 2022;
https://www.dbrsmorningstar.com/research/407008)

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