DBRS Morningstar Confirms Ratings on All Classes of JPMBB Commercial Mortgage Securities Trust 2015-C28

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of 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 (low) (sf)
-- Class E at B (high) (sf)
-- Class F at CCC (sf)

All trends are Stable, with the exception of Class F, which is assigned a rating that does not typically carry a trend in commercial mortgage-backed securities ratings.

The rating confirmations and Stable trends reflect DBRS Morningstar’s current outlook and loss expectations for the transaction, which remains relatively unchanged from the November 2022 rating action.

At issuance, the transaction consisted of 67 fixed-rate loans secured by 122 commercial and multifamily properties, with a trust balance of $1.14 billion. As of the April 2023 remittance, 57 loans remain within the transaction with a trust balance of $839.0 million, reflecting collateral reduction of 26.6% since issuance. The pool is concentrated by property type, with loans representing 52.1% of the pool collateralized by retail properties. There are currently 16 fully defeased loans, representing 15.0% of the current pool balance. In addition, two loans, representing 2.4% of the pool, are currently in special servicing, and three loans, representing 11.8% of the pool, are on the servicer’s watchlist.

The largest loan in special servicing is Horizon Outlet Shoppes Portfolio (Prospectus ID#12, 2.3% of the pool), which transferred to special servicing in March 2020, prior to the onset of the Coronavirus Disease (COVID-19) pandemic, for imminent monetary default. The loan is pari passu with a companion note securitized in another DBRS Morningstar-rated transaction, JPMBB Commercial Mortgage Securities Trust 2015-C29. At issuance, the portfolio consisted of three outlet malls in Wisconsin, Washington, and Indiana, all of which became real estate owned in August 2021. The two smaller properties, Prime Outlets at Freemont in Indiana and Prime Outlets at Burlington in Washington, have been sold. Prime Outlets at Burlington was sold in March 2023 for $9.5 million with net proceeds totaling $8.8 million, and Prime Outlets at Fremont was sold in May 2022 for $4.2 million with net proceeds totaling $3.9 million.

The remaining asset is Prime Outlets at Oshkosh, a 270,500-square-foot (sf) anchored retail property in Oshkosh, Wisconsin. According to the February 2023 rent roll, the property was 58.1% occupied compared with 60.0% at YE2021 and 90% at issuance. Net cash flow (NCF) fell in turn with the YE2021 servicer reported figure of $559,497, marking an 88.0% decline from the issuance figure of $4.7 million. Tenancy at the property is fairly granular with no tenant making up more than 5.0% of the total net rentable area (NRA). Likewise, lease roll-over within the next 12 months is negligible with tenant leases totaling 3.4% of the total NRA scheduled to expire. The servicer commentary states that the asset manager is targeting the asset for a near-term sale with a potential disposition scheduled in Q2 2023. While the Oshkosh property has historically performed better than the other two properties in the portfolio, the December 2022 appraisal value of $9.7 million represents a 78.4% decline from the issuance appraised value of $45.0 million and is well below the current whole-loan amount of $37.1 million. DBRS Morningstar’s analysis includes a stress to the most recent appraisal value, resulting in a loss severity in excess of 95.0%.

The largest loan on the servicer’s watchlist, Shops at Waldorf Center (Prospectus ID#2, 9.0% of the pool), is secured by a 497,000-sf anchored retail property in Waldorf, Maryland, approximately 30 miles south of Washington, D.C. The loan transferred to special servicing in July 2020 for imminent monetary default. A loan modification was executed in November 2022, and the loan subsequently returned to the master servicer in February 2023. The terms of the loan modification include a conversion to interest-only (IO) payments through the deferral period, ending in May 2024, in addition to a one-year extension option that pushes the fully extended maturity date to April 2026 from April 2025. Occupancy at the collateral property has been in flux during the past few years; occupancy hit 82.0% in January 2023, up from 74.0% in January 2022 but below 89.5% at issuance. The annualized NCF for the trailing-nine month period ended September 30, 2022, was $5.5 million with a debt service coverage ratio of 1.38 times (x), compared with $5.2 million and 1.59x in 2019 and $6.2 million and 1.35x at issuance.

The three largest tenants at the property, Christmas Tree Shops (35,232 sf; lease expiration in January 2026), PetSmart (30,900 sf; lease expiration in January 2025), and LA Fitness (30,253 sf; lease expiration in June 2028), comprise approximately 19.0% of total NRA. Lease roll over is moderate, with tenant leases representing 7.3% of NRA scheduled to expire within the next 12 months. The property’s average rental rate of $21.67 per sf (psf) is slightly below the Q4 2022 average effective rental rate of $24.65 psf for retail properties in suburban Maryland, while the property’s vacancy rate of 18.0% is elevated when compared with the 2022 market average of 7.6%, as reported by Reis. The most recent appraisal dated September 2021 valued the property at $90.2 million, which was relatively consistent with the September 2020 appraised value of $90.9 million, and above the loan’s current balance of $75.3 million. Given the decline in value since issuance, DBRS Morningstar’s analysis includes an elevated probability of default. The resulting expected loss was 2.7x higher than 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, X-B, X-C, X-D, and X-E 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.

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. 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.

DBRS Limited
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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.