DBRS Confirms Ratings of JPMBB Commercial Mortgage Securities Trust 2014-C21

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2014-C21 (the Certificates) issued by JPMBB Commercial Mortgage Securities Trust 2014-C21 as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 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 C at A (low) (sf)
-- Class EC at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class X-C at BB (high) (sf)
-- Class E at BB (sf)
-- Class X-D at BB (low) (sf)
-- Class F at B (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance, when the transaction consisted of 73 fixed-rate loans secured by 84 commercial properties with an original trust balance of $1.3 billion. Per the February 2019 remittance, 67 loans remain in the pool with a current trust balance of $1.2 billion, representing a collateral reduction of 6.4% due to scheduled loan amortization and the repayment of seven loans. The pool also benefits from defeasance as five loans (8.0% of the pool) are fully defeased. There is only one loan scheduled to mature in 2019 in Prospectus ID#49, LaQuinta Inn – Lake Charles (0.5% of the pool), which is secured by a limited service hotel in southwest Louisiana. The loan is scheduled to mature in June 2019, and although the year-end (YE) 2018 DSCR of 2.04 times (x) is below historical performance trends that showed the debt service coverage ratio (DSCR) hovering near or just below 2.50x, the exit debt yield of approximately 15.8% implies a successful refinance is likely. The remaining loans in the pool are scheduled to mature in 2021 and 2024. There are eight loans, representing 25.9% of the pool, that are fully interest only (IO) and 11 loans (31.6% of the pool) with partial IO structures, ranging between two and four months of IO remaining. In general, these loans are performing in line with expectations at issuance.

To date, approximately 96.8% of the pool (excluding defeased loans) reported YE2017 financials. Based on the most recent year-end reporting, the pool reported a weighted average (WA) DSCR and debt yield of 1.52x and 8.9%, respectively. At issuance, the WA DBRS Term DSCR and Debt Yield for the remaining loans was 1.43x and 8.5%, respectively. Based on the most recent reporting, the 14 largest non-defeased loans (58.8% of the pool) in the pool reported a WA DSCR and debt yield of 1.62x and 9.0%, respectively, reflective of 21.4% cash flow growth from DBRS net cash flow figures at issuance.

According to the February 2019 remittance, there are nine loans (13.5% of the pool) on the servicer’s watchlist and one loan, Lockport Professional Park (Prospectus ID#46, 0.6% of the pool), in special servicing. The Lockport Professional Park loan is secured by 19 Class B office buildings that, combined, account for 82,292 square feet (sf) and are all located in Lockport, New York, within the Buffalo metropolitan statistical area. The loan has been in special servicing since 2015 and property performance has precipitously declined since the loan’s transfer. Based on the most recent appraised value of $4.6 million, dated August 2017, DBRS expects the loan to take a loss greater than 75.0% of the current trust balance.

Of the nine loans on the servicer’s watchlist, the largest two are secured by regional malls and combined account for 6.6% of the pool balance. The pool is concentrated in retail properties as five loans (23.3% of the pool) are secured by regional malls and larger anchored retail properties, including three loans (18.2% of the pool) in the top ten. The largest loan on the watchlist, Westminster Mall (Prospectus ID#6, 4.3% of the pool), is secured by a regional mall located in Westminster, California, approximately 30 miles southwest of the Los Angeles central business district. The loan is being monitored for the property’s loss of non-collateral anchor Sears (16.2% of the total net rentable area (NRA)). DBRS also notes that cash flows have declined significantly since issuance, resulting in an in-place DSCR of 1.21x, down from the DBRS Term DSCR at issuance of 1.69x, largely a factor of revenue declines since 2014. Simon spun off this asset to Washington Prime Group (WPG) in 2014, shortly after closing for the subject loan, a move that is perhaps telling given that the entity has typically held non-core assets and/or malls considered for redevelopment. Although the cash flow declines are noteworthy, DBRS believes the property’s prime location within close proximity to transportation arteries within a densely populated area would lend well to repurposing the Sears and perhaps other spaces at the property. The trust exposure at $102 per sf (psf) is considered reasonable. For additional information on this loan, please see the DBRS Viewpoint platform, for which information has been provided below.

More concerning is the second-largest loan on the watchlist in Charlottesville Fashion Square (Prospectus ID#16, 2.3% of the pool), which is secured by a regional mall in Charlottesville, Virginia, a tertiary area that is home to the University of Virginia. This mall is also owned and operated by WPG, and is also losing an anchor in Sears (28.8% of collateral NRA) in March 2019. Once Sears vacates the property, DBRS expects the property’s physical occupancy rate will fall to 65.6%, down from 94.5% at September 2018. These developments combine with continued trends of declining inline sales for the property, which have generally hovered below $300 psf, and recent announcement by WPG as part of its annual 10K filing for 2019, that the property has been downgraded from a Tier II property to a “non-core property” in the firm’s portfolio. Previously, properties receiving this classification have been sold by WPG or given back to lenders. DBRS assumed a highly stressed cash flow for the purposes of this review, significantly increasing the probability of default and is currently monitoring this loan on the DBRS Hotlist. For additional information on this loan, please see the DBRS Viewpoint platform.

DBRS also notes increased risk for the pool in the third-largest loan on the servicer’s watchlist, 200 West Monroe (Prospectus ID#18, 2.1% of the pool). This loan is secured by an office property in Chicago, Illinois, and the cash flows and occupancy rate have both been sustained at levels well below the issuance figures. Although there has been some recent leasing activity that will move the property’s occupancy rate up to approximately 72.0%, that figure remains well below the issuance figure of 82.4% and the loan’s five-year IO period will expire in June 2019, further stressing the sponsor’s ability to fund debt service shortfalls out of pocket. DBRS has placed the loan on the DBRS Hotlist. For additional information, please see the extended loan commentary in the DBRS Viewpoint platform.

At issuance, DBRS shadow-rated Miami International Mall (Prospectus ID#3, 5.1% of the pool) investment grade and with this review, DBRS confirms the credit characteristics of the loan remain in line with the investment-grade rating.

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.

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1 – Showcase Mall (8.7% of the pool)
-- Prospectus ID#3 – Miami International Mall (5.1% of the pool)
-- Prospectus ID#6 – Westminster Mall (4.3% of the pool)
-- Prospectus ID#11 – The Shops at Wiregrass (2.8% of the pool)
-- Prospectus ID#16 – Charlottesville Fashion Square (2.3% of the pool) (DBRS Hotlist)
-- Prospectus ID#18 – 200 West Monroe (2.1% of the pool) (DBRS Hotlist)
-- Prospectus ID#19 – Stonebriar Plaza (1.7% of the pool)
-- Prospectus ID#46 – Lockport Professional Park (0.6% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on www.dbrs.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 Global Structured Finance Related Methodologies document, which can be found on www.dbrs.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 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@dbrs.com.

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

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

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