DBRS Confirms Ratings of JPMCC Commercial Mortgage Securities Trust 2014-C20

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

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3A1 at AAA (sf)
-- Class A-3A2 at AAA (sf)
-- 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 B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class EC at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (high) (sf)
-- Class G at B (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)

All classes have Stable trends. DBRS does not rate the first loss piece, Class NR. The Class A-S, Class B and Class C certificates may be exchanged for the Class EC certificates (and vice versa).

The rating confirmations reflect that the current pool performance remains in line with DBRS’s expectations since the deal closed in June 2014. The transaction consists of 37 loans secured by 54 properties and the pool has experienced collateral reduction of 0.5% since issuance as a result of scheduled loan amortization. The transaction benefits from a healthy concentration of loans secured by properties located within urban markets, which represent 27.3% of the current pool balance. The weighted-average DBRS Term DSCR and Debt Yield for the Top 15 loans is 1.48 times and 8.1%, respectively.

At issuance, DBRS assigned an investment-grade shadow-rating to The Outlets at Orange (Prospectus ID#1, 10.3% of the current pool balance). DBRS has today confirmed that the performance of the loan is consistent with investment-grade loan characteristics.

As of the March 2015 remittance, there is one loan (2.1% of the current pool balance) on the servicer’s watchlist. This loan has been flagged for an issue related to the tax reserve and DBRS does not believe it to be at immediate risk of default.

DBRS has highlighted a large loan that is not currently on the servicer’s watchlist. 200 West Monroe (Prospectus ID#6, 4.4% of the current pool balance) is secured by a Class B office building located in downtown Chicago, Illinois. According to the December 2014 rent roll, the property was 80.4% occupied. It has recently come to light that the largest and third-largest tenants will be vacating the property as early as 2016. Select Hotels Group (Select Hotels) is the property’s largest tenant and occupies 13.9% of the NRA on a lease scheduled to expire in March 2016. In December 2014, it was announced that Select Hotels would be relocating its headquarters and moving from the property. Amli Residential (Amli), the third-largest tenant occupying 5.4% of the NRA has announced that it will also be vacating the property in early 2016 ahead of its 2019 lease expiration. Leases representing an additional 13.9% of the NRA are scheduled to roll in the next 12 months and, if not renewed, the property could be half vacant. According to issuance documents, both Select Hotels and Amli are obligated to provide a cancellation payment to the landlord in the event of a lease termination; however, it has not been confirmed at this time that either tenant will be responsible for paying a termination fee and if that fee will be held by the lender for future leasing or paid directly to the borrower. Current reserves for the loan total $2.6 million, including a $1.3 million tenant reserve. The loan financed the borrower’s acquisition of the property and the borrower fronted $26.5 million of fresh equity to close the deal. Nevertheless, DBRS modeled the loan with a below-average cash flow stability to reflect the tenant rollover risk, which results in an elevated probability of default.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool. The March 2015 monthly surveillance report for this transaction will be published shortly. If you are interested in receiving this report, contact DBRS at info@dbrs.com.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are North American CMBS Rating Methodology (March 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.