DBRS Finalizes Provisional Ratings on JPMBB Commercial Mortgage Securities Trust 2015-C31

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C31 (the Certificates) to be issued by JPMBB Commercial Mortgage Trust 2015-C31. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 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 AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D 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 (low) (sf)
-- Class F at B (low) (sf)

Classes X-C, X-D, E and F have been privately placed.

The provisional rating on Class A-4 has been discontinued as the class was not issued.

The X-A, X-B, X-C and X-D balances are notional. DBRS ratings on interest-only (IO) certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the IO certificates’ position within the transaction payment waterfall when determining the appropriate rating.

Up to the full certificate balance of the Class A-S, Class B and Class C certificates may be exchanged for the Class EC certificates. Class EC certificates may be exchanged for the full certificate balance of the Class A-S, Class B and Class C certificates.

The collateral consists of 58 fixed-rate loans secured by 155 commercial and multifamily properties, comprising a total transaction balance of $1,027,315,082. The conduit pool was analyzed to determine the final ratings, reflecting the long-term probability of loan default within the loan term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized net cash flow (NCF) and their respective actual constants, there were seven loans, representing 22.5% of the pool, with a DBRS Term debt service coverage ratio (DSCR) below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default. Additionally, to assess refinance risk given the current low interest rate environment, DBRS applied its refinance constants to the balloon amounts. This resulted in 26 loans, representing 53.9% of the pool, having DBRS Refinance (Refi) DSCRs below 1.00x; however, the DBRS Refi DSCRs for the loans are based on a weighted-average (WA) stressed refinance constant of 9.9%, which implies an interest rate of 9.3%, amortizing on a 30-year schedule. This represents a significant stress of 4.7% over the WA contractual interest rate of the loans in the pool. The loans’ probability of default (POD) is based on the more constraining of the DBRS Term or Refi DSCR.

Ten loans, representing 37.2% of the pool balance, are secured by office properties, including seven of the top 15 loans. The DBRS sample included nine office loans, representing 98.3% of the office concentration, thus providing an understanding of the cash flow dynamics associated with each. Furthermore, the average whole loan balance of the ten loans is $38.1 million, indicating mostly institutional quality assets (41.0% located in urban markets and 0.0% located in tertiary or rural markets) that will benefit from stronger investor demand.

Three loans, representing 3.8% of the pool balance, provide for monthly IO payments for their entire terms. Twenty-two loans, representing 38.4% of the pool balance, provide for monthly IO payments for a portion of their respective terms and then provide for the monthly principal and interest payments over their respective remaining terms. Lack of amortization will result in both a higher-modeled POD and loss severity for these loans.

The DBRS sample included 30 of the 58 loans in the pool. Site inspections were performed on 61 of the 155 properties in the pool (72.1% of the pool by allocated loan balance). DBRS conducted meetings with the on-site property manager, leasing agent or a representative of the borrowing entity for 65.9% of the pool. The DBRS average sample NCF adjustment for the pool was -9.7%.

The ratings assigned to the Certificates by DBRS are based exclusively on the credit provided by the transaction structure and underlying trust assets. All classes will be subject to ongoing surveillance, which could result in upgrades or downgrades by DBRS after the date of issuance.

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

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

The applicable methodology is North American CMBS Rating Methodology, which can be found on our website under Methodologies.

With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form 15-E) which contains the description of the information that the third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While DBRS did not rely on the due diligence services outlined in Form 15-E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.

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