DBRS Finalizes Provisional Ratings on JPMBB Commercial Mortgage Securities Trust 2015-C32

DBRS, Inc. (DBRS) has today finalized its provisional ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C32 (the Certificates) issued by JPMBB Commercial Mortgage Securities Trust 2015-C32. The trends are Stable.

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- 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 X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class A-S 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 (sf)
-- Class G at B (low) (sf)
Classes X-C, X-D, E, F and G have been privately placed.

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 89 fixed-rate loans secured by 273 commercial and multifamily properties, comprising a total transaction balance of $1,148,162,649. The conduit pool was analyzed to determine the provisional 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 24 loans, representing 16.5% 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 52 loans, representing 62.9% 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 9.7%, which implies an interest rate of 9.1%, 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.

There are only eight loans, representing 5.9% of the pool, leased to single tenants. Loans secured by properties occupied by single tenants have been found to have higher loss severities in the event of default. Twenty-eight loans, representing 43.8% of the pool, have partial or full IO periods, reflecting a lower percentage than recent transactions that typically have partial or full IO concentration in excess of 65.0%. Only one of the 28 loans, representing 0.3% of the pool, is IO for the full term. The transaction’s scheduled amortization by maturity is 17.5%. Even when excluding the U-Haul Portfolio (4.3% of pool), which is a fully amortizing loan, the transaction will amortize by approximately 13.8% by maturity. The U-Haul Portfolio, representing 4.3% of the pool balance, was assigned a AAA shadow rating based on its favorable credit metrics.

The pool is relatively diverse based on loan size, with a concentration profile equivalent to that of a pool of 36 equal-size loans. Diversity is further enhanced by eight loans, representing 15.2% of the pool, that are secured by multiple properties (193 in total), including three loans in the top 15. Increased pool diversity helps to insulate the higher-rated classes from event risk.

The DBRS sample included 37 of the 89 loans in the pool. Site inspections were performed on 65 of the 273 properties in the pool (69.6% 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 55.5% of the pool. The DBRS average sample NCF adjustment for the pool was -11.2%.

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-15E) 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-15E, DBRS did use the Data File outlined in the Independent Accountant’s Report in its analysis to determine the ratings.