DBRS Confirms Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C25

DBRS Limited (DBRS) has today confirmed the ratings on the Commercial Mortgage Pass-Through Certificates issued by J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C25 as follows:

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

All trends are Stable.

The rating confirmations reflect the stable performance of the transaction, which has remained in line with DBRS expectations since issuance in November 2014. The collateral consists of 65 fixed-rate loans secured by 157 commercial and multifamily properties. As of the October 2015 remittance, the pool’s balance was approximately $1,180.4 million, representing a collateral reduction of 0.3% since issuance as a result of scheduled loan amortization. Overall, the pool is relatively diverse based on loan size, with a concentration profile equivalent to that of a pool of 30 equal-sized loans.

As of the October 2015 remittance, 59.6% of the pool was reporting Q2 2015 financials and 2.3% of the pool was reporting Q3 2015 financials. DBRS has reached out to the servicer for information on the delay in Q2 2015 reporting for the remainder of the pool, as those statements were likely due by the end of August 2015, per the terms of the respective loan documents. For the 11 loans in the top 15 that have updated financials, the weighted-average debt service coverage ratio (DSCR) was 1.89 times (x), which is above the DBRS underwritten DSCR of 1.79x for those 11 loans.

There are no delinquent or specially serviced loans as of the October 2015 remittance; however, one loan, representing 1.7% of the current pool balance, was placed on the servicer’s watchlist for tenant rollover that has included recent tenant departures at lease expiry. The loan on the watchlist and the largest loan in the pool are highlighted below.

3600 San Clemente Building B (Prospectus ID#22, 1.7% of the current pool balance) is secured by a three-storey Class A office building located in Austin, Texas. This loan was placed on the watchlist for upcoming lease expirations for major tenants, including the third-largest tenant, CLS Partners (CLS), which previously occupied a total of 10.1% of the net rentable area (NRA). A portion of the previous CLS space expired in July 2015, and at expiry, CLS vacated that space and moved into a larger space formerly occupied by Hawkeye Partners, LP (14.1% of the NRA with a lease that expired in June 2015) on a two-year term. With this move, CLS is now the property’s largest tenant, occupying a total of 16.1% of the NRA, with leases expiring in 2017 and 2019. Based on the availability shown on the property’s website and listings on CoStar, it appears that the former CLS space has been leased. DBRS has requested confirmation from the servicer and is awaiting the response.

Another tenant, Innovative Neurotronics, occupied 7.7% of the NRA and vacated at lease expiration in September 2015. According to CoStar, the space is currently vacant, but a portion of the space may have been rented out, as the property’s website shows an availability rate of 5.5%. In addition, Nix, Paterson & Roach occupies 9.7% of the NRA on a lease that expired in October 2015. The servicer has advised that the tenant is in negotiations to renew the lease with a possible expansion. According to CoStar, the property is in the Austin Southwest submarket, which had an overall vacancy rate of 7.8% and an overall availability rate of 13.2% as of November 2015 for Class A office properties larger than 90,000 square feet. The current submarket condition has improved or remained relatively consistent in comparison with the Q3 2014 vacancy rate of 7.4% and availability rate of 18.3%. Given the relatively healthy submarket metrics and the historical metrics showing occupancy at or above market levels, DBRS expects that any occupancy loss at the property would be short lived. DBRS has reached out to the servicer for updates on all tenant leases and is awaiting a response.

CityPlace (Prospectus ID#1, 9.2% of the current pool balance) is secured by six buildings located in the CityPlace Campus in Creve Coeur, Missouri, a St. Louis suburb. The collateral property comprises five office buildings and one mixed-use office and retail building. The property was 86.5% occupied with an average rental rate of approximately $23.50 per square foot (psf) as stated in the June 2015 rent roll. Occupancy is below the DBRS’s underwritten level of 89.0% but in line with submarket levels as reported by CoStar, which show Class A office buildings located in Creve Coeur at a vacancy rate of 18.0%. The availability rate was reported at 22.7%, and CoStar shows an average gross rental rate of $20.64 psf for the subset as of November 2015. Based on the Q2 2015 financial reporting, the annualized DSCR was 1.24x, which is consistent with the DBRS underwritten DSCR of 1.21x.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction. The November 2015 Monthly CMBS 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 (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

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