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

DBRS Limited (DBRS) has today confirmed the ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-C20 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 X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C 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)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since closing. At issuance, the collateral consisted of 37 loans secured by 54 commercial properties. The transaction had a DBRS weighted-average (WA) debt service coverage ratio (DSCR) and a DBRS WA debt yield of 1.47 times (x) and 8.4%, respectively. As of the March 2016 remittance, loans representing 60.9% of the current pool balance are reporting YE2015 financials, and loans representing 32.6% of the current pool balance are reporting 2015 partial-year financials. The nine loans in the top 15 (representing 48.5% of the current pool balance) reporting YE2015 figures showed a WA amortizing DSCR of 1.71x, with a WA net cash flow growth over the respective DBRS underwritten figures of 9.1%. All loans remain in the pool, with a collateral reduction of 1.2% since issuance as a result of scheduled loan amortization.

As of the March 2016 remittance, there are no loans in special servicing and four loans are on the servicer’s watchlist, representing 4.2% of the current pool balance. All of the loans on the servicer’s watchlist were flagged for performance-related issues and DBRS modelled the loans with stressed cash flows to reflect the increased risk associated with the declining performance of the underlying collateral. One loan in the top 15 and one loan on the servicer’s watchlist are discussed below.

The 200 West Monroe loan (Prospectus ID#6, 2.8% of the current pool balance) is secured by a Class B office building in downtown Chicago. As of the December 2015 rent roll, the property was 78.0% occupied and the largest tenant, Select Hotels Group, occupied the eighth, ninth and 23rd floor of the property, representing 15.5% of the net rentable area (NRA). The servicer advises that the tenant recently consolidated space and extended its lease to December 2017, leaving the 23rd floor vacant at the end of March 2016. In addition, Amli (5.4% of NRA) exercised its early termination option and vacated the property in January 2016. With these developments, DBRS believes the property’s physical occupancy rate could be as low as 67.2%. Amli’s termination fee was estimated to be $1.1 million and according to the servicer, the fee was received and deposited into a reserve. According to CoStar, Class B office properties located within a 0.2-mile radius from the subject reported an average vacancy rate and availability rate of 15.9% and 22.4%, respectively. In terms of the average rental rate, the submarket reported $27 psf, which is above the subject’s average rental rate of $17 psf. The second- and third-largest tenants, Barcodes LLC (7.5% of NRA) and Destiny Health (7.4% of NRA) have increased their footprint at the property since issuance with leases expiring in 2017 and 2026, respectively. According to the YE2015 financials, the loan had a DSCR of 1.00x, down from the YE2014 DSCR of 1.09x and DBRS underwritten DSCR of 1.18x. Given the performance decline, DBRS modelled this loan with a stressed NCF figure.

The Gate at Aberdeen Proving Ground loan (Prospectus ID#21, 1.7% of the current pool balance) is secured by a 105,000 sf mixed-use property located in Aberdeen Proving Ground, Maryland, built in 2010 and is LEED Gold certified. This loan was placed on the watchlist because of a low DSCR, which was 1.08x at Q3 2015, compared to the YE2014 DSCR of 1.84x and DBRS underwritten DSCR of 1.52x. The former largest tenant, D&S Consultants Inc. (40.0% of NRA), was seven months behind in rent payments and was evicted in October 2015. As of the December 2015 rent roll, the property was 59.1% occupied. The second-and third-largest tenants, Telford Group (10.9% of NRA) and QED Systems LLC (8.6% of NRA), have leases scheduled to expire in August and September 2016, respectively. According to CoStar, flex industrial and office properties located in the Abderdeen Proving Ground submarket reported an average rental rate of $24 psf with an average vacancy and availability rate of 19.9% and 28.7%, respectively. The average rental rate at the subject property is below the submarket at $19 psf. This loan was modelled with a stressed cash flow given the decrease in occupancy and soft market conditions present.

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 2016) and CMBS North American Surveillance (December 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.