DBRS Confirms Ratings of JPMBB Commercial Mortgage Securities Trust 2015-C31

DBRS, Limited (DBRS) has today confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C31 issued by JPMBB Commercial Mortgage Trust 2015-C31:

-- 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 EC at A (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

All trends are Stable. 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 the overall performance of the transaction, which has remained in line with DBRS’s expectations since issuance in August 2015. The collateral consists of 58 loans secured by 155 properties. As of the July 2016 remittance, the pool has experienced a collateral reduction of 0.8% since issuance as a result of loan amortization with all of the original 58 loans remaining in the pool. The transaction reported a weighted-average (WA) debt service coverage ratio (DSCR) and a WA debt yield of 1.36 times (x) and 8.4%, respectively, with 69.8% of the current pool reporting YE2015 financials. At issuance, the pool reported a WA DSCR and debt yield of 1.33x and 8.2%, respectively.

As of the July 2016 remittance, there are no loans in special servicing and three loans on the servicer’s watchlist, representing 2.7% of the current pool balance. The largest loan on the watchlist and a loan in the top 15 are discussed below.

The Dadeland at 9700 loan (Prospectus ID#21, 1.2% of the current pool balance) is secured by the borrower’s fee interest in an 11-story Class B office property in Miami, Florida, located approximately eight miles southwest of the Miami central business district. The property was built in 1982 and renovated in 2015. This loan was placed on the watchlist in June 2016 because the YE2015 DSCR of -0.05x was well below the 1.10x threshold. Since issuance, occupancy was at 68.6% as Eastern National Bank (Eastern), currently the largest tenant occupying 31.7% of the net rentable area, did not move into the subject until its lease start date of April 2016. The subject now serves as the headquarters for Eastern on a long-term lease, expiring in March 2026. As a result of a period of low occupancy, the YE2015 effective gross income declined by 30.7% from the DBRS underwritten (UW) figure. In addition, the YE2015 capital expenditure (capex) figure of $326,177 was above the DBRS UW figure of $170,711, which may have been attributed to renovations to common areas that occurred in 2015 and/or tenant improvement amounts given to Eastern. DBRS has requested more detail regarding this increase in capex costs. At closing, the borrower established an upfront rent and leasing commission reserve of $727,410 for Eastern, as well as a letter of credit of $500,000, which will be released for use only after all renovation expenses are paid. Given the increase in occupancy at the subject property, DBRS expects performance to improve in the near term.

The Cumberland Apartments loan (Prospectus ID#10, 3.1% of the current pool balance) is secured by the borrower’s fee interest in a 314-unit multifamily complex in Tyler, Texas, located approximately 105 miles southeast of downtown Dallas. The loan is a partial interest-only (IO) loan with 24 months of IO payments remaining. The subject was constructed in two phases with 206 units built in 2008 and the remaining units built in 2014. At issuance, the property was 94.9% occupied; however, occupancy declined to 80.6% as of the March 2016 rent roll. Despite the decrease in occupancy, the March 2016 average rental rate of $1,161 per unit was above the in-place rent at issuance of $1,129 per unit. According to Reis, as of August 2016, multifamily properties within the Tyler submarket reported an average vacancy rate of 3.7% while properties of similar vintage reported a vacancy rate of 7.1%. At issuance, Reis reported the submarket vacancy rate at issuance of 3.1% for all multifamily properties and 3.6% for properties of similar vintage. Reis also reported a five-year forecasted vacancy rate of 3.6% for the submarket, which is below the DBRS UW vacancy rate of 8.5%. Major employment industries in Tyler include government, education, technology, energy and health care. The property manager noted at issuance that the subject would not be affected by oil price volatility given that its tenant employment profile consisted of medical and educational employees; however, the appraiser noted that the local market could feel ancillary effects of low oil prices. According to the YE2015 financials, the YE2015 amortizing DSCR was 1.02x and the IO DSCR was 1.37x compared with the DBRS UW DSCR of 1.20x.

The rating assigned to Class F differs from the higher rating implied by the quantitative model. DBRS considers this difference to be a material deviation and, in this case, the rating reflects the dispersion of loan-level cash flows expected to occur as loans season.

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 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.

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

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