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 following classes of Commercial Mortgage Pass-Through Certificates, Series 2014-C25 issued by J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2014-C25:

-- 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 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. The collateral consists of 65 fixed-rate loans secured by 157 properties, and as of the October 2016 remittance, there has been a collateral reduction of 0.8% since issuance. Loans representing 97.7% of the current pool balance are reporting YE2015 figures with a weighted-average (WA) debt service coverage ratio (DSCR) and a WA debt yield of 1.72 times (x) and 9.6%, respectively. The DBRS underwritten WA DSCR and WA debt yield at issuance were 1.60x and 8.9%, respectively. The largest 15 loans in the pool collectively represent 58.6% of the transaction balance, and those loans showed a WA net cash flow growth of 6.2% over the DBRS underwritten figures at YE2015, with a WA DSCR and debt yield of 1.74x and 9.7%, respectively.

There are no loans in special servicing as of the October 2016 remittance, but seven loans are on the servicer’s watchlist, representing 7.3% of the current pool balance. Five of those loans, representing 5.8% of the current pool balance, were flagged for non-performance-related items pertaining to deferred maintenance or outstanding real estate taxes and insurance payments. One loan in the top 15 that showed a performance decline is discussed below.

The Hilton Houston Post Oak loan (Prospectus ID#6, 3.8% of the current pool balance) is secured by a 448-key, full-service hotel in Houston, Texas, located approximately one block north of The Galleria mall. The property was constructed in 1982 and was converted from a DoubleTree to a Hilton hotel in 2005. As part of the franchise agreement with Hilton, the borrower was required to complete an $8.4 million property improvement plan (PIP). At issuance, approximately $2.3 million of those required renovations had been completed and included upgrades to the lobby and common areas, the addition of a buffet bar and the Java Jive Café, as well as the conversion of the Brittany Bar into a three-meal restaurant. Approximately $6.1 million of the PIP remains incomplete, and projects scheduled for the remainder of 2016 include upgrades to the Grand Bal1room, meeting space and executive lounges and suites; the full scope of the project is scheduled to be completed by 2019.

This loan reported a Q2 2016 cover of 1.14x, down from 1.84x at YE2015 and the DBRS underwritten DSCR of 1.85x. DBRS believes that the ongoing renovations were a primary contributor to the cash flow declines in 2016, with secondary factors that include a slight softening in market performance as shown in the Smith Travel Research report provided for the trailing 12 months ending August 31, 2016, which showed a decline in revenue per available room (RevPAR) for the competitive set of 13.2% from the prior year. That report showed that the collateral reported an occupancy rate of 65.9% and an average daily rate (ADR) of $153.43, resulting in a RevPAR rate of $101.15. This RevPAR figure represents a 23.0% decrease from 2015, which is attributed to the 20.1% decrease in occupancy during that time, driven largely by the PIP renovations that have taken rooms offline for renovations. However, ADR also saw a 3.6% year-over-year decrease as well. As the renovation work progresses, DBRS believes property cash flows will improve; however, to capture the near-term increased risk associated with the cash flow decline and softening market conditions, the loan was modeled with a stressed cash flow and will be monitored closely for developments.

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 sustainability of loan performance trends was not demonstrated and, as such, was reflected in the ratings.

For more information on this transaction and supporting data, please log in to DBRS CMBS IReports at www.ireports.dbrs.com. DBRS continues to monitor this transaction monthly, with periodic updates provided in the DBRS CMBS IReports platform.

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

The applicable methodologies are the North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (October 2016), which can be found on our website under Methodologies.

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