DBRS Confirms Ratings and Assigns Negative Trends to Three Classes of JPMCC 2012-CIBX Mortgage Trust

DBRS Limited (DBRS) confirmed the ratings of the following classes of Commercial Mortgage Pass-Through Certificates, Series 2012-CIBX (the Certificates), issued by JPMCC 2012-CIBX Mortgage Trust, as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-4FL at AAA (sf)
-- Class A-4FX at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class X-B at B (high) (sf)
-- Class G at B (sf)

In addition, DBRS has assigned Negative trends for the Class F, Class X-B and Class G certificates. All other trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance, with Negative trends assigned to the three junior classes listed above to reflect DBRS’s concerns surrounding performance declines for the largest loan in the pool (Prospectus ID #2, theWit Hotel) and anchor losses for two malls in the top 15 (Prospectus ID #4, Jefferson Mall and Prospectus ID #5, Southpark Mall). As of the January 2018 remittance, 45 of the original 49 loans at issuance remained in the pool with an aggregate principal balance of $925.8 million, representing a collateral reduction of 28.1% as a result of scheduled loan amortization and successful loan repayments. With the February 2018 remittance, two additional loans were repaid in full, with collateral reduction increased to 31.7% since issuance.

The pool benefits from defeasance collateral, as five loans, representing 12.2% of the current pool balance, are fully defeased. Of the remaining 40 non-defeased loans as of the January 2018 remittance, 38 loans were reporting YE2016 cash flows, with a weighted-average (WA) net cash flow growth of 4.7% over theYE2015 cash flow figures. The same 38 loans reported a WA debt service coverage ratio (DSCR) and WA Debt Yield (DY) of 1.59 times (x) and 11.7%, respectively, compared to their respective YE2015 figures of 1.55x and 11.5%. The DBRS WA DSCR and Debt Yield at issuance for the pool overall was 1.40x and 10.1%, respectively.

There are twelve loans, representing 37.9% of the current pool balance, on the servicer’s watchlist, including the three largest loans in the pool. The watchlisted loans reported a WA YE2016 DSCR and debt yield of 1.44x and 10.8%, respectively. The largest watchlisted loan and the largest loan in the pool is Prospectus ID#2, theWit Hotel, representing approximately 8.8% of the current pool balance and secured by a 310-key full-service hotel located in the North Loop submarket of Chicago, Illinois. The loan reported a Q3 2017 DSCR of 1.05x, with the in-place cash flows consistently reported below the DBRS NCF figure derived at issuance over the last several years, largely because of increased expenses since issuance.

As of the January 2018 remittance, there was one loan in special servicing in Prospectus ID#17, One Upland Road, which represents 2.3% of the current pool balance. The loan was transferred for a maturity default after failing to repay at the scheduled January 2018 maturity. The loan is secured by the leasehold interest in a single-tenant office property in Norwood, Massachusetts. The property is 100% occupied by the universal Technical Institute (UTI), a for-profit nationwide provider of technical training. The current lease is in place until October 2022, with four five-year extension options remaining. The sponsor is reportedly not interested in retaining the asset and the special servicer is currently devising a workout strategy.

In addition to the relatively high concentration of large loans being monitored on the servicer’s watchlist for increased credit risk, the pool also has an above-average concentration of loans backed by retail properties. As of the January 2018 remittance 20 loans, representing 44.2% of the current pool balance, are secured by retail properties. Two of these retail loans are secured by regional malls in Prospectus ID#4, Jefferson Mall, and Prospectus ID#5, Southpark Mall. Both malls are owned and operated by CBL & Associates Properties, Inc. (CBL) and both are located in secondary markets with recent anchor losses. CBL recently reported disappointing Q4 2017 earnings, with funds from operations down 17.6% year over year due to occupancy and gross rent declines within their portfolio for the same period.

Jefferson Mall is located in Louisville, Kentucky and in March 2017, the non-collateral Macy’s vacated the property. CBL purchased the former Macy’s box and according to the servicer, continues to determine a strategy for the space. The Southpark Mall is located in Colonial Heights, Virginia, approximately 20 miles south of the Richmond CBD. In January 2018, collateral anchor Sears (19.1% of the net rentable area) was closed ahead of the February 2019 lease expiry, through which the tenant will continue to pay rent.

For additional information on these malls and for the loan in special servicing, please see the detailed commentary and analysis for each in the DBRS Viewpoint platform, for which information is provided below.

Classes X-A and X-B are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

As part of this review, DBRS has provided updates analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#2, theWit Hotel
-- Prospectus ID#3, 100 West Putnam
-- Prospectus ID#4, Jefferson Mall
-- Prospectus ID#5, Southpark Mall
-- Prospectus ID#10, Illini Tower
-- Prospectus ID#17, One Upland Road
-- Prospectus ID#20, DoubleTree Hotel & Suites – Pittsburgh

For complimentary access to this content, please register for the DBRS Viewpoint platform at viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS-rated transactions.

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

The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance-related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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