DBRS Confirms All Classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C8

DBRS Limited (DBRS) confirmed all classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C8 of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C8 as follows:

-- Class A-3 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class C at AA (low) (sf)
-- Class EC 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)

All trends are Stable.

Class EC is exchangeable with Class A-S, Class B and Class C (and vice versa).

The rating confirmations reflect the overall stable performance of the transaction since issuance and since the last review, when DBRS upgraded four classes. As of the June 2018 remittance, 37 of the original 43 loans remain in the pool, with collateral reduction of 26.2% since issuance as the result of scheduled amortization and loan repayments. There is one loan that has been defeased, Prospectus ID#11: One Kennedy Square, representing 2.8% of the pool balance. There have been no realized losses to date, but there is one loan, Prospectus ID#23: Main Street Tower (1.6% of the pool), currently in special servicing.

In addition to the collateral reduction since issuance, the transaction benefits from overall healthy credit metrics for the underlying collateral. As of the June 2018 remittance, there were 31 loans, representing 89.4% of the pool balance, reporting YE2017 financials, with a weighted-average (WA) debt service coverage ratio (DSCR) and in-place debt yield of 1.56 times (x) and 11.5%, respectively. Comparatively, the WA DBRS Term DSCR and WA DBRS Debt Yield for those loans at issuance were 1.56x and 9.5%, respectively. Of the largest 15 loans, which represent 74.6% of the transaction balance, 14 loans are non-defeased and, as of June 2018, were reporting YE2017 or Q3 2017 financials. The 14 largest non-defeased loans represent 71.8% of the pool balance, and based on the YE2017 or annualized Q3 2017 figures, reported WA net cash flow (NCF) growth of 13.0% over the DBRS NCF figures, with a WA DSCR of 1.79x and WA in-place debt yield of 11.7%.

However, there are two top 15 loans reporting cash flow declines from issuance, including the only loan on the servicer’s watchlist, Prospectus ID#5: Ashford Office Complex, and Prospectus ID#7: Hotel Sorella City Centre, which total 12.0% of the pool balance. Both loans are secured by properties located in Houston, where declines in the oil and gas markets have contributed to lower occupancy rates for commercial properties in recent years. In the case of these loans, DBRS assumed a stressed cash flow scenario to increase the probability of default (POD) in the analysis. For further information on the DBRS analysis and viewpoint, please see the loan commentary on the DBRS Viewpoint platform, for which information has been provided below.

The largest loan in the pool, Prospectus ID#1: Battlefield Mall (14.2% of the pool), is secured by a regional mall located in Springfield, Missouri, a tertiary market in the southern portion of the state. The mall is anchored by collateral tenants in Dillard’s, Dillard’s Men and Home and Macy’s, as well as a non-collateral Sears. Recent news reports have suggested Sears is trying to sell the box and lease it back from the buyer; DBRS has requested confirmation of these reports from the servicer. A YE2017 tenant sales report provided for the property showed a total sales decline of 4.1% from YE2016, with in-line tenants reporting sales of $374 psf, a decline of 7.0% year over year. Cash flows remain healthy, with a YE2017 DSCR of 2.43x, implying cash growth of 24.1% over the DBRS NCF figure since issuance. For further detail on this property, please see the loan commentary on the DBRS Viewpoint platform.

The specially serviced loan, Main Street Tower, is secured by a Class B office building located in downtown Norfolk, Virginia. The loan has been in special servicing since January 2016. The property has suffered from occupancy declines since issuance, and the largest remaining tenant, the U.S. Coast Guard (65.1% of the net rentable area), has been in negotiations with the borrower to extend its lease expiring in 2021. The January 2018 appraisal obtained by the servicer showed an as-is value for the property at $21.1 million, suggesting value well outside of the $14.0 million trust exposure as of June 2018. However, DBRS expects that a near-term liquidation would likely bring a lower selling price than implied by the appraisal. As such, DBRS believes the special servicer’s strategy for modifying the loan to allow the sponsor time to stabilize the asset is the best course of action. In the analysis for this loan, the cash flow was highly stressed to increase the POD. For further information on the DBRS outlook for this loan, please see the loan commentary on the DBRS Viewpoint platform.

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 applicable reference obligation 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 updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#1: Battlefield Mall
-- Prospectus ID#5: Ashford Office Complex
-- Prospectus ID#7: Hotel Sorella City Centre
-- Prospectus ID#23: Main Street Tower

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire commercial mortgage-backed security 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.