DBRS Confirms All Classes of JPMCC Commercial Mortgage Securities Trust 2016-JP2

DBRS Limited (DBRS) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2016-JP2 issued by JPMCC Commercial Mortgage Securities Trust 2016-JP2:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 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 AA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class X-C at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance. The deal closed in July 2016 with an original trust balance of $939.2 million. At issuance, the transaction consisted of 47 fixed-rate loans secured by 78 commercial and multifamily properties. As of the June 2018 remittance, there has been a collateral reduction of 0.9% since issuance due to scheduled loan amortization with all loans remaining in the pool. All but two loans in the pool reported YE2017 financials, reporting a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.76 times (x) and 10.0%, respectively; both figures are an improvement from the YE2016 figures.

In addition to benefiting from stable cash flow performance since issuance, the largest loans in the pool have performed particularly well. Based on the YE2017 financials, the Top 15 loans (65.4% of the pool) reported a WA DSCR of 1.83x, compared with the WA DBRS Term DSCR at issuance of 1.56x, representing a WA net cash flow (NCF) growth of 16.0% from the DBRS NCF figures derived at issuance for those loans. There is one top 15 loan being monitored closely by DBRS in Four Penn Center (Prospectus ID#13, 2.2% of the pool), which is secured by an office tower in Philadelphia, Pennsylvania. The property has seen occupancy and declining cash flow performance since issuance, when the property was 84.5% occupied. As of the March 2018 rent roll, the property’s leased rate had fallen to 72.5%. DBRS assumed a stressed scenario for that loan with this review to increase the probability of default (POD).

As of the June 2018 remittance, there are seven loans, representing 8.6% of the pool balance, on the servicer’s watchlist, and no loans in special servicing. The most noteworthy watchlist loan is the Dollar General Portfolio (Prospectus ID#25, 1.4% of the current pool balance), which is secured by 27 freestanding Dollar General stores located in Ohio and West Virginia. The loan was placed on the servicer’s watchlist for delinquent monthly payments since April 2018, with the servicer’s notes indicating the lockbox funds have been insufficient to cover the monthly debt service due and the sponsor contributing the remainder late for the past several months. DBRS has requested clarification on the payment status with this loan, as all rents should be deposited into the lockbox with more than enough funds to cover the monthly payment amount. To increase the POD for this loan, DBRS has assigned a sponsor strength of Weak for the purposes of this review to reflect the ongoing issues with the payments. For additional information on this loan, please see the DBRS Viewpoint platform, for which information has been provided below.

At issuance, DBRS shadow-rated The Shops at Crystals (Prospectus ID#6, 5.3% of the pool balance) investment grade. With this review, DBRS confirms that the performance of this loan remains consistent with investment-grade characteristics.

Classes X-A, X-B and X-C 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.

For more information on this transaction and supporting data, please log into www.viewpoint.dbrs.com. DBRS will continue to monitor this transaction with periodic updates provided in the DBRS Viewpoint platform.

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 – Opry Mills
-- Prospectus ID#6 – The Shops at Crystals
-- Prospectus ID#9 – Hagerstown Premium Outlets
-- Prospectus ID#12 – 700 17th Street
-- Prospectus ID#13 – Four Penn Center
-- Prospectus ID#14 – Aloft Milwaukee
-- Prospectus ID#25 – Dollar General Portfolio
-- Prospectus ID#26 – Autumn Park Apartments

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 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.