DBRS Confirms all Classes and Maintains Negative Trends on Three Classes of JPMCC 2012-CIBX Mortgage Trust

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

--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)

DBRS maintains Negative trends for Classes F, X-B and G. All other trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance with Negative trends maintained for three classes, as noted above, to reflect ongoing concerns regarding the sharp cash-flow declines for some of the largest loans in the pool, as well as the loss of anchor tenants for two regional malls securing two of the top five largest loans in Jefferson Mall (Prospectus ID#4, 7.4% of the pool) and Southpark Mall (Prospectus ID#5, 7.0% of the pool). Both malls are located in secondary markets and are owned and operated by affiliates of CBL & Associates Properties (CBL). The Negative trends were assigned at the last review, when DBRS also noted performance declines for the hotel securing the largest loan in the pool, the Wit Hotel (Prospectus ID #2, 9.3% of the pool). Since the last review, performance for that property has improved significantly, but the in-place debt service coverage ratio (DSCR) still remains low as compared with the DBRS Term DSCR derived at issuance, a factor of a sharp increase in expenses since issuance. In-depth commentary for each of these loans has been provided on the DBRS Viewpoint platform, with information for that site provided below.

The pool was originally secured by 49 loans with a trust balance of $1.3 billion, and as of the January 2019 remittance report, 42 loans remained in the pool with a trust balance of $857.0 million, representing a 33.5% collateral reduction since issuance. The pool benefits from six loans, representing 11.1% of the pool balance, being fully defeased. In addition, only two loans (1.9% of the pool balance) are interest only (IO) for the loan term and ten loans, representing 15.1% of the pool balance, have amortization schedules of 25 years or less.

Of the non-defeased loans, 92.4% of the pool balance reported year-end (YE) 2017 financials and 94.6% of the pool balance reported partial-year 2018 financials. The pool’s financials metrics remain flat from issuance with a weighted-average (WA) year-end (YE) 2017 DSCR and debt yield of 1.43 times (x) and 10.8%, respectively. These figures compare with the WA DBRS Term DSCR and Debt Yield of 1.43x and 9.7%, respectively, that were derived at issuance. The overall flat cash flow growth for the pool is noteworthy, as deals of this vintage are often characterized by strong overall cash flow growth from the issuance estimates, trends typically driven by rental rate growth and occupancy rates that are higher than the more conservative market rates assumed by DBRS at issuance. However, there are several loans in the pool within the top 15 that showed cash flow declines from issuance at YE2017, including the largest loan, as previously mentioned, in the Wit Hotel, but also 100 West Putnam (Prospectus ID#3, 8.3% of the pool), The Illini Tower (Prospectus ID#10, 3.8% of the pool), Plaza Centro (Prospectus ID#16, 2.9% of the pool) and DoubleTree Hotel & Suites – Pittsburgh, Pennsylvania (Prospectus ID#20, 2.0% of the pool), which showed cash flow declines ranging between -15.6% and -70.2% at YE2017 from the DBRS Term NCF figures derived at issuance.

As of the January 2019 remittance report, there was one loan, One Upland Center (Prospectus ID#17, 2.4% of the pool balance), in special servicing. The loan transferred to the special servicer in January 2018 due to a maturity default. The loan is secured by a single-tenant, special-purpose warehouse/office flex property located in Norwood, Massachusetts. Universal Technical Institute has leased the property since 2007 with a lease expiration of October 2022. The borrower was unable to refinance the subject loan due to the short-term nature of the remaining lease term and the tenant’s request for rent relief. The special servicer continues to negotiate with the borrower and expects the loan to resolve in the near term. DBRS assumed a conservative cash flow scenario for the loan to increase the probability of default as part of this review. However, pending any unforeseen circumstances, DBRS does not ultimately expect there to be a significant loss at resolution for this loan.

Nine loans, representing 27.0% of the pool balance, were on the servicer’s watchlist as of the January 2019 remittance, including four of the largest 15 loans. The two largest watchlisted loans are the previously mentioned Jefferson Mall and Southpark Mall loans, which collectively represent 14.3% of the pool balance. Both of these properties recently lost Sears anchors to closures completed as part of the company’s Chapter 11 bankruptcy filing.

The Jefferson Mall loan is secured by the in-line suites of a regional mall in Louisville, Kentucky. Although the collateral in-line space remains well occupied, the total mall occupancy rate fell to approximately 60.0% with the closure of Macy’s in 2017 and Sears in December 2018. News outlets reported CBL purchased these two anchor boxes for the purpose of redeveloping both spaces. As of February 2019, one tenant in Round1 Bowling & Amusement has been signed for part of the Macy’s space, with that venue open as of November 2018. There are three mall properties located in the Louisville area and the subject is the third best of the group, located well south of the Louisville core. However, sales at the subject have historically been relatively healthy, suggesting there is a sustainable shopper base within the area overall. In-line sales for suites with less than 10,000 square feet (sf) remain stable at $357 per square foot (psf) as of YE2017, which is a slight improvement over the sales figure at issuance of $340 psf.

The Southpark Mall loan is secured by the in-line suites and the Sears anchor box of a regional mall in Colonial Heights, Virginia, a tertiary community situated approximately 25 miles south of Richmond. As of the September 2018 rent roll, the subject collateral was 95.6% occupied, but the overall mall occupancy rate is implied at approximately 67.1% when accounting for the January 2018 Sears closure. The mall’s tertiary location within Colonial Heights, which is home to Virginia State University and Fort Lee, has historically meant steady sales performance given the lack of significant competition in the area. In-line sales as of YE2017 were healthy at $347 psf, indicative of a 7.0% improvement over the issuance sales psf of $324. Although the sales trends are encouraging, DBRS believes this property will be particularly challenged when it comes to backfilling the vacated Sears box given the low population base in the area. In addition, the mall already has a sporting goods retailer and an entertainment venue in the existing anchors in Dick’s Sporting Goods and Regal Cinemas, limiting the options for the sponsor among popular choices for operators in the current environment.

Stressed cash flows were applied to both the Jefferson Mall and Southpark Mall loans as part of the review to reflect the increased risk for each. For additional information on both, please see the DBRS loan commentary in the DBRS Viewpoint platform, for which information is provided below.

Classes X-A and X-B are 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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

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

-- Prospectus ID#3 – 100 West Putnam (8.3% of the pool balance)
-- Prospectus ID#4 – Jefferson Mall (7.4% of the pool balance) (DBRS Hotlist)
-- Prospectus ID#5 – Southpark Mall (7.0% of the pool balance)
-- Prospectus ID#10 – The Illini Tower (3.8% of the pool balance) (DBRS Hotlist)
-- Prospectus ID#16 – Plaza Centro (2.9% of the pool balance)
-- Prospectus ID#17 – One Upland Road (2.4% of the pool balance)
-- Prospectus ID #20 – DoubleTree Hotel & Suites – Pittsburgh, Pennsylvania (2.0% of the pool balance)

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 most outstanding CMBS transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. 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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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