DBRS Morningstar Downgrades Two Classes of JPMCC Commercial Mortgage Securities Trust 2015-JP1

DBRS Limited (DBRS Morningstar) downgraded two classes of Commercial Mortgage Pass-Through Certificates, Series 2015-JP1 issued by JPMCC Commercial Mortgage Securities Trust 2015-JP1 as follows:

-- Class F to BB (sf) from BB (high) (sf)
-- Class G to B (high) (sf) from BB (low) (sf)

DBRS Morningstar also confirmed the following classes:

-- 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-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 AA (high) (sf)
-- Class B at AA (sf)
-- Class X-C at A (high) (sf)
-- Class C at A (sf)
-- Class X-D at A (low) (sf)
-- Class D at BBB (high) (sf)
-- Class X-E at BBB (high) (sf)
-- Class E at BBB (sf)

DBRS Morningstar, in addition, changed the trends for Classes F and G to Negative from Stable. All other classes have Stable trends.

The rating downgrades and Negative trend changes for Classes F and G reflect DBRS Morningstar’s outlook for the Holiday Inn Baltimore Inner Harbor loan (Prospectus ID#6; 4.8% of the pool), which is the only loan in the pool currently in special servicing. The loan transferred to special servicing in August 2018 following sustained performance declines for the collateral hotel, a 365-key full-service hotel located in Baltimore’s Inner Harbor area. The property’s struggles were attributed to soft market conditions in the Baltimore area. The special servicer obtained an updated appraisal as of November 2019, which showed an as-is value of $25.9 million, a 57.9% discount to the $61.5 million appraised value at issuance. Coupled with the value decline, there is no upside in sight, particularly given the current environment for hotel properties during the Coronavirus Disease (COVID-19) outbreak, which has resulted in a sharp reduction in travel bookings for both personal and business purposes as efforts to stem the virus’ spread has prompted mass cancellations. DBRS Morningstar estimates that a loss severity in excess of 50.0% will be realized at liquidation.

In general, the pool is concentrated with hotel-backed loans, with three loans in the top 15, including the aforementioned Holiday Inn Baltimore Inner Harbor loan, DoubleTree Tulsa Warren Place (Prospectus ID#9; 2.4% of the pool), and DoubleTree Anaheim – Orange County (Prospectus ID#10; 2.4% of the pool). Although the Anaheim, California, property has performed well since issuance, the Tulsa, Oklahoma, property is on the servicer’s watchlist, reporting cash flows well below issuance levels. For these reasons, the loan is also on the DBRS Morningstar Hotlist.

DBRS Morningstar also notes increased risks for the pool in the Highland Landmark V (Prospectus#4; 6.0% of the pool) loan, which is secured by an office property in Downers Grove, Illinois, within the Chicago metropolitan statistical area. Although the property has shown strong performance since issuance, DBRS Morningstar notes concerns with the largest tenant, Adtalem Global Education (formerly DeVry Education Group; 71.1% of the net rentable area through February 2025), a for-profit college chain that has been in the news for reported inflated job-placement claims and accusations of predatory lending practices. The loan also has a scheduled maturity date of October 2020, which may present a challenge given the current market conditions and major tenant roster. Given these factors, the loan has been placed on the DBRS Morningstar Hotlist.

As of the February 2020 remittance, there had been a collateral reduction of 3.2% since issuance, with all 51 of the original loans remaining in the pool. Three loans, representing 4.0% of the pool, were fully defeased. Loans representing 96.0% of the pool reported YE2018 financials with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.61 times (x) and 9.4%, respectively. The largest 15 loans reported YE2018 financials with a WA DSCR and WA debt yield of 1.57x and 8.7%, respectively, representing a WA cash flow improvement of 7.4% over the DBRS Morningstar net cash flow figures derived at issuance.

As of the February 2020 remittance, 16 loans, representing 16.0% of the pool (including one loan in the top 15), were on the servicer’s watchlist and one loan, representing 4.8% of the pool, was in special servicing. The largest watchlisted loan is the aforementioned DoubleTree Tulsa Warren Place loan.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

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

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

-- Prospectus ID#4–Highland Landmark V (6.0% of the pool)–DBRS Morningstar Hotlist
-- Prospectus ID#6–Holiday Inn Baltimore Inner Harbor (0.6% of the pool)
-- Prospectus ID#9–DoubleTree Tulsa Warren Place (2.4% of the pool)–DBRS Morningstar Hotlist

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding commercial mortgage-backed security transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

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

The principal methodology is the North American CMBS Surveillance Methodology, which can be found on www.dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on www.dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 Morningstar 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar’s outlooks and ratings are monitored.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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