DBRS Morningstar Changes Trend on Two Classes and Confirms Ratings on All Classes of JPMBB Commercial Mortgage Securities Trust 2015-C32

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C32 issued by JPMBB Commercial Mortgage Securities Trust 2015-C32:

-- 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 (sf)
-- Class B at AA (low) (sf)
-- Class X-C at A (sf)
-- Class C at A (low) (sf)
-- Class EC at A (low) (sf)
-- Class X-D at BBB (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (sf)
-- Class G at B (low) (sf)

All trends are Stable with the exception of Classes F and G which were assigned a Negative trend. The Negative trends reflect DBRS Morningstar’s concerns with the exposure of hotel loans in the top 15 because the Coronavirus Disease (COVID-19) pandemic has resulted in mass cancellations of conferences, sporting events, and entertainment events that are expected to significantly affect the cash flow of hotel properties across the country. Both the Hilton Suites Chicago Magnificent Mile loan (Prospectus ID#1; 7.0% of the pool) and Hyatt Place Texas Portfolio loan (Prospectus ID#14; 2.3% of the pool) are on the servicer’s watchlist for performance declines for the collateral hotels, all of which are situated in locations heavily dependent on tourist traffic. Additionally, the Hilton Atlanta Perimeter loan (Prospectus ID#12; 2.7% of the pool) is expected to be adversely affected by the cancellations of large sporting events and conventions within the Atlanta Metropolitan Statistical Area, including the NCAA Final Four. That loan is performing in line with issuance expectations, however, suggesting the overall impact could be less significant by comparison.

The rating confirmations reflect the overall performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since issuance. As of the February 2020 remittance, there has been a collateral reduction of 10.9% since issuance, with 86 of the original 89 loans remaining in the pool. Four loans, representing 2.8% of the pool, are fully defeased.

Loans representing 96.9% of the pool reported YE2018 financials with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.46 times (x) and 10.0%, respectively. The largest 15 loans reported YE2018 financials with a WA DSCR and WA debt yield of 1.36x and 9.5%, respectively, representing a WA cash flow improvement of 6.9% over the DBRS Morningstar net cash flow figures derived at issuance.

As of the February 2020 remittance, 15 loans, representing 22.4% of the pool (including three loans in the top 15), are on the servicer’s watchlist and two loans, representing 2.0% of the pool, are in special servicing. Hilton Suites Chicago Magnificent Mile has been on the watchlist for several years due to a depressed DSCR, part of which is attributable to ongoing renovations for the hotel. In addition, the hotel lost a notable corporate account since issuance and this factor, along with an increase in supply in the submarket, has suppressed cash flow below the issuance expectations. The hotel’s cash flow is expected to be further suppressed because of the COVID-19 pandemic. DBRS Morningstar reviewed this loan with a significantly increased probability of default to capture the increased risks from issuance.

The largest loan in special servicing, Town & Country Shopping Center (Prospectus ID#26; 1.3% of the pool), is secured by a community shopping centre located in Springfield, Illinois. The loan was transferred to special servicing for monetary default in March 2019 after the property’s largest tenant, Burlington Coat Factory (24.1% of net rentable area (NRA)), vacated in April 2018 and the property’s second-largest tenant, Illinois Board of Elections (10.4% of NRA; lease expires January 2022), fell behind on its rent payments. With this review, DBRS Morningstar assumed a loss severity approaching 60% at liquidation, based on the most recent appraised value.

For additional information on these and other pivotal loans, please see the loan commentary on the DBRS Viewpoint platform, for which information has been provided below.

At issuance, DBRS Morningstar shadow-rated the U-Haul Portfolio Loan (Prospectus ID#5; 3.0% of the pool) as investment grade and, with this review, DBRS Morningstar confirms that the performance of the loan remains consistent with investment-grade loan characteristics.

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, and X-D 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 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#1 – Hilton Suites Chicago Magnificent Mile (7.0% of the pool)
-- Prospectus ID#2 – Civic Opera Building (7.0% of the pool)
-- Prospectus ID#14 – Hyatt Place Texas Portfolio (2.3% of the pool)
-- Prospectus ID#26 – Town & Country Shopping Center (1.3% of the pool)
-- Prospectus ID#38 – Old Stage Warehouse (0.7% of the pool)

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 CMBS 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 info@dbrsmorningstar.com.

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 info@dbrsmorningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577