DBRS Morningstar Downgrades Two Classes of JPMBB 2015-C28, Removes Six Classes from UR-Neg.

DBRS Limited (DBRS Morningstar) downgraded two classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C28 issued by JPMBB Commercial Mortgage Securities Trust 2015-C28 as follows:

-- Class X-F at B (sf) from B (high) (sf)
-- Class F at B (low) (sf) from B (sf)

In addition, DBRS Morningstar confirmed the remaining classes as follows:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S 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 X-E at BB (sf)
-- Class E at BB (low) (sf)

Classes D, E, F, X-D, X-E, and X-F were removed from Under Review with Negative Implications, where they were placed on August 6, 2020. The trends for these classes are Negative. All other trends are Stable. The Negative trends and rating downgrades reflect the continued performance challenges for the underlying collateral, much of which has been driven by the impacts of the Coronavirus Disease (COVID-19) global pandemic. In addition to loans representing 12.3% of the pool in special servicing as of the October 2020 remittance, DBRS Morningstar also notes the pool has a high concentration of retail and hospitality properties, representing 49.3% and 13.5% of the pool balance, respectively. These property types have been the most severely affected by the initial effects of the coronavirus pandemic and as such, those concentrations suggest increased risks for the pool, particularly at the lower rating categories, since issuance.

As of the October 2020 remittance, 60 of the original 68 loans remain in the pool, representing a collateral reduction of 19.4% since issuance. There are four loans, representing 12.3% of the pool, in special servicing, including the second-largest loan, The Shops at Waldorf Center, which is 30 to 59 days delinquent and is secured by a 497,000-square-foot anchored retail property in Waldorf, Maryland. The collateral property’s occupancy rate has fallen precipitously over the last few years but cash flows have remained relatively healthy, with a YE2019 debt service coverage ratio (DSCR) of 1.59 times (x) reported by the servicer. The loan transferred to special servicing in July 2020 for imminent default related to the coronavirus pandemic. In addition to the trust loan, there is a $10 million mezzanine loan. Discussions regarding the workout strategy between the special servicer, borrower, and the mezzanine holder are ongoing. For more information on this loan, please visit www.viewpoint.dbrsmorningstar.com. Given the performance declines for the collateral property and uncertainty surrounding the resolution of the outstanding defaults, DBRS Morningstar analyzed this loan with an elevated probability of default for this review.

The other three loans in special servicing are notably backed by anchored retail, full-service hotel, and unanchored retail property types. The second-largest loan in special servicing is the Horizon Outlet Shoppes Portfolio (Prospectus ID#12, 2.9% of the pool), a pari passu loan which transferred to special servicing in March 2020, prior to the onset of the pandemic. According to a March 2020 appraisal obtained by the special servicer, the collateral portfolio of three outlet malls located in Wisconsin, Washington, and Indiana was valued at $39.1 million, down from the issuance value of $87.4 million and well below the total senior loan balance of $51.5 million. As of the October 2020 remittance, the loan is more than 121 days delinquent and a receiver was appointed at all three properties by August 2020. The special servicer reports discussions regarding a potential deed-in-lieu have been held, with a foreclosure strategy also being dual-tracked. The collateral properties are located in tertiary and rural markets, and the servicer reported a YE2019 DSCR of 0.91x. Given the sharp value decline from issuance and the likelihood that the trust will eventually own the collateral properties, this loan was analyzed with a liquidation scenario that implied a loss severity in excess of 50.0%.

According to the October 2020 remittance, 10 loans are on the servicer’s watchlist, representing 13.4% of the current pool balance. These loans are being monitored for various reasons including low DSCR or occupancy, tenant rollover risk, and/or pandemic-related forbearance requests. Four loans, representing 2.6% of the current pool balance, are fully defeased. Based on the YE2019 financials, the pool reported a weighted-average DSCR of 2.34x, compared with the issuer’s DSCR of 1.97x.

ESG CONSIDERATIONS
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, X-E, and X-F 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 – Houston Galleria (16.3% of the pool)
-- Prospectus ID#2 – The Shops at Waldorf Center (8.4% of the pool)
-- Prospectus ID#12 – Horizon Outlet Shoppes Portfolio (2.9% 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 North American CMBS Surveillance Methodology (March 6, 2020), which can be found on 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 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.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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.

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