DBRS Morningstar Confirms All Classes of JPMCC 2017-JP7

DBRS Limited (DBRS Morningstar) confirmed the ratings for all classes of the Commercial Mortgage Pass-Through Certificates, Series 2017-JP7 issued by JPMCC Commercial Mortgage Securities Trust 2017-JP7 as follows:

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

All trends are Stable.

With this review, DBRS Morningstar removed Class G-RR from Under Review with Negative Implications, where it was placed on August 6, 2020.

The rating confirmations reflect the overall stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations since issuance. The collateral consists of 37 loans secured by 168 commercial and multifamily properties. As of the December 2020 remittance, the pool had an aggregate principal balance of $796.4 million, representing a marginal collational reduction of 1.8% since issuance.

Loans representing 76.0% of the current pool balance are reporting partial-year 2020 figures. Based on these financials, those loans reported a weighted-average debt-service coverage ratio (DSCR) of 1.78 times (x), which is down slightly from the year-end 2019 figure of 1.98x. At issuance, two loans, representing 12.5% of the current pool balance, were shadow-rated investment grade. These loans include Gateway Net Lease Portfolio (Prospectus ID#2) and West Town Mall (Prospectus ID#7). With this review, DBRS Morningstar confirms that the performance of these loans remains consistent with investment-grade loan characteristics. For additional information on these loans, please see the DBRS Viewpoint platform, for which information has been provided below.

As of the December 2020 remittance, there were two loans in special servicing, representing 4.3% of the current pool balance. The first loan in special servicing is Prospectus ID#13 – Springhill Suites Newark Airport, representing 2.3% of the current pool balance. The collateral is a 200-key limited-service hotel located in Newark, New Jersey, adjacent to the Newark International Airport. The loan transferred to special servicing in June 2020 for imminent monetary default and was 121+ days delinquent as of the December 2020 remittance. The hotel has been closed since April 2020 due to low demand and, according to its website as of January 2021, is taking reservations for bookings beginning in February 2021.

An updated appraisal dated September 2020 has been obtained by the special servicer, showing an as-is value of $20.8 million, down from $28.6 million at issuance but above the outstanding loan balance as of December 2020. The special servicer continues to discuss the workout options with the borrower and, as of December 2020, expected a loan modification to be approved that would allow for a deferral of all principal and interest payments and furniture, fixture, and equipment reserve payments from May 2020 to April 2021.

The second loan in special servicing is Prospectus ID#17 – Carolina Hotel Portfolio, representing 2.0% of the current pool balance. The trust loan is part of a pari passu whole loan and is secured by a portfolio of five hotels located in North Carolina and South Carolina, totaling 511 rooms. The portfolio consists of three flags: Holiday Inn, Comfort Suites, and Fairfield Inn. The loan transferred to special servicing in May 2020 for imminent monetary default and, as of the December 2020 remittance, was 121+ days delinquent. The workout strategy has not been finalized and the special servicer reports negotiations remain ongoing with the borrower. An October 2020 appraisal valued the portfolio at $50.3 million on an as-is basis, down from $55.3 million at issuance but still well above the combined senior loan amount of $35.2 million.

As both of the specially serviced loans appear to be headed for a loan modification and both have reported recent appraisals suggesting there remains value outside of the respective loan balances, neither loan was liquidated in the analysis for this review.

As of the December 2020 remittance, there were 10 loans on the servicer’s watchlist, representing 23.7% of the current pool balance. Six of these loans are being monitored for DSCR declines from issuance; two are being monitored for increased levels of risk due to the Coronavirus Disease (COVID-19) pandemic; one is on the watchlist for deferred maintenance issues; and one loan is being monitored for late financial statement submissions. In general, DBRS Morningstar does not have any significant concerns at this time with any of the watchlisted loans.

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 and X-B 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#13 – Springhill Suites Newark Airport (2.3% of the pool)
-- Prospectus ID#17 – Carolina Hotel Portfolio (2.0% 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 (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 [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.

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

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