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

DBRS, Inc. (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 B (sf) from BB (sf)
-- Class G to CCC (sf) from B (high) (sf)

DBRS Morningstar also confirmed the following classes:

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

DBRS Morningstar removed Classes E, F, G, and X-E from Under Review with Negative Implications, where they were placed on August 6, 2020. All trends are Stable, with the exception of Class F, which has a Negative trend, and Class G, which doesn’t carry a trend. The downgrades and Negative trend reflect a loss incurred by the trust since the last review, as well as anticipated losses upon resolution of the transaction’s largest specially serviced loan.

As of the February 2021 remittance, the pool’s balance had been reduced to $621.7 million from $799.2 million at issuance, resulting from the payoff of six loans and scheduled amortization. Additionally, the pool recorded its first loss in October 2020 when the $36.6 million Holiday Inn Baltimore Inner Harbor loan, formerly the sixth-largest loan, liquidated with a $22.6 million loss.

Eight loans, representing 11.5% of the pool, are with the special servicer. The largest specially serviced loan is the DoubleTree Tulsa Warren Place loan (Prospectus ID#9, 3.0% of the pool), which is secured by a 370-room full-service hotel in Tulsa, Oklahoma. The loan transferred to the special servicer in May 2020 ahead of the December 2020 maturity due to Coronavirus Disease (COVID-19) related hardships. The property has not met the issuance net cash flow for the past several years, with the 2019 cash flow reported at $1.4 million, or 36% below the issuer’s level of $2.2 million. The coronavirus pandemic further stressed the property and it reported a September 2020 cash flow below breakeven. The property was reappraised for $15.0 million in October 2020, 56% lower than the at-issuance appraisal value of $34.2 million. The hotel is being sold via receivership and the special servicer set best and final offers by February 2021. As part of this analysis, DBRS Morningstar liquidated the loan from the trust and expects a loss upon resolution.

The second-largest specially serviced loan is the DoubleTree Anaheim – Orange County loan (Prospectus ID#10, 2.9% of the pool balance), which is secured by a 461-room full-service hotel in Orange County, California, and transferred to special servicing in July 2020 for payment default. The subject is located in close proximity to several major demand drivers, primarily Disneyland and the Anaheim Convention Center, both of which have been effectively closed by the coronavirus pandemic and are currently functioning as vaccination sites. The borrower has presented the special servicer with resolution options to bring the loan current, which are being evaluated by the lender. An updated appraisal as of August 2020 valued the property as-is at $61.1 million, a 23.5% decline from the issuance value of $83.8 million but still well in excess of the whole loan amount. The appraisal also lists a stabilized value of $90.4 million, which incorporates occupancy and average daily rate increases over a three-year period.

The cross-collateralized/cross-defaulted Franklin Ridge loans (Prospectus IDs#13, 14, and 15, totaling 2.7% of the pool balance) are secured by a total of 133,869 sf of medical office space across three buildings in White Marsh, Maryland, about 10 miles northeast of Johns Hopkins University. The 9910 building was 100% leased to Johns Hopkins, which had a lease expiration in December 2020; it is unclear if Johns Hopkins vacated, returned any space, or if it renewed the lease, but it appears likely that the transfer was related to this lease expiration. Additionally, the 9900 building lost a large tenant in 2018, which reduced occupancy at that building to 77%, down from 100% since issuance and performance has hovered just above breakeven for the last few years. However, the tenant that vacated remained at this campus and took a smaller space in the 9920 building. All three loans remain current as of the February 2021 remittance.

There are 11 additional loans, representing 12.3% of the pool, on the servicer’s watchlist. These loans are being monitored for various reasons, including low debt service coverage ratios or occupancy, tenant rollover risk, and/or pandemic-related forbearance requests.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, X-C, X-D, and X-E 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 complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer date 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 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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