DBRS Morningstar Confirms All Classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C8

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C8 issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C8:

-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (low) (sf)
-- Class EC at AA (low) (sf)
-- Class D at A (low) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class X-B at B (high) (sf)
-- Class G at B (sf)

DBRS Morningstar removed Classes X-B and G from Under Review with Negative Implications, where they were placed on August 6, 2020. All trends are Stable, with the exception of Classes X-B and G, which carry Negative trends.

The Negative trends are reflective of DBRS Morningstar’s concerns surrounding the larger watchlisted loans in the pool. As of the February 2021 remittance, the initial trust balance of $1.1 billion had been reduced by 39.7% to $685.5 million, with 29 of the original 43 loans remaining in the pool. The transaction is concentrated by property type, as 12 loans, representing 32.5% of the pool, are secured by retail collateral. To date, there have been no losses incurred to the trust, and, as of the February 2021 remittance, no loans were delinquent or in special servicing. The pool benefits from a relatively large amount of defeasance, as four loans, representing 18.6% of the pool, are fully defeased.

There are nine loans, representing 39.1% of the pool, being monitored on the servicer’s watchlist. These loans are generally being monitored for low debt service coverage ratios (DSCRs) and low occupancy. The Gallery at Harborplace loan (Prospectus ID#4, 10.2% of the pool) is the largest loan on the watchlist and is secured by a mixed-use property consisting of office and retail space in downtown Baltimore. The loan was added to the servicer’s watchlist in December 2020 after the loan reported an annualized Q3 2020 DSCR of 0.74 times (x) and an occupancy rate of 69.5%, a decrease from the YE2019 DSCR of 1.29x and occupancy of 79%. The property has been negatively affected by the Coronavirus Disease (COVID-19) pandemic and the loss of several smaller retail tenants, which has resulted in a 10% drop in occupancy in 2020. This has led to a 13% decline in base rent and a 45% decline in other income in comparison with YE2019 figures. The property’s retail space is highly dependent on foot traffic generated by other Inner Harbor attractions like the National Aquarium, and a rebound in net cash flow will be somewhat dependent on a rebound in tourism.

Hotel Sorella CityCentre (Prospectus ID#7, 6.3% of the pool) is the largest hotel loan in the pool and was added to the servicer’s watchlist in July 2020 for low occupancy and a low DSCR as a result of the coronavirus pandemic. The loan is secured by a boutique luxury full-service hotel in Houston’s Energy Corridor and has historically relied on clientele from the oil and gas industry. Despite the downturn in the oil industry, the loan had continued to report a healthy DSCR before the pandemic, most recently with a YE2019 DSCR of 1.45x (although net cash flow slightly lagged issuance levels). The hotel has been severely affected by the pandemic, reporting a Q2 2020 annualized DSCR of -0.15x. The loan remains current as of the February 2021 remittance.

DBRS Morningstar remains concerned about the Ashford Office Complex (Prospectus ID#5, 7.6% of the pool) and The Crossings (Prospectus ID#9, 4.6% of the pool) loans. Both loans have been monitored on the servicer’s watchlist since 2018 for low occupancy and low DSCRs. Ashford Office Complex is secured by three office buildings in Houston’s Energy Corridor and most recently reported a Q3 2020 annualized DSCR of 0.78x with an occupancy rate of 56%. The Crossings is secured by an office property in Dallas. This loan most recently reported a Q3 2020 annualized DSCR of 0.57x with an occupancy rate of 58%. Both properties are in submarkets with vacancy rates exceeding 20%. DBRS Morningstar analyzed all previously mentioned loans with elevated probabilities of default to reflect their current risk profiles.

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 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 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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