DBRS Morningstar Upgrades Three Classes of JP Morgan Chase Commercial Mortgage Securities Trust 2011-C4

DBRS Limited (DBRS Morningstar) upgraded the ratings on three classes of Commercial Mortgage Pass-Through Certificates, Series 2011-C4 issued by JP Morgan Chase Commercial Mortgage Securities Trust 2011-C4 as follows:

-- Class C to AAA (sf) from AA (low) (sf)
-- Class D to AAA (sf) from A (sf)
-- Class E to AA (low) (sf) from BBB (high) (sf)

DBRS Morningstar also confirmed the ratings on the remaining classes as follows:

-- Class F at BBB (low) (sf)
-- Class G at BB (low) (sf)
-- Class H at B (sf)

DBRS Morningstar changed the trend on Class H to Stable from Negative. All other trends are Stable.

The rating upgrades reflect the collateral reduction to date, while the rating confirmations reflect the overall stable performance of the remaining collateral in the transaction. Since December 2020, 10 loans, with a combined balance of $141.2 million, have been repaid. As a result, there has been total collateral reduction of 86.7% since issuance. As of the June 2021 remittance, the remaining collateral consists of three loans, the largest of which is the Newport Centre loan (Prospectus ID#1, 87.3% of the pool).

The Newport Centre loan is secured by a 782,000-square-foot (sf) portion of a 1.15-million-sf regional mall located in Jersey City, New Jersey, owned by a joint venture between Melvin Simon & Associates and the LeFrak family, who also developed the Newport Master Planned Community where the property is located. The management company for Simon Property Group manages the mall. The loan was transferred to special servicing in July 2020 when a Coronavirus Disease (COVID-19) relief request was made by the borrower. A loan modification was granted in September 2020 that allowed for the deferral of principal, replacement, and leasing reserve payments from May 2020 through to July 2020. The loan was brought current in November 2020 and was returned to the master servicer in January 2021.

The loan was transferred to special servicing for a second time, however, after the loan failed to repay at its May 2021 maturity date. The servicer reports that the borrower has requested approval for a loan modification that would extend the maturity date for a period of two years through to May 2023, with an additional 12-month extension option available that would extend the maturity through May 2024. The servicer has not provided confirmation of a modification or terms to date, but the loan was returned to the master servicer with the June 2021 remittance, suggesting a modification has closed. DBRS Morningstar has requested details and the servicer’s response is pending as of the date of this press release.

Prior to the pandemic, performance had been quite stable, with the YE2019 and YE2018 debt service coverage ratios (DSCRs) reported at 2.08 times (x) and 2.05x, respectively. Cash flow dipped slightly in 2020 due to lower percentage rents and other income, with occupancy holding steady at 93.2% as of February 2021. The YE2020 DSCR was reported at 1.85x, representing a 10.8% decline from YE2019 and a 9.7% increase from the issuer’s underwritten DSCR.

Although the healthy DSCR figures are encouraging, DBRS Morningstar does note risks in the anchor mix, which includes Macy’s (23.6% of total net rentable area (NRA), expiring January 2028), Sears (19.8% of total NRA, subject to a ground lease that expires in October 2027), JCPenney (18.5% of total NRA, expiring January 2050), Kohl’s (14.9% of total NRA, expiring January 2028), and an 11-screen AMC Theatres (4.9% of total NRA, expiring January 2026). All of these tenants have reported difficulties both before and during the pandemic, with noteworthy developments including JCPenney’s Chapter 11 bankruptcy filing in May 2020 and Macy’s prepandemic announcement that 125 stores would be closed in the next few years. Although there is tenant risk at the subject, the mall has held its value even throughout the pandemic, with the most recent appraised value as of April 2021 being reported at $315.0 million. This represents a 6.5% decline from the issuance value of $337.0 million but is still well in excess of the current loan amount of $167.6 million.

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.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.

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 26, 2021), 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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