DBRS Morningstar Confirms All Ratings on JP Morgan Chase Commercial Mortgage Securities Trust 2013-C16

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2013-C16, issued by JP Morgan Chase Commercial Mortgage Securities Trust 2013-C16 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 C at A (low) (sf)
-- Class EC at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-C at B (high) (sf)
-- Class F at B (sf)

All trends remain Stable.

The rating confirmations and Stable trends reflect the overall stable performance of the transaction. Per the October 2021 remittance, 48 of the original 60 loans remain in the pool, with an aggregate principal balance of $744.2 million, representing a collateral reduction of 34.5% since issuance as a result of loan repayments, scheduled amortization, and the liquidation of one loan. In addition, 18 loans, representing 27.0% of the current pool balance, are defeased.

The transaction is relatively diverse by property type, with multifamily, office, and retail properties securing 22.0%, 19.9%, and 16.2%, respectively, of the current nondefeased pool balance. Only three loans, representing 11.2% of the current pool balance, are secured by lodging properties, which is noteworthy as these property types were the most immediately affected by the Coronavirus Disease (COVID-19) pandemic. The pool displays some concentration from a loan size perspective as its largest loan, The Aire, accounts for 16.4% of the current pool balance. This loan, secured by a 310-unit luxury apartment on the Upper West Side of Manhattan, has been on the servicer’s watchlist since February 2017 because of a debt service coverage ratio (DSCR) below breakeven, primarily as a result of a steady rise in real estate taxes as the property’s 10-year tax abatement burns off, leading to tax increases of 20.0% every two years since 2014. The poor performance was recently further exacerbated as a result of the pandemic, with occupancy falling to a low of 73.0% as of March 2020, at which point the loan’s DSCR fell to 0.22 times (x). However, per the July 2021 rent roll, occupancy has rebounded to 95.0% with an average rental rate of $5,885 per unit, in line with historical figures from before the pandemic. While cash flow continues to significantly trail expectations, the sponsor has kept the loan current with no missed payments reported to date. Given the continuing performance struggles, DBRS Morningstar analyzed this loan with an increased probability of default (POD) for this review.

According to the October 2021 remittance, 11 loans, representing 41.0% of the current pool balance, are on the servicer’s watchlist. These loans are being monitored for a number of reasons, including low DSCRs, increased vacancy, near-term tenant rollover, and/or pandemic-related hardships. Excluding the The Aire loan, the other 10 loans on the watchlist had a weighted average DSCR of 0.97x, based on the most recent reporting (primarily Q1 2021 and Q2 2021 financial reporting), an improvement from 0.84x at YE2020. Three other loans, representing 8.2% of the current pool balance, are in special servicing.

The largest loan in special servicing, Hilton Richmond Hotel & Spa (Prospectus ID#7, 5.2% of the current pool balance), is secured by a 254-key, full-service hotel in Richmond, Virginia. The property has historically benefited from its proximity to several major corporate headquarters as well as its 21,700 sf of meeting space, but it has been severely negatively affected by the pandemic. The loan transferred to the special servicer in April 2020 for imminent default and is currently listed as 121+ days delinquent; however, the borrower recently signed a reinstatement agreement and is now working with the receiver to resume operating the property. While terms have not been fully disclosed, the loan is pending a return to the master servicer as of the October 2021 reporting as the borrower works to bring the loan current.

Based on the STR report for the trailing three months (T-3) ended July 31, 2021, the property reported occupancy, average daily rate (ADR), and revenue per available room (RevPAR) figures of 61.3%, $119, and $73, respectively, compared with the competitive set’s figures of 59.7%, $117, and $70, respectively. While these figures are still well below those of the pre-pandemic T-3 ended July 31, 2019, at 73.3%, $146, and $102, respectively, performance is trending in the right direction, with a RevPAR penetration rate of 105.2% during July 2021. While it appears foreclosure has been avoided, there are still a number of obstacles for the borrower to overcome and, as such, DBRS Morningstar has elevated the loan’s POD for this review. Based on the February 2021 as-is value of $47.7 million, the loan was leveraged to 82.3%.

The second-largest loan in special servicing, Northpointe Center (Prospectus ID#23, 1.7% of pool), is secured by a community retail center with five single-story buildings totaling 90,000 sf in Zanesville, Ohio. The loan was transferred to special servicing in June 2020 for imminent default, with a receiver appointed in September 2020 and a foreclosure sale in June 2021 resulting in the loan becoming real estate owned as of September 2021. The property was appraised in May 2021 with an as-is value of $9.6 million, representing a 50.8% decline from the issuance value of $19.5 million, and an LTV of 143.7%, based on the total loan exposure. The property was 37.0% occupied as of September 2021 with additional risks of near-term tenant rollover and co-tenancy clauses. DBRS Morningstar liquidated this loan from the trust in its analysis for this review and anticipates a loss severity in excess of 50.0% upon resolution.

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, and X-C 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.

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 the 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

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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