DBRS Morningstar Finalizes Provisional Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-NYAH

DBRS, Inc. (DBRS Morningstar) finalized provisional ratings to the following classes of Commercial Mortgage Pass-Through Certificates, Series 2021-NYAH to be issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-NYAH (JPMCC 2021-NYAH):

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class X-CP at AA (sf)
-- Class X-EXT at AA (sf)
-- Class D at AA (low) (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (low) (sf)
-- Class G at BB (low) (sf)
-- Class H at B (low) (sf)

All trends are Stable.

Classes X-CP and X-EXT are interest-only (IO) classes whose balances are notional.

The collateral for JPMCC 2021-NYAH includes the borrowers' fee-simple interest in 11 multifamily portfolios encompassing 31 properties, 53 buildings, 3,531 multifamily units, and 23,051 square feet of commercial space located throughout the Bronx, Brooklyn, Queens, and Upper Manhattan boroughs of New York. The transaction sponsor acquired all properties in the portfolio between 2015 and 2017 for a total of $776.8 million and has a current cost basis of approximately $907.4 million. While the properties were originally built between 1915 and 1964, DBRS Morningstar considers its concerns with the older construction vintage to be mitigated by the sponsor’s significant investment of $130.6 million ($36,982 per unit) in capital improvements across the properties since acquisition. Specifically, the sponsor has completed $96.0 million ($27,202 per unit) of buildingwide capital expenditures and 1,255 unit renovations with an additional 227 unit renovations in progress at a cost of $34.5 million ($23,303 per unit).

There are 3,069 affordable units (86.9% of total) across the portfolio, which DBRS Morningstar generally views as favorable because of the enhanced cash flow stability. The collateral had an average occupancy of 92.4% from January 2019 through August 2021 despite having a considerable number of units under renovation. Occupancy is slightly down at 90.5% as of the August 31, 2021, rent roll, but DBRS Morningstar primarily attributes this to renovations at more than 200 units. The submarkets across the portfolio experienced average asking rent decreases in 2020 ranging from 0.2% to 7.8% according to Reis. However, DBRS Morningstar recognizes that the properties have limited exposure to rent declines as a result of a heavy concentration of affordable units that already have below-market rents. Ultimately, DBRS Morningstar’s outlook on the stability of multifamily assets in and around the New York Metro area has historically been positive, as the region is considered to be a top-tier, super-dense urban market and the global epicenter for banking and financial services.

Four properties, representing 18.3% of the allocated loan amount, benefit from some form of tax abatement or exemption, which poses moderate refinance risk as rises in future tax rates resulting from the loss of such benefits could diminish the value of the underlying collateral as derived through income capability. However, tax abatement benefits throughout the portfolio are generally correlated with the provision of affordable housing units. Such affordable units are generally considered to be leased at below-market rates to make them affordable to tenants at limited income levels. As a result, loss of tax abatement benefits might also result in the ability to lease such affordable units at market-rate rents, potentially offsetting reductions in net cash flow otherwise incurred from a loss of abatement benefits. The portfolio’s favorable location in a super-dense urban market, the strong fundamentals of the surrounding multifamily market, and the sponsor’s evidenced experience in the local market reinforce DBRS Morningstar’s comfort in the portfolio’s ability to maintain cash flow stability.

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-CP and X-EXT are 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.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrsmorningstar.com. DBRS Morningstar provides analysis and in-depth commentary in the DBRS Viewpoint platform.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes loan-level 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.

This press release was amended on October 27, 2022, to remove the reference to ratings of Classes A-1, A-2, B-1, B-2, C-1, C-2, D-1, and D-2, which were originally published as a result of an administrative error.

Notes:
All figures are in U.S. dollars unless otherwise noted.

With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar’s methodology, DBRS Morningstar used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is North American Single-Asset/Single-Borrower Ratings Methodology (March 2, 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/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

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

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