DBRS Morningstar Confirms All Classes, Maintains Negative Trends on Three Classes of JPMBB Commercial Mortgage Securities Trust 2015-C31

DBRS Limited (DBRS Morningstar) confirmed its ratings on all the classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C31 issued by JPMBB Commercial Mortgage Securities Trust 2015-C31 as follows:

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

The trends for Classes D, E, and X-D remain Negative, reflective of concerns surrounding the largest loan in the pool, Civic Opera Building (Prospectus ID#1, 9.4% of the pool) and its ultimate resolution. The trends on Classes A-S, B, C, EC, X-A, X-B, and X-C were changed to Stable from Negative, reflecting the positive developments for large loans previously on the servicers’ watchlist and the additional $110.0 million in defeasance collateral from DBRS Morningstar’s last review of the transaction in March 2021. All other trends remain Stable, with an exception of Class F, which has a rating that does not carry a trend.

The rating confirmations reflect the overall stable performance of the transaction. According to the January 2022 remittance, 54 of the original 58 loans remain in the trust, representing a collateral reduction of 13.9% since issuance with a current trust balance of $889.1 million. The pool benefits from 11 defeased loans, representing 18.9% of the current pool balance. Six loans, representing 13.4% of the current pool balance, are in special servicing, with three of those loans representing 11.0% of the current pool balance, currently delinquent on debt-service payments. There are 14 loans, representing 22.3% of the current pool balance, on the servicer’s watchlist, including 11 that have been flagged for low debt service coverage ratios (DSCR).

The largest loan in special servicing, Civic Opera Building (Prospectus ID#1, 9.4% of the pool), is secured by the borrower's fee-simple interest in a 915,162-square-foot office property in Chicago’s West Loop District. The loan transferred to special servicing in June 2020 due to imminent monetary default as a result of the Coronavirus Disease (COVID-19). As of December 2021, the loan was 121+ days delinquent with the servicer reporting it is pursuing multiple workout strategies including ongoing forbearance negotiations with the borrower and foreclosure, as a consensual receivership was also awarded by the courts, according to a November 2021 servicer commentary. The most recent appraisal reported by the servicer, dated February 2021, valued the property at $165.0 million, down 25% from the appraised value of $220.0 million at issuance, equating to a current whole-loan loan-to-value ratio of 94.2%. As of March 2021, the property reported an occupancy rate of 75.0% and a DSCR of 0.73 times (x), compared with the YE2020 figures of 75.0% and 0.80x, respectively. The cash flow declines have been the result of lower occupancy rates in the last few years, as well as significant increases in payroll and real estate tax expenses. Given the sustained low DSCRs, the 25% decrease in value, and the leasing challenges, the loan exhibits elevated credit risk. As the servicer continues to evaluate the workout strategies, a positive resolution remains unlikely at this time.

The largest loan on the servicer’s watchlist, The Roosevelt New Orleans Waldorf Astoria (Prospectus ID#2, 8.3% of the pool), is secured by the borrower's fee and leasehold interest in a 504-room full-service hotel in New Orleans. The loan transferred to special servicing in March 2020 for imminent monetary default at the borrower’s request because of the coronavirus pandemic; however, the loan was returned to the Master Servicer in May 2020 when the borrower received a public-private partnership loan in lieu of a monetary loan modification. As of the December 2021 remittance, the loan is being monitored due to a low DSCR; however, the loan remains current. Historically, the property has performed in line with or slightly above issuance expectations, and, although the impact of the coronavirus pandemic has introduced increased risk for this loan, mitigating factors include the loan’s current status and location within New Orleans, which is well positioned to benefit from an increase in leisure travel as the hospitality sector rebounds.

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, and X-D 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 the following loans in the transaction:

-- Prospectus ID#1 – Civic Opera Building (9.4% of the pool)
-- Prospectus ID#2 – The Roosevelt New Orleans Waldorf Astoria (8.3% of the pool)

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.

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 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.

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 [email protected].

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