DBRS Morningstar Downgrades Rating on One Class of JPMCC 2012-CIBX Mortgage Trust

DBRS Limited (DBRS Morningstar) downgraded its rating on the following class of Commercial Mortgage Pass-Through Certificates, Series 2012-CIBX issued by JPMCC 2012-CIBX Mortgage Trust:

-- Class E to C (sf) from CCC (sf)

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

-- Class A-4 at AAA (sf)
-- Class A-4FL at AAA (sf)
-- Class A-4FX at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class F at C (sf)
-- Class G at C (sf)

The trends on Classes A-4, A-4FL, A-4FX, A-S, and X-A are Stable, while the trends on Classes B, C, and D are Negative. Classes E, F, and G have ratings that do not carry a trend. The rating actions reflect the continued credit risk challenges to the transaction driven by three loans in special servicing and the largest loan in the pool on the servicer’s watchlist, which collectively represent 45.7% of the pool. All loans, with the exception of Jefferson Mall, are scheduled to mature in 2022.

As of the February 2022 remittance, only 18 of the original 49 loans remain in the pool, with a collateral reduction of 66.54% since issuance. An additional three loans (21.2% of the pool) are fully defeased. The pool has incurred losses of $18.2 million (all absorbed by the nonrated Class NR) to date. There are three loans, representing 28.4% of the pool, in special servicing, and there are six loans on the servicer’s watchlist, representing 26.3% of the pool.

The largest loan in special servicing, Jefferson Mall (Prospectus ID#4; 13.5% of the pool), is secured by a regional mall in Louisville, Kentucky. The collateral includes the in-line space at the mall and the junior anchors, which include H&M, Ross Dress for Less, Old Navy, and Jo-Ann Fabrics. The loan has been on the DBRS Morningstar Hotlist since February 2019 after the loss of two noncollateral anchors (Macy’s in 2017 and Sears in 2018). The two remaining traditional anchors, Dillard’s and JCPenney, remain open as of February 2022. The loan initially transferred to special servicing in February 2020 for imminent default risk and was modified in August 2020 with terms including a maturity extension to 2026 and a cash trap. However, it was transferred to special servicing again in January 2021 because of imminent nonmonetary default as its sponsor, CBL & Associates (CBL), filed for Chapter 11 bankruptcy in November 2020. As of the February 2022 reporting period, the negotiations between the borrower and the servicer regarding an additional modification have stalled. The borrower has submitted a proposal for a discounted payoff (DPO) or a transfer of the asset to the lender.

The most recent appraisal reported by the servicer, dated February 2021, valued the property at $34.7 million, down 66% from the appraised value of $101.7 million at issuance. Per the rent roll dated September 2021, the property was 97.7% occupied. The trailing-12-month net cash flow (NCF) ended September 2021 was reported at $4.7 million, down from $5.1 million at YE2020. The trailing-12-month debt service coverage ratio (DSCR) ended September 2021 was reported at 1.05 times (x), down from 1.73x at YE2020. The loan remains current and the cash flow sweep remains in place. DBRS Morningstar expects a sizable loss upon the resolution of this loan.

The second-largest loan in special servicing, Southpark Mall (Prospectus ID#5; 12.8% of the pool), is secured by a regional mall in Colonial Heights, Virginia, and is also owned by CBL. The collateral includes the in-line space, a Regal Cinemas anchor space, and the former Sears anchor pad. There was a Dillard’s anchor in place at issuance that also served as collateral for the loan; that space was vacated and ultimately re-leased to Dick’s Sporting Goods. The loan has been on the DBRS Morningstar Hotlist since March 2020 as a result of increased credit risk. The remaining traditional anchors are Macy’s and JCPenney, which remain open. The loan initially transferred to special servicing in March 2020 for imminent default risk, and the borrower was granted a 90-day forbearance allowing for the use of all existing reserves to keep the loan current. The loan returned to the master servicer in October 2020 but transferred back to special servicing in January 2021 because of CBL’s bankruptcy filing. Negotiations between the borrower and the servicer regarding an extension or modification have stalled. The borrower has submitted a DPO proposal or a transfer of the asset to the lender in the event a DPO cannot be agreed upon.

The most recent appraisal reported by the servicer, dated February 2021, valued the property at $40.0 million, down 61% from the appraised value of $103.0 million at issuance. Per the rent roll dated September 2021, the property was 99.7% occupied. The trailing-12-month NCF ended September 2021 was reported at $3.14 million, down from $6.6 million as of YE2020. The trailing-12-month DSCR ended September 2021 was reported at 0.99x, down from 1.55x as of YE2020. This loan also remains current, but DBRS Morningstar has modeled a loss upon resolution.

The largest loan on the servicer’s watchlist, TheWit Hotel (Prospectus ID#2; 17.3% of the pool), is secured by a 310-key full-service boutique hotel in the North Loop submarket of Chicago. The property is on State Street, adjacent to the Chicago Theatre and just one block from the Chicago River. The hotel is subject to a franchise agreement with Hilton under the DoubleTree brand until June 2029 but continues to operate as a boutique full-service hotel. The loan has been on the servicer’s watchlist since 2017 because of low DSCRs. The property also suffered from the lockdown caused by the Coronavirus Disease (COVID-19) pandemic and faced damages due to civil unrest in May 2020. The property was closed from June 2020 to September 2020 for repair work. As of the February 2022 remittance, the loan is under a cash trap until it reaches the DSCR threshold of 1.15x. According to the financials for the trailing nine months ended September 2021, occupancy improved to 36.6% from 16.9% in 2020; however, it still trails pre-pandemic levels. The NCF turned positive at $389,000 when compared with -$4.6 million at YE2020. According to an STR, Inc. report for the trailing-three-month period ended November 2021, the collateral reported occupancy, average daily rate, and revenue per available room figures of 50.1%, $223.32, and $111.85, respectively, compared with the competitive set figures of 57.2%, $243.50, and $139.22, respectively, resulting in an index penetration level of 87.6%, 91.7%, and 80.3%, respectively. The loan will likely be challenged to successfully pay off given the recent performance and its maturity in June 2022.

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.

DBRS Morningstar materially deviated from its North American CMBS Insight Model when determining the ratings assigned to Classes B, C, and D as the quantitative results suggested a higher rating. The material deviations are warranted due to uncertain loan-level event risk as DBRS Morningstar remains concerned regarding the potential for losses for the three specially serviced loans and the near-term refinancing prospects for TheWit Hotel, which is scheduled to mature in June 2022.

Class X-A is an interest-only (IO) certificate that references 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#2 – TheWit Hotel (17.3% of the pool) – DBRS Morningstar Hotlist
-- Prospectus ID#3 – 100 West Putnam (15.4% of the pool) – DBRS Morningstar Hotlist
-- Prospectus ID#4 – Jefferson Mall (13.5% of the pool) – DBRS Morningstar Hotlist
-- Prospectus ID#5 – Southpark Mall (12.8% of the pool) – DBRS Morningstar Hotlist

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.

DBRS Morningstar notes that this press release was amended on April 22, 2022, to include language noting a material deviation in its rating of the Class B, C, and D certificates.

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

The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), 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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are 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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