DBRS Morningstar Confirms Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-MHC

DBRS Limited (DBRS Morningstar) confirmed its ratings on the following classes of JPMCC 2021-MHC Mortgage Trust Commercial Mortgage Pass-Through Certificates issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-MHC (JPMCC 2021-MHC or the Issuer):

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class X-CP at A (high) (sf)
-- Class X-EXT at A (high) (sf)
-- Class D at A (sf)
-- Class E at BB (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction, which remains in line with DBRS Morningstar’s expectations at issuance. The JPMCC 2021-MHC transaction is a single-asset/single-borrower transaction collateralized by the borrower’s fee-simple interest of 93 manufactured housing communities (MHCs) containing 11,129 pads and one self-storage property across 13 states, with the largest concentrations in the Midwest and Texas. Of the 11,129 total pads, 10,897 are manufactured housing pads, 194 are recreational vehicle pads, and 38 are site-built homes. According to the March 2022 remittance, the current loan balance is $478.5 million, reflecting nominal collateral reduction since issuance, driven by the release of two properties within the collateral portfolio. The $488.6 million first-mortgage loan, $40.0 million mezzanine loan, and $258.8 million of sponsor equity were used to acquire the portfolio for $743.3 million, fund an earn-out reserve of $11.0 million, finance an immediate repair upfront reserve of $1.0 million, and cover closing costs of $32.2 million.The sponsor for the transaction is Horizon Land Co. The Issuer’s debt service coverage ratio (DSCR) was 2.25 times (x), compared with the DBRS Morningstar DSCR of 1.96x. Given the recent vintage, updated financial reporting has been limited, but the servicer has confirmed the loan remains paid as agreed. DBRS Morningstar notes performance is expected to have remained stable since issuance because the property type benefits from its status as a more affordable housing option within the portfolio’s markets compared with home ownership, and multifamily and single-family home rental rates. As a result, MHC pad renters tend to have higher renewal probabilities even with annual rental rate increases than traditional multifamily renters, as the cost to move manufactured homes deters pad lessees from moving manufactured homes to competitive MHCs.

The DBRS Morningstar loan-to-value ratios (LTV) on the trust loan and the total debt stack are high at 119.8% and 129.6%, respectively. The high leverage point, combined with the lack of amortization, could potentially result in elevated refinance risk and/or loss severities in an event of default. DBRS Morningstar considers the significant equity contribution at close, which represented 34.8% of the $743.3 million purchase price, a mitigating factor for the high DBRS Morningstar LTV. In addition, MHC properties have historically performed well during the past economic recessions relative to other property types.

DBRS Morningstar believes the overall risk profile of the asset remains relatively stable from issuance and does not expect any interruptions in the debt service payments over the near to moderate term.

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 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 this transaction.

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 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.

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

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