DBRS Morningstar Changes Trends on Three Classes, Confirms All Ratings of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-WLDN

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2012-WLDN issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-WLDN as follows:

-- Class X-A at BB (sf)
-- Class A at BB (low) (sf)
-- Class B at B (low) (sf)
-- Class C at CCC (sf)

In addition, DBRS Morningstar changed the trends on Classes X-A, A, and B to Stable from Negative. The rating for Class C does not carry a trend.

The trend changes reflect recent events including a loan modification, which extended the underlying loan’s maturity date to November 2024 from May 2022. Although the collateral regional mall property has experienced a significant value decline since issuance, DBRS Morningstar accounted for that in its last review in August 2021, when it downgraded the ratings on all four classes. At that time, Negative trends were maintained for the three classes rated B (low) (sf) and above given the uncertainty surrounding the workout and the general timeline for stabilization for regional malls that were negatively affected by the Coronavirus Disease (COVID-19) pandemic. DBRS Morningstar observes that the recent loan modification and the sponsor’s willingness to keep loan payments current despite business interruption as a result of the pandemic demonstrate a longer-term commitment to the collateral, supporting the change in trends with this review.

The transaction is collateralized by a $270.0 million, 10-year, fixed-rate, first-lien mortgage loan secured by the fee-simple interest in the Walden Galleria, a super-regional shopping mall in Cheektowaga, New York. As of the May 2022 remittance report, the loan balance had amortized down to $236.3 million. Walden Galleria is a super-regional mall that is considered a desination for both local and visitor shopping in the Buffalo metropolitan statistical area. Anchors include JCPenney, Dick’s Sporting Goods (on a ground lease), Regal Cinemas, Best Buy, and Forever 21. In addition to the current anchor mix, a Sears was in occupancy at issuance; an affiliate owned the store, which was closed and released from the collateral in January 2018. Noncollateral anchors include Macy’s and a former Lord & Taylor box.

In February 2022, the loan transferred to special servicing as a result of imminent maturity default as the loan was not able to be refinanced ahead of its May 2022 maturity date. The loan had previously transferred to special servicing in April 2020 and was re-appraised in August 2020 at $216.0 million, which represented a -64% variance from the issuance value and an as-is loan-to-value ratio of 109.4%. With the loan’s recent transfer to special servicing, a loan modification was approved in May 2022 that includes a maturity date extension through November 2024 with a six-month extension option if the loan balance is below the lesser of $225.0 million or 80.0% of its appraised value (a new appraisal would be ordered 90 days prior to the new November 2024 maturity). In addition, loan payments will change to interest-only, rollover and replacement reserve deposits will increase to $250,000 per month, mezzanine loan deferred amounts will continue to be deferred, and a cash trap will remain in effect until the loan is paid in full.

The mall’s performance had been declining over the past few years as several anchor tenants filed for bankruptcy and vacated. The coronavirus pandemic brought about forced closures and other distancing restrictions, which further depressed cash flow in 2020. Of particular concern, the mall has historically relied heavily on traffic from shoppers from Canada and, with the extended closure of the Canadian-U.S. border throughout the pandemic, foot traffic was paralyzed, adding strain to the already-distressed mall sales. The year-end (YE) 2020 net cash flow (NCF) of $12.7 million was 60.2% below the issuance level of $31.9 million and the mall reported an 86% occupancy rate. The YE2021 NCF improved to $24.9 million; however, this was mainly due to the collection of deffered rent in 2020 and is projected to decline in 2022.

The loan sponsor is The Pyramid Companies (Pyramid), the largest privately held shopping mall developer in the Northeast United States; its affiliate, Pyramid Management Group, LLC, provides management services. The subject is one of several commercial mortgage-backed security (CMBS) loans backed by malls in the sponsor’s portfolio that transferred to special servicing amid the pandemic and which the sponsor is in the process of obtaining, or has already obtained, some form of relief. As of the May 2022 remittance, there are five Pyramid mall loans that remain in special servicing, all five of which are in negotiation for some form of pandemic relief extensions.

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.

Class X-A is an interest-only (IO) certificate 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.

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.

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

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