DBRS Morningstar Upgrades Ratings on Six Classes of JP Morgan Chase Commercial Mortgage Securities Trust 2013-C16

DBRS Limited (DBRS Morningstar) upgraded its ratings on six classes of Commercial Mortgage Pass-Through Certificates (Series 2013-C16), issued by JP Morgan Chase Commercial Mortgage Securities Trust 2013-C16 as follows:

-- Class B to AA (high) (sf) from AA (low) (sf)
-- Class C to A (high) (sf) from A (low) (sf)
-- Class F to B (high) (sf) from B (sf)
-- Class EC to A (high) (sf) from A (low) (sf)
-- Class X-B to AAA (sf) from AA (sf)
-- Class X-C to BB (low) (sf) from B (high) (sf)

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

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-A at AAA (sf)

All trends are Stable.

The rating upgrades and Stable trends reflect the overall steady performance of the transaction since DBRS Morningstar’s last surveillance rating action in October 2021, as well as the three additional loans defeased and further collateral reduction since that time. Per the July 2022 remittance, 46 of the original 60 loans remain in the pool, with an aggregate principal balance of $715.5 million, representing a collateral reduction of 37.0% since issuance as a result of loan repayments, scheduled amortization, and the liquidation of two loans. Since October 2021, Holiday Inn Energy Corridor (Prospectus ID#27) was liquidated from the pool with the November 2021 remittance with a realized loss of $3.4 million to the trust, representing a loss severity of 31.4%. In addition, the pool benefits from 21 loans, representing 32.6% of the current pool balance, that are defeased.

According to the July 2022 remittance, seven loans, representing 31.5% of the current pool balance, are on the servicer’s watchlist. These loans are being monitored for a number of reasons, including low debt service coverage ratios (DSCRs), occupancy issues, servicing trigger events, and delinquent payments. In addition, only one loan, Northpointe Center (Prospectus ID#23, 1.7% of the current pool), is in special servicing and is real estate owned (REO).

The largest loan on the servicer’s watchlist and also the largest loan in the pool, The Aire (Prospectus ID#1, 16.8% of the current pool) is being monitored for a persistently low DSCR. The loan is secured by a 310-unit luxury apartment on the Upper West Side of Manhattan. The loan has been on the servicer’s watchlist since February 2017 because of a DSCR below break-even, primarily as a result of a steady rise in real estate taxes as the property’s 10-year tax abatement burns off, leading to tax increases of 20.0% every two years since 2014. The subject was significantly affected by the Coronavirus Disease (COVID-19) pandemic with occupancy dropping to 70.3% by year-end (YE) 2020, but occupancy has since increased to 99.4% as of the May 2022 rent roll. At May 2022, the property had an average rental rate of $5,597 per unit compared with the July 2021 average rental rate of $5,885 per unit, when the property was 95.0% occupied. As of the most recent financials, the trailing three month (T-3) ended March 2022 DSCR was reported at 0.71 times (x), an increase from the YE2021 and YE2020 DSCRs of 0.36x and 0.58x, respectively. While cash flow continues to significantly trail expectations, the sponsor has kept the loan current with no missed payments reported to date.

The sole loan in special servicing, Northpointe Center, is secured by a 190,196-square-foot anchored retail property in Zanesville, Ohio. The loan transferred to the special servicer in June 2020 for imminent default and, as of June 2021, the subject became REO with the foreclosure deed recorded in September 2021. The loan was previously being monitored on the servicer’s watchlist for an occupancy decline when former largest tenant TJ Maxx (29.2% of net rentable area (NRA)) relocated in 2018 and MC Sports (13.0% of NRA) vacated as a result of a bankruptcy filing in 2018. In July 2021, Hobby Lobby (29.2% of NRA) informed management it would not be exercising its renewal option upon lease expiry in September 2021. The servicer reported an in-place occupancy of 37.0% as of December 2021 following Hobby Lobby’s departure. The subject was reappraised in May 2022, which valued the property at $8.9 million, representing a 54% decline from the issuance appraised value of $19.5 million and a 7.3% decline from the May 2021 appraised value of $9.6 million. In the analysis for this review, DBRS Morningstar liquidated the loan from the pool with a scenario that resulted in a loss severity in excess of 60.0%.

ESG CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

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/396929.

Classes X-A, X-B, and X-C 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.

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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