DBRS Morningstar Confirms Ratings on Three Remaining Classes of JPMCC 2012-CIBX Mortgage Trust

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

-- Class E at C (sf)
-- Class F at C (sf)
-- Class G at C (sf)

These classes have ratings that do not typically carry trends for commercial mortgage backed securities (CMBS) ratings.

These rating actions reflect DBRS Morningstar’s loss expectations for the remaining loans in the transaction, which is currently in wind-down. Two loans remain in the pool, Jefferson Mall (Prospectus ID#4; 50.8% of the pool balance) and Southpark Mall (Prospectus ID#5; 49.2% of the pool balance), both of which are current but remain with the special servicer and are expected to be returned to the master servicer in the near term. The pool has incurred losses of $18.3 million to date, all of which were contained to the nonrated Class NR. Interest shortfalls totaled $1.7 million as of the December 2022 remittance. Based on the most recent appraisals for both remaining collateral properties, DBRS Morningstar believes losses could ultimately be contained to Classes F and G, but relatively minor stress tests on those values suggest Class E remains exposed to the possibility of loss at ultimate resolution, supporting the maintenance of a C (sf) rating for that class.

The Jefferson Mall loan is secured by 281,020 square feet (sf) of a 957,000 sf regional mall in Louisville, Kentucky. The loan has been in special servicing since February 2021, with the special servicer initially working with the sponsor, CBL & Associates Properties, Inc. (CBL), which filed for bankruptcy in November 2020. The sponsor ultimately emerged from bankruptcy and the loan was reinstated. The special servicer also approved a maturity extension through June 2026. The mall is in a tertiary market that is somewhat saturated with malls as there are two competing properties located within 12 miles of the subject. The subject is the third best of those three malls in Louisiville and noncollateral anchor tenants include JCPenney, Dillard’s, Overstock Furniture (temporary resident in the former Sears space), and Round1 (permanent tenant in the former Macy’s space). The largest collateral tenants include H&M (8.12% of the net rentable area (NRA), lease expiry in January 2026), Old Navy (5.90% of the NRA, lease expiry in January 2024), and Shoe Depot (5.69% of the NRA, lease expiry in July 2026).

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. Despite the sharp value decline, the mall’s performance remains relatively stable, with an occupancy rate of 99.2% as of the September 2022 rent roll and a debt service coverage ratio (DSCR) for the trailing 12 months (T-12) ended June 30, 2022, of 1.29 times (x), compared with the year-end (YE) 2021, YE2020, and YE2019 DSCRs of 1.11x, 1.73x, and 1.41x, respectively. Based on the 2021 appraised value, DBRS Morningstar expects the loan will be resolved with a significant loss, with a loss severity that could be in excess of 65%.

The Southpark Mall loan is secured by a regional mall in Colonial Heights, Virginia. The loan is also sponsored by CBL and has an extended loan maturity through June 2026. The noncollateral anchor tenants include JCPenney and Macy’s, and collateral anchors and junior anchors include Regal Cinemas (17.3% of the NRA, lease expiry in July 2032), H&M (5.1% of the NRA, lease expiry in November 2029), and Planet Fitness (4.9% of the NRA, lease expiry in December 2026). It is noteworthy that Cineworld, Regal Cinemas’ chain owner, filed for bankruptcy as of November 2022, but no closure of the subject location has been announced to date.

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. Recent occupancy and cash flow declines have been more pronounced for this property, with the September 2022 rent roll showing an occupancy rate of 80.8%, with approximately 12.8% of the NRA scheduled to rollover by YE2023. The large vacancy is comprised largely of the dark collateral Sears box (18.7% of the NRA). The T-6 ended June 30, 2022, DSCR was reported at 1.13x, compared with the YE2021, YE2020, and YE2019 DSCRs of 1.44x, 1.55x, and 1.42x, respectively. According to an article published by Richmond BizSense in January 2022, CBL plans to gut the Sears space to allow for the construction of two apartment buildings that will house a total of 280 multifamily units. DBRS Morningstar has requested confirmation of these plans from the special servicer and a response is pending. Based on the most recent appraised value, DBRS Morningstar expects a loss severity in excess of 55% will be realized at the final resolution for this loan.

Environmental, Social, and Governance (ESG) CONSIDERATIONS
There were no environmental, social, and governance factors 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 (May 17, 2022).

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

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

The principal methodology is North American CMBS Surveillance Methodology (October 3, 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 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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