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

DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2013-C16 issued by JP Morgan Chase Commercial Mortgage Securities Trust 2013-C16 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 X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (high) (sf)
-- Class C at A (high) (sf)
-- Class EC at A (high) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class X-C at BB (low) (sf)
-- Class F at B (high) (sf)

All trends are Stable.

The rating recommendations reflect the overall stable performance of this transaction since the last rating action in November 2022. The pool continues to wind down, with all remaining loans having an upcoming maturity date before the end of November 2023. As such, DBRS Morningstar looked to a recovery analysis as part of the ratings rationale. Additionally, loans backed by office properties (18.4% of the pool) were generally stressed given the proximity to maturity and low investor appetite for the property type, resulting in a weighted average expected loss that was approximately 80.0% higher than the expected loss for the pool.

Per the March 2023 remittance, 45 of the original 60 loans remain in the trust, with an aggregate principal balance of approximately $685.9 million, representing a collateral reduction of 39.6% since issuance. The pool benefits from 25 loans that are fully defeased, representing 37.6% of the pool. There are nine loans on the servicer’s watchlist, representing 34.9% of the pool, which are primarily being monitored for upcoming loan maturities and/or performance concerns. There are two loans in special servicing, representing 4.3% of the pool.

To date, two loans have been liquidated from the trust with losses totaling $6.7 million contained to the nonrated Class NR Certificate, which has been reduced to $45.8 million. With this review, DBRS Morningstar applied a liquidation approach on the two loans in special servicing, applying haircuts to most recent appraisals, resulting in an implied loss to the trust contained to the nonrated Class NR, thereby supporting the rating confirmations.

The largest loan in special servicing, Riverview Office Tower (Prospectus ID#15; 2.5% of the current pool), is secured by a 235,271-square-foot (sf), suburban office property in Bloomington, Minnesota. The loan transferred to special servicing in August 2022 due to monetary default following the departure of its largest tenant, CoreLogic (which previously occupied 29.9% of the net rentable area (NRA)). The loan was last paid through May 2022, and according to the March 2023 remittance, the servicer is pursuing a foreclosure, and a receiver was recently appointed in January 2023. Per the December 2022 rent roll, the property was 47.3%, below the YE2021 occupancy rate of 67.8% and a further decrease from the issuance occupancy rate of 89.7%. Given the increased vacancy, trailing nine months (T-9) ended September 30, 2022, financials reported a debt service coverage ratio (DSCR) of 0.34 times(x), compared with the YE2021 DSCR of 1.13x and the YE2020 DSCR of 1.30x.

The December 2022 appraisal value was made available with the March 2023 remittance, which reported a value of $16.5 million, representing a 46.8% decline from the issuance value of $31.0 million. Given the low in-place occupancy, significant value decline, and the soft submarket with Reis reporting a YE2022 vacancy rate of 19.1% for the Southwest/Northeast Scott County submarket, DBRS Morningstar liquidated this loan from the trust, resulting in a loss severity in excess of 40%.

The largest loan on the servicer’s watchlist and also the largest loan in the pool, The Aire (Prospectus ID#1; 17.2% of the current pool balance) is secured by a 310-unit luxury apartment on the Upper West Side of Manhattan. The loan was initially added to the watchlist in February 2017 because of a low DSCR, primarily driven by the rising real estate taxes after the property’s 10-year tax abatement burned off, leading to increases of 20.0% every two years since 2014. The situation was further exacerbated during the Coronavirus Disease (COVID-19) pandemic when occupancy dropped to 70.3% at YE2020. The loan reported below break-even DSCRs even before the onset of the pandemic with the T-9 ended September 30, 2022, DSCR at 0.77x; however, occupancy for the same period improved to 93.2%. According to the servicer commentary, the residential market in New York was severely affected by the pandemic, and it was common to offer rent abatements and concessions to retain existing tenants and attract prospective tenants. The loan is currently in cash management due to a DSCR trigger, although significant excess cash, if any at all, is not expected to have been reserved given that the loan has been reporting less than 1.0x for the last several years.

According to Reis, multifamily properties in the Upper West Side submarket reported a YE2022 vacancy rate of 3.8% with a projected five-year forecast vacancy rate of 2.5%. Given the decline in performance and increased refinance risk with the upcoming scheduled loan maturity, DBRS Morningstar applied an elevated probability of default penalty adjustment in the analysis of this loan to increase the expected loss.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/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 https://www.dbrsmorningstar.com/research/396929 (May 17, 2022).

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.

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

The principal methodology is the North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).

Other methodologies referenced in this transaction are listed at the end of this press release.

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 rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)

Rating North American CMBS Interest-Only Certificates (December 19, 2022), https://www.dbrsmorningstar.com/research/407577

DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022), https://www.dbrsmorningstar.com/research/402646

North American Commercial Mortgage Servicer Rankings (September 8, 2022), https://www.dbrsmorningstar.com/research/402499

Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022), https://www.dbrsmorningstar.com/research/402153

Legal Criteria for U.S. Structured Finance (December 7, 2022),
https://www.dbrsmorningstar.com/research/407008

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