DBRS Morningstar Confirms All Classes of JPMBB Commercial Mortgage Securities Trust 2014-C22

DBRS Limited (DBRS Morningstar) confirmed all ratings of the Commercial Mortgage Pass-Through Certificates, Series 2014-C22 issued by JPMBB Commercial Mortgage Securities Trust 2014-C22 as follows:

-- Class A-3A1 at AAA (sf)
-- Class A-3A2 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 B at A (high) (sf)
-- Class C at BB (high) (sf)
-- Class EC at BB (high) (sf)
-- Class D at C (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class G at C (sf)

Classes D, E, F, and G are assigned ratings which typically do not carry trends for commercial mortgage-backed security (CMBS) ratings. All other trends are Stable. The liquidation scenarios analyzed for four loans suggested losses will be incurred through Class E, nearly eroding the full balance of that class and leaving only a small amount of cushion for Class D. However, given the Class D certificate has a total balance of $61.6 million, there is a sizable buffer against loss for the BB (high) (sf)-rated Class C, supporting the rating confirmation and Stable trend.

Overall, the rating confirmations and Stable trends reflect DBRS Morningstar’s loss expectations for the transaction, which remain relatively unchanged from the last review. As of the April 2023 remittance, 64 of the original 76 loans remain in the pool, with an aggregate principal balance of $905.3 million, reflecting a collateral reduction of 20.3% since issuance as a result of loan repayments and scheduled amortization. In addition, 31 loans, representing 16.2% of the pool, are fully defeased. There are 15 loans, representing 28.7% of the pool, on the servicer’s watchlist and three loans, representing 5.4% of the pool, in special servicing. Two specially serviced loans, 200 Newport Avenue (Prospectus ID#21; representing 1.6% of the pool) and Junction Plaza (Prospectus ID#73; representing 0.3% of the pool), are real estate owned.

The majority of DBRS Morningstar’s liquidated loss expectations for this pool are the result of the outlook for the largest watchlisted loan, Las Catalinas Mall (Prospectus ID#3; 8.3% of the pool). The loan is secured by a 355,200-square foot (sf) portion of an enclosed shopping mall in Caguas, Puerto Rico. The loan returned to the master servicer in May 2021 as a corrected mortgage with the maturity date extended to June 2026. Most notably, the loan modification also contains a provision that provides the borrower a discounted payoff option available in August 2023 to repay the loan at a discounted amount of $72.5 million without any fee or prepayment penalty. The most recent value reported by the special servicer was as of August 2020, with the appraiser’s as-is estimate at $62.0 million and a stabilized value estimate of $77.5 million.

The property’s occupancy rate has struggled following the loss of one collateral anchor tenant, Kmart (previously 34.5% of the collateral NRA), and one non-collateral anchor tenant, Sears. According to the September 2022 reporting, the collateral portion of the subject was 49.6% occupied, in line with previous years. The annualized year-to-date net cash flow for the nine-month period ended September 30, 2022, was $8.4 million and the debt service coverage ratio was 1.85 times. The loan is pari passu, with the $75.0 million A-1 note securitized in the subject transaction, and the A-2 note securitized in JPMBB 2014-C23 (not rated by DBRS Morningstar). Given the borrower’s option to prepay the loan at a significant discount in August of this year, DBRS Morningstar assumed a liquidation scenario based on the August 2020 appraisal’s as-is value, which resulted in a loss severity of approximately 55.0%.

The largest specially serviced loan, 10333 Richmond (Prospectus ID#7; 3.7% of the pool), is secured by a 218,600-sf office building in Houston. The loan has been in special servicing since December 2017 following the loss of several tenants and the related cash flow declines that created debt service shortfalls not funded by the borrower. As of the September 2022 reporting, the property was 51.0% occupied, compared with 47.6% at YE2021. The servicer commentary reported the foreclosure process had been initiated and discussions to resolve the borrower’s default and recourse liability are ongoing. DBRS Morningstar liquidated the loan in its analysis with a 15.0% haircut to the October 2022 value of $13.8 million, resulting in an implied loss severity exceeding 75.0%. The liquidation scenario also considers outstanding and potential future advances, with the haircut providing cushion against further value decline amid the uncertainty for office property types.

The second-largest specially serviced loan, 200 Newport Avenue (Prospectus ID#21; representing 1.6% of the pool), is secured by a 143,000-sf Class B office building approximately 6 miles south of Boston, in Quincy, Massachusetts. The loan transferred to special servicing in August 2022 for imminent default following the loss of the former single tenant, State Street Bank, which vacated the property at lease expiry in March 2021. The property was foreclosed, and the trust now holds the title. DBRS Morningstar’s liquidation scenario considered a 15.0% haircut to the October 2022 value of $13.8 million, resulting in an implied loss severity exceeding 30.0%. This liquidation scenario also considers outstanding and expected future advances, with the 15% haircut to the appraiser’s value estimate to cushion against further value volatility as the loan is resolved.

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 (May 17, 2022) at https://www.dbrsmorningstar.com/research/396929.

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

DBRS Limited
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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].