DBRS Morningstar Maintains Under Review With Negative Implications Status on All Classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-410T

DBRS Limited (DBRS Morningstar) maintained the Under Review with Negative Implications status on all classes of Commercial Mortgage Pass-Through Certificates, Series 2021-410T issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-410T as follows:

-- Class A rated AAA (sf)
-- Class B rated AA (low) (sf)
-- Class C rated A (low) (sf)
-- Class D rated BBB (high) (sf)
-- Class HRR rated BBB (sf)
-- Class X-A rated AA (sf)

There are no trends for these credit rating actions.

DBRS Morningstar placed the above referenced classes Under Review with Negative Implications in March 2023 following the announcement that First Republic Bank (First Republic) (33.5% of the net rentable area (NRA) for the collateral office property) was experiencing significant stress and could fail without an acquisition or other intervention to shore up the bank’s financial position. As First Republic was rated investment grade with a long-term lease, DBRS Morningstar’s analysis at issuance gave credit to rent steps in the tenant’s lease over the loan term. However, given the firm’s reported financial stress, the likelihood that the bank’s investment-grade rating would be maintained was in question. If DBRS Morningstar were to remove the credit given to rent steps in its analysis, the results may suggest downward pressure on the credit ratings, supporting placing all classes Under Review with Negative Implications in March 2023.

Since that credit rating action, First Republic has been acquired. In May 2023, the U.S. government announced it had taken control of First Republic and sold the bank to JPMorgan Chase Bank, N.A. (JPM; rated AA with a Stable trend by DBRS Morningstar, most recently confirmed as of December 7, 2022). DBRS Morningstar asked the servicer for confirmation of the status of First Republic’s lease. In May 2023, the servicer noted that JPM had until July 1, 2023, to affirm or reject First Republic’s lease at the collateral office property, a 20-story, Class A office building in Manhattan on 10th Avenue between 33rd Street and 34th Street. An update provided by the servicer in August 2023 stated that JPM has yet to confirm its intention of formally assuming the First Republic lease; however, the August rent payment was received. Given the uncertainty surrounding the status of the lease and JPM’s obligation for the remaining term, DBRS Morningstar maintained the Under Review with Negative Implications status on all classes with this review and will continue to monitor for developments.

First Republic is currently the property’s second-largest tenant, occupying just over one-third of the building on a lease through August 2036. The building is well situated in the highly desirable Hudson Yards/Penn Station submarket with good commuter rail and subway hubs positioned to the east and west of the building. The largest tenant is Amazon.com, Inc. (Amazon) (53.1% of the NRA, lease expiry in May 2037). At issuance, DBRS Morningstar noted that both Amazon and the property’s third-largest tenant, Related (11.3% of the NRA, lease expiry in 2045), have termination options. Starting in 2030 and every subsequent five years, Related can terminate the lease with 18 months’ notice with no termination penalty. Amazon will be eligible to exercise its one-time termination option in 2032, approximately four years after the anticipated repayment date in 2028 and during the year of loan maturity. Amazon’s termination fee would be equal to the sum of unamortized brokerage commissions, landlord’s contribution, rent abatement applicable to terminated premises, and six months’ fixed annual rent for the terminated premises.

The servicer reported a YE2022 occupancy rate of 97.0% and net cash flow (NCF) for the same period of $45.2 million, with a debt service coverage ratio of 2.07 times. This NCF compares with the DBRS Morningstar NCF of $45.0 million derived at issuance.

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 at https://www.dbrsmorningstar.com/research/416784 (July 4, 2023).

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 credit ratings are subject to surveillance, which could result in credit 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 (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 credit rating was initiated at the request of the rated entity.

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

This is a solicited credit rating.

Please note that a risk sensitivity analysis was not conducted considering the deal was placed Under Review with Negative Implications.

This credit rating is Under Review with Negative Implications. Generally, the conditions that lead to the assignment of reviews are resolved within a 90-day period, but the resolution period may extend further depending on the information received from the servicer.

DBRS Limited
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Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

The credit 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 version 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 (August 23, 2023; https://www.dbrsmorningstar.com/research/419592)

Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023; https://www.dbrsmorningstar.com/research/415687)

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

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/417279.

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