DBRS Morningstar Confirms Credit Ratings on All Classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C8

DBRS Limited (DBRS Morningstar) confirmed the credit ratings on all classes of Commercial Mortgage Pass-Through Certificates, Series 2012-C8 issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-C8 as follows:

-- Class X-B at B (sf)
-- Class G at B (low) (sf)

All trends are Stable.

The rating confirmations reflect minimal changes in DBRS Morningstar’s expectations since the last rating action in December 2022. One loan, Ashford Office Complex (Prospectus ID#5; 100% of the pool), which has been in special servicing since August 2022 following maturity default, remains in the pool. DBRS Morningstar’s ratings are based on a recoverability analysis of the remaining asset that continues to indicate that disposition of the asset will likely result in a loss to the remaining trust.

Ashford Office Complex is secured by three eight-story Class B office buildings totaling 570,000 square feet in the Energy Corridor of Houston. The loan’s decline in performance dates back to 2017 when the in-place debt service coverage ratio fell below breakeven, driven by volatility in the oil and gas industry. Market fundamentals softened and credit metrics declined further amid the Coronavirus Disease (COVID-19) pandemic. Although new leases have been signed in the past year, the occupancy rate remains stressed at 57.1% as of June 2023, down from 61.0% at YE2022 and well below 92.3% at issuance. The subject property is located in a submarket with one of the highest vacancy rates in the U.S. Reis reported the West/Katy Freeway submarket’s Q3 2023 average rental and vacancy rates at $28.30 per square foot (psf) and 26.9%, respectively, while office properties within a five-mile radius reported average rental and vacancy rates of $30.10 psf and 17.0%, respectively. In comparison, the collateral currently achieves an in-place average rental rate of $17.6 psf as of the July 2023 rent roll.

From the time of the loan’s transfer to special servicing in August 2022 through the spring of 2023, the servicer’s commentary suggested ongoing discussions with the borrower regarding a maturity extension. However, beginning in May 2023, the servicer reported a receiver sale was to be scheduled and a loan assumption was being offered as part of the sale. The most recent commentary, dated November 2023, suggests that remains the disposition strategy but no other updates have been provided. The loan reported current on principal and interest payments as of the November 2023 remittance and there are relatively minimal servicer advances outstanding as of that report. The property was re-appraised in November 2022 at $59.7 million, a 25.6% decrease from the issuance appraised value of $80.2 million. The loan was current as of the October 2023 reporting. DBRS Morningstar expects that, in an assumption or liquidation scenario, the asset will be sold at a discount at the most recent appraised value given the collateral’s year-over-year declines in net cash flow, soft submarket location, and the general lack of investor appetite for this property type. DBRS Morningstar analyzed this loan with a liquidation scenario and determined that the asset could withstand up to a 75% reduction in the reported appraised value before losses would exceed the unrated Class NR bond. However, given the exposure to a single, defaulted asset and the possibility that interest could be shorted in the future, the B (low) (sf) rating was maintained for the Class G certificate.

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-B 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.

DBRS Morningstar notes that a sensitivity analysis was not performed for this review as the transaction is winding down, with only one loan remaining in the pool. In those cases, the DBRS Morningstar credit ratings are typically based on a recoverability analysis for the remaining loan.

DBRS Limited
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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 (November 3, 2023)/North American CMBS Insight Model v 1.1.0.0 (https://www.dbrsmorningstar.com/research/422859/north-american-cmbs-multi-borrower-rating-methodology)

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 22, 2023; https://www.dbrsmorningstar.com/research/420982)

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)

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].