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

DBRS Limited (DBRS Morningstar) confirmed its credit 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 credit ratings that do not typically carry trends for commercial mortgage-backed securities (CMBS) credit ratings.

There have been minimal changes since DBRS Morningstar’s last credit rating action in January 2023. Today’s credit rating confirmations reflect the ongoing credit risk driven by the two remaining loans 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). Although the loans received modifications and returned to the master servicer in April 2023 and June 2023, respectively, DBRS Morningstar remains concerned about the historical underperformance of the underlying properties, high rollover concentration, previous maturity defaults, and significant declines in appraised value since issuance. Given these concerns and the concentration of the pool, DBRS Morningstar’s credit ratings are based on a recoverability analysis of the two remaining assets. Based on the most recent appraisal values, future losses at disposition could be contained to Classes F, G, and the unrated Class NR; however, when subject to additional stress tests, Class E continues to remain exposed to possible losses at resolution, supporting the maintenance of the C (sf) credit ratings across all classes. Mitigating some of these concerns is the added hard lockbox as part of the loans’ modification that requires the application of 40% to 60% of excess cash flow to pay down the loan balances. The loans continue to perform with above-breakeven debt service coverage ratios (DSCRs) and, as of the November 2023 remittance, transaction reserves totaled $10.0 million.

As of the November 2023 remittance, there has been 91.8% of collateral reduction since issuance. The pool has incurred losses of $18.3 million to date, which are contained to the unrated Class NR certificate. There was also a total of $1.2 million in cumulative interest shortfalls on this class as of November 2023.

The largest loan in the pool, Jefferson Mall, is secured by 281,020 square feet (sf) of a 957,000-sf super-regional mall in Louisville, Kentucky. The loan was transferred to the special servicer in February 2021 because of imminent nonmonetary default following the bankruptcy filing of the sponsor, CBL & Associates Properties, Inc. (CBL), in November 2020. After emerging from bankruptcy, the sponsor executed a modification to achieve full reinstatement of the loan while retaining CBL as the property manager and sponsor. Modification terms included an extension of the maturity date to June 2026, as well as the execution of a hard lockbox requiring the application of excess cash flow to be applied to principal payments and a capital expenditure reserve.

The noncollateral anchor tenants include JCPenney, Dillard’s, Overstock Furniture (temporary resident in the former dark Sears space), and Round 1 Entertainment (permanent tenant in the former Macy’s space). As per the rent roll dated June 2023, the property was 99.2% occupied. The largest collateral tenants are H&M (8.1% of the net rentable area (NRA), lease expiry in January 2026), Ross Dress for Less (8.1% of the NRA, lease expiry in January 2028), and Old Navy (5.9% of the NRA, lease expiry in January 2024). Near-term rollover is concentrated with leases representing 38.2% of the NRA scheduled to expire by YE2024, including Old Navy and the fifth-largest tenant, Jo-Ann Fabrics and Crafts. Based on the most recent financials, the subject reported a YE2022 DSCR of 1.25 times (x), compared with YE2021 and YE2020 DSCRs of 1.11x and 1.73x, respectively. The most recent appraisal, dated February 2021, valued the property at $34.7 million, down 66% from the appraised value of $101.7 million at issuance. DBRS Morningstar’s various scenarios projected a loan-level loss severity of at least 55%.

The Southpark Mall loan is secured by a regional mall in Colonial Heights, Virginia. The loan is also sponsored by CBL and transferred to the special servicer in February 2021 following CBL’s bankruptcy filing. Similar to Jefferson Mall, modification terms included an extension of the maturity date to June 2026, as well as the execution of a hard lockbox requiring the application of excess cash flow to be applied to principal payments and reserves.

The noncollateral anchor tenants include JCPenney and Macy’s. Collateral tenant Dick’s Sporting Goods (28.6% of the NRA, lease expiry in November 2024) occupies a third anchor pad. The loan was added to the servicer’s watchlist in December 2023 for a low DSCR and late payment; however, the most recent remittance indicates the loan is paid through November. DBRS Morningstar has asked for further clarification on this matter. According to the June 2023 rent roll, the property was 98.1% occupied, and other major tenants include Regal Cinemas (17.3% of the NRA, lease expiry in July 2032) and H&M (5.1% of the NRA, lease expiry in November 2029). There is a heavy concentration of near-term rollover, with leases representing 51.3% of the NRA scheduled to expire by YE2024, including the largest collateral tenant, Dick’s Sporting Goods. The June 2023 annualized DSCR was reported at 1.13x, compared with YE2022 and YE2021 DSCRs of 1.38x and 1.44x, respectively. The most recent appraisal, dated February 2021, valued the property at $40.0 million, down 61% from the appraised value of $103.0 million at issuance. DBRS Morningstar’s various scenarios projected a loan-level loss severity of at least 45%.

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).

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 in wind-down, with only a few loans remaining. In those cases, the DBRS Morningstar credit ratings are typically based on a recoverability analysis for the remaining loans.

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 version 1.2.0.0 (https://www.dbrsmorningstar.com/research/422859)

-- 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)

-- 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].