Morningstar DBRS Downgrades Credit Ratings on Four Classes of JPMBB Commercial Mortgage Securities Trust 2015-C32

DBRS, Inc. (Morningstar DBRS) downgraded credit ratings on four classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C32 issued by JPMBB Commercial Mortgage Securities Trust 2015-C32 as follows:

-- Class A-S to AA (low) (sf) from AAA (sf)
-- Class B to BBB (sf) from A (low) (sf)
-- Class X-A to AA (sf) from AAA (sf)
-- Class X-B to BBB (high) (sf) from A (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class C at CCC (sf)
-- Class D at C (sf)
-- Class E at C (sf)
-- Class F at C (sf)
-- Class G at C (sf)
-- Class EC at CCC (sf)

Morningstar DBRS maintained the Negative trends on Classes A-S, B, X-A, and X-B. Classes C, D, E, F, G, and EC have credit ratings that do not typically carry trends in commercial mortgage-backed securities (CMBS) transactions.

The credit rating confirmations for Classes A-4, A-5, and A-SB reflect Morningstar DBRS' payoff analysis, which suggests those classes will likely be repaid with successful takeout financing for the larger performing loans in the pool, as well as the defeased loans which total just more than $40.0 million. Morningstar DBRS notes; however, that some loans may require maturity extensions and the most notable of those might be the One Shell Square loan (Prospectus ID #9, 4.3% of the pool), backed by an office property in New Orleans and exposed to a large lease rolling in 2026. In total, office loans represent 31.9% of the outstanding balance of the deal, and performance declines for some of the largest office loans have contributed to credit rating downgrades over the past several years for this transaction.

The credit rating downgrades and Negative trends reflect Morningstar DBRS' increased loss projections from the loans in special servicing as a result of declines in appraised values for the underlying assets as further discussed below. The pool has a high concentration of specially serviced loans, at 37.3%, and Morningstar DBRS continues to project significant liquidated losses for the largest of those loans, a primary contributor to the CCC (sf) and C (sf) credit ratings assigned to Classes C, D, E, F, G, and EC. Given the proximity to maturity for most loans in the pool, Morningstar DBRS' analysis considered the high likelihood that the pool's composition will soon wind down to primarily include only defaulted or underperforming assets, putting downward pressure on the middle of the capital stack. In addition, Morningstar DBRS remains concerned with the risk of increasing interest shortfalls, which as of the December 2024 remittance total $22.5 million, with interest being shorted up to the Class C certificate. Total shortfalls have increased from $14.9 million as of Morningstar DBRS' credit rating action for this deal in February 2024, a result of an increased special servicing concentration and appraisal reduction amounts for some loans.

As of the December 2024 remittance, 73 of the original 89 loans remain outstanding with a pool balance of $707.0 million, representing a collateral reduction of 38.4%. Six loans, representing 4.1% of the pool, have been fully defeased. There are 26 loans in special servicing totalling 37.3% of the pool. Morningstar DBRS considered a liquidation scenario for five of those loans, representing 31.2% of the pool. Total liquidated losses considered with this review totalled $162.0 million, with loss severities averaging approximately 75.0%. Since last review, Morningstar DBRS' liquidated loss projections have increased by $31.7 million, partially a factor of lower appraised values for some loans since the February 2024 credit rating action. There are 21 small specially serviced loans, collectively representing 6.2% of the pool, which are secured by multifamily properties in California. All 21 loans recently transferred because of a trigger event related to ongoing litigation associated with the common sponsor and based on the collateral performance and other information available at the time of this review, liquidated losses are not expected for any of those loans.

The largest loan in the pool, Civic Opera Building (Prospectus ID#2, 9.6% of the pool), is secured by the borrower's fee-simple interest in a 915,162-square-foot (sf) office property in Chicago's West Loop District and is pari passu with a companion note in the JPMBB Commercial Mortgage Securities Trust 2015-C31 transaction, which is also rated by Morningstar DBRS. The loan has been in special servicing since June 2020, and according to servicer commentary from December 2024, the lender and borrower are awaiting court ruling on a motion to add a recourse component to the foreclosure. Occupancy continues to decline, with the June 2024 rent roll reporting an occupancy of 55.4% with an additional 15% of rollover through 2025. An updated appraisal dated September 2024, valued the property at $109.8 million, compared with the April 2023 value of $128.3 million, and representing a 50.1% decline from the appraised value of $220.0 million at issuance. Morningstar DBRS' analysis included a liquidation scenario based on a stress to the September 2024 appraised value to reflect the continued declining occupancy, upcoming rollover, and weak submarket fundamentals, resulting in an increased projected loss severity approaching 70% with this review.

The second-largest loan in special servicing is Hilton Suites Chicago Magnificent Mile (Prospectus ID#1, 9.1% of the pool), which is secured by a 345-key full-service hotel in the Magnificent Mile district of Chicago. The loan transferred to special servicing in May 2020, and the asset became real estate owned (REO) in April 2023. According to the January 2024 servicer commentary, the property is projected to be put up for sale in Q1 2025. According to the September 2024 STR report, the property's occupancy, average daily rate, and revenue per available room (RevPAR) were relatively unchanged from prior year figures at 68.2%, $210.78, and $140.95, respectively, for the trailing 12-month period, with a RevPAR penetration of 116.9%. A February 2024 appraisal valued the asset at $61.9 million representing a 44.9% reduction in value since issuance and a $1.2 million decline from the previous appraisal in March 2023. Given oversaturation concerns with the Chicago hotel market, as well as additional value decline signaled by the February 2024 appraisal, Morningstar DBRS' liquidation scenario included a stress to the most recent appraised value, resulting in a projected loss severity of more than 50%.

The third-largest loan in special servicing is secured by the fee-simple interest in Palmer House Retail Shops (Prospectus ID#3, 8.2% of the pool). The collateral consists of 134,536 sf of retail (40.2% of NRA), office (10.7% of NRA), and parking space (49.1% of NRA) as part of the Palmer House Hotel in Chicago (noncollateral). The loan transferred to special servicing in July 2020 and the asset became REO in September 2023. As of the November 2024 rent roll, the property reported an occupancy of 38.0% for the retail and office portion, compared with 47.1% in October 2023 and 90.1% for the same portion at issuance. Each of the retail tenants currently appears to be paying rent based on gross sales. Occupancy and operating performance concerns have persisted since the loan's transfer to special servicing, with no updated financials provided as of this review. A June 2024 updated appraisal valued the collateral at $18.4 million, representing an 80.1% decline in value when compared with the $92.6 million valuation at issuance. With this review, Morningstar DBRS applied a haircut to the updated June 2024 appraisal in its liquidation scenario, resulting in a 100% loss severity.

Morningstar DBRS' credit ratings on the applicable classes address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions' respective press releases at issuance.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024), https://dbrs.morningstar.com/research/437781.

Classes X-A and X-B and 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 credit ratings are subject to surveillance, which could result in credit ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by Morningstar DBRS.

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

The principal methodology is North American CMBS Surveillance Methodology (December 13, 2024), https://dbrs.morningstar.com/research/444617.

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

The credit ratings were initiated at the request of the rated entity.

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

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

These are solicited credit ratings.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The Morningstar DBRS Long-Term Obligation Rating Scale definition indicates that credit 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.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' outlooks and credit ratings are monitored.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429

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

-- North American CMBS Multi-Borrower Rating Methodology/North American CMBS Insight Model v 1.2.0.0 (December 13, 2024),
https://dbrs.morningstar.com/research/444616
-- Morningstar DBRS North American Commercial Real Estate Property Analysis Criteria (September 19, 2024),
https://dbrs.morningstar.com/research/439702
-- Legal Criteria for U.S. Structured Finance (December 3, 2024),
https://dbrs.morningstar.com/research/444064
-- North American Commercial Mortgage Servicer Rankings (August 23, 2024),
https://dbrs.morningstar.com/research/438283

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.