Morningstar DBRS Confirms All Credit Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-MHC

DBRS Limited (Morningstar DBRS) confirmed its credit ratings on all classes of JPMCC 2021-MHC Mortgage Trust Commercial Mortgage Pass-Through Certificates issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2021-MHC as follows:

-- Class A at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class X-EXT at A (high) (sf)
-- Class D at A (sf)
-- Class E at BB (sf)

All trends are Stable.

The credit rating confirmations and Stable trends reflect the stable performance of the transaction, which remains in line with Morningstar DBRS' expectations at issuance. At issuance, the underlying floating-rate interest-only (IO) loan was secured by the fee-simple interest in a portfolio of 93 manufactured housing communities containing 11,129 pads and one self-storage property across 13 states, with the largest concentrations in the Midwest and Texas. Of the 11,129 total pads, 10,897 are manufactured housing pads, 194 are recreational vehicle pads, and 38 are site-built homes.

Initial loan proceeds of $488.6 million along with a $40.0 million mezzanine loan and $258.8 million in sponsor equity were used to acquire the portfolio for $743.3 million, fund an earn-out reserve of $11.0 million, finance an immediate repair upfront reserve of $1.0 million, and cover closing costs of $32.2 million. The loan is structured with an initial two-year term with three one-year extension options bringing the fully extended maturity to April 2026. The loan is currently scheduled to mature in April 2025 and the borrower may exercise the third extension option, subject to the purchase of a replacement interest rate cap agreement, a minimum loan-level debt yield of 6.22%, and an extension of the mezzanine loan.

According to the January 2025 remittance, the loan balance was $478.5 million, unchanged from the previous credit rating action and reflecting a 2.1% collateral reduction from the issuance figure of $488.6 million following the release of the River View property in 2021. The transaction documents allow for property releases at a release price of 105.0% of the allocated loan amount (ALA) for all but the five largest properties by ALA, which have a release price of 110.0%.

Based on the trailing 12-month period ended March 31, 2024, the portfolio reported a net cash flow (NCF) of $38.8 million, which is equivalent to a debt yield of 8.2%. The NCF is comfortably above the Morningstar DBRS NCF of $29.1 million for the portfolio less the one released property. It is worth noting that the most recent financials reported an A-note debt service coverage ratio (DSCR) of 0.99 times (x) as a result of increases to the debt service given the floating-rate structure of the loan; however, the interest rate cap agreement is structured with a DSCR floor of 1.10x. The servicer most recently reported a portfolio occupancy rate of 88.7% as September 2024, generally in line with historical trends but slightly above the issuance occupancy rate of 87.4%.

During the prior credit rating action, Morningstar DBRS derived a value of $400.8 million based on the Morningstar DBRS NCF of $29.1 million (adjusted for the released property), and a capitalization rate of 7.25%, resulting in a Morningstar DBRS loan-to-value ratio of 119.4% based on the trust loan balance of $478.5 million. The Morningstar DBRS value represents a -40.5% variance from the cumulative issuance appraised value of $673.1 million for the remaining properties in the portfolio. In addition, Morningstar DBRS maintained the positive qualitative adjustment totaling 3.25% to reflect the low cash flow volatility of the subject portfolio. Morningstar DBRS did not receive either an updated rent roll or financial report, and although the incremental cash flow growth from issuance speaks to the overall strength of the collateral portfolio, it is noteworthy that the Morningstar DBRS NCF derived at issuance represented a -12.7% haircut to the issuer's assumption, driven primarily by a lower income figure as Morningstar DBRS did not accept the revenue for the community-owned homes across the portfolio.

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. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS  
There were no Environmental/Social/Governance factors 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 at (August 13, 2024), https://dbrs.morningstar.com/research/437781.

Class X-EXT is an 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 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 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 info-DBRS@morningstar.com.

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.

Morningstar DBRS 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 see the related appendix for additional information regarding the sensitivity of assumptions used in the credit rating process.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
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://dbrs.morningstar.com/about/methodologies.

--North American Single-Asset/Single-Borrower Ratings Methodology (December 13, 2024), https://dbrs.morningstar.com/research/444612

--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

-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623

A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/417279 (July 17, 2023).

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