Morningstar DBRS Downgrades Seven Classes of JPMBB Commercial Mortgage Securities Trust 2015-C31

DBRS Limited (Morningstar DBRS) downgraded credit ratings on seven classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C31 issued by JPMBB Commercial Mortgage Securities Trust 2015-C31 as follows:

-- Class X-B to BB (high) (sf) from A (high) (sf)
-- Class B to BB (sf) from A (sf)
-- Class C to CCC (sf) from BB (sf)
-- Class X-C to CCC (sf) from BB (high) (sf)
-- Class EC to CCC (sf) from BB (sf)
-- Class D to C (sf) from CCC (sf)
-- Class X-D to C (sf) from CCC (sf)

In addition, Morningstar DBRS confirmed the following credit ratings:

-- Class A-3 at AAA (sf)
-- Class A-SB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class E at C (sf)
-- Class F at C (sf)

Morningstar DBRS changed the trends on Classes A-S and X-A to Negative from Stable. The trends on Classes B and X-B are Negative. Classes C, D, E, F, X-C, X-D, and EC are credit rating categories that do not generally carry a trend in commercial mortgage backed securities (CMBS). The trends on all remaining Classes are Stable.

The credit rating downgrades on Classes C, X-C, D, EC, and X-D reflect Morningstar DBRS' increased loss projections from the loans in special servicing, which suggests trust losses would fully erode the Class D principal balance and eat into the Class C principal balance. The loss projection is primarily driven by the two largest specially serviced loans, Civic Opera Building (Prospectus ID#1, 10.9% of the pool) and the Sunblet Portfolio (Prospectus ID#3, 8.6% of the pool), both of which were analyzed with liquidation scenarios at the previous Morningstar DBRS credit rating action in April 2024. Since then, the Highland Landmark I (Prospectus ID#5, 5.1% of the pool) and Airport North Portfolio (Prospectus ID#6, 4.9% of the pool) loans have both transferred to special servicing and were analyzed under liquidation scenarios with this credit rating action. Three of the four specially serviced loans are discussed below.

Morningstar DBRS also recognizes nearly all of the outstanding loans in the pool have upcoming maturity dates throughout the second and third quarters of 2025. Most of the remaining borrowers are expected to successfully secure takeout financing; however, Morningstar DBRS has identified a number of loans, representing approximately 8.0% of the pool, that have an elevated refinance risk because of performance-related concerns. Although the properties securing those loans have not received updated appraisals since issuance, Morningstar DBRS believes there is potential for value declines given the ongoing performance concerns, which will complicate takeout financing efforts. The repayment of Class B is reliant on proceeds from the loans identified with increased maturity risk, supporting the credit rating downgrade on Classes B and X-B. In the event additional borrowers are unable to secure takeout financing or at risk properties experience greater than anticipated value declines, further credit rating action may be taken, supporting the Negative trend on Classes AS, X-A, B, and X-B.

As of the February 2025 remittance, 45 loans of the original 58 remain outstanding with a pool balance of $723.0 million, representing a collateral reduction of 29.6% since issuance. Of the remaining loans, 16 loans, representing 27.3% of the pool balance, have fully defeased. Four loans are in special servicing, totaling 29.5% of the pool balance. Each of these loans are among the largest 10 loans in the pool by outstanding trust loan balance. In addition, six loans representing 6.1% of the pool balance are on the servicer's watchlist, four of which have been flagged for performance and/or credit related reasons.

The largest loan in the pool, Civic Opera Building, 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-C32 transaction, which is also rated by Morningstar DBRS. The loan has been in special servicing since June 2020, and according to servicer commentary from February 2025, the lender amended the complaint to add a recourse component to the foreclosure and will enter the discovery phase shortly. Occupancy continues to decline, with the September 2024 rent roll reporting an occupancy rate of 53.7% with an additional 8.3% of rollover over the next 12 months. 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 for this loan included a liquidation scenario based on a 30.0% haircut to the September 2024 appraised value, in addition to including the outstanding advances and expected servicer expenses, which totaled nearly $30 million. This analysis suggested a loss severity in excess of 85.0%, or approximately $70 million.

The second-largest loan in special servicing, Sunbelt Portfolio, is secured by the fee-simple interests in a portfolio of three office properties in Birmingham, Alabama, and Columbia, South Carolina. The loan transferred to special servicing in January 2022 for imminent monetary default and with the February 2025 servicer commentary, receivers had been appointed and the special servicer is proceeding with foreclosure. The loan was last paid in May 2024 and remains delinquent as of this commentary. The loan has a scheduled July 2025 maturity date. The portfolio has experienced precipitous occupancy declines in recent years, with the most recent figure reporting the properties were 65.5% occupied as of September 2024, compared with 72.2% occupancy as of YE2021. Financial performance continues to decline, with the September 2024 debt service coverage ratio (DSCR) reported at 0.46 times (x), down from 1.10x at YE2022. At issuance, the portfolio was valued at $203.3 million, which declined to $118.0 million as of the May 2024 appraisal, representing a decline of approximately 42.0%. The Morningstar DBRS' analysis included a liquidation scenario based on a 35.0% haircut to the May 2024 appraised value, in addition to including the outstanding advances and expected servicer expenses, which totaled nearly $9.0 million. This analysis suggested a loan loss severity in excess of 50.0%, or approximately $32 million.

Another specially serviced office loan, Highland Landmark I (Prospectus ID#5, 5.1% of the pool) transferred to special servicing in June 2024 following payment default. The loan is paid through in November 2024 and has a scheduled maturity date of August 2025. The loan is secured by a suburban Class A office property in Downers Grove, Illinois. According to the February 2025 servicer commentary, the special servicer has reached out to the borrower while also initiating the foreclosure process. The servicer is currently awaiting a hearing date regarding the appointment of the receiver. Prior to the transfer to special servicing, the loan was being monitored on the servicer's watchlist for a cash trap tied to the departure of the former largest tenant, Advocate Health Center (formerly 68.0% of the net rentable area (NRA). As of the February 2025 reserve report, there is $10.9 million in the cash trap account with an additional $300,000 spread among various accounts. As of the September 2024 rent roll, the subject was only 17.5% occupied, down significantly from 86.0% at YE2023. The largest tenant at the subject is Univar Inc. (12.9% of the NRA, lease expiry in June 2026), while the remaining tenancy is quite granular. Although a new appraisal has not been completed to date, Morningstar DBRS expects a significant value decline from the issuance value of $64.6 million. The Morningstar DBRS' analysis for this loan included a liquidation scenario based on a 75% haircut to the issuance appraised value, in addition to the inclusion of outstanding advances and expected servicer expenses, which totaled nearly $4.0 million. This analysis suggested a loan loss severity in excess of 65.0%, or approximately $25.0 million.

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 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) at https://dbrs.morningstar.com/research/437781.

Classes X-A, X-B, X-C, and X-D 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 (February 28, 2025), https://dbrs.morningstar.com/research/448963.

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 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 Limited
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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 CMBS Multi-Borrower Rating Methodology (December 13, 2024)/North American CMBS Insight Model v 1.2.0.0, 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

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.