Morningstar DBRS Downgrades Credit Ratings on Five Classes of JPMBB Commercial Mortgage Securities Trust 2015-C28

DBRS Limited (Morningstar DBRS) downgraded its credit ratings on five classes of Commercial Mortgage Pass-Through Certificates, Series 2015-C28 issued by JPMBB Commercial Mortgage Securities Trust 2015-C28 as follows:

-- Class D to B (high) (sf) from BB (high) (sf)
-- Class X-D to BB (low) (sf) from BBB (low) (sf)
-- Class E to C (sf) from B (low) (sf)
-- Class X-E to C (sf) from B (sf)
-- Class F to C (sf) from CCC (sf)

In addition, Morningstar DBRS confirmed its credit ratings on the remaining classes as follows:

-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AA (sf)
-- Class B at AA (low) (sf)
-- Class X-C at A (sf)
-- Class C at A (low) (sf)
-- Class EC at A (low) (sf)

Morningstar DBRS discontinued the credit rating on Class A-4 certificate as that class was repaid in full with the March 2025 remittance.

Morningstar DBRS changed the trends on Classes D and X-D to Stable from Negative. All other trends are Stable, with the exception of Classes E, F, and X-E, which have credit ratings that do not typically carry a trend in commercial mortgage-backed securities (CMBS) transactions.

Morningstar DBRS previously downgraded its credit ratings for Classes D, E, X-D and X-E in April 2024, primarily as a result of the projected liquidated loss expectations tied to the loans in special servicing at that time in Pinnacle Office Shops and Parking loan (Prospectus ID#13, formerly 2.5% of the pool) and Horizon Outlet Shoppes Portfolio (Prospectus ID#12, formerly 2.2% of the pool). Those loans have since been liquidated from the trust with cumulative losses that were relatively in line with Morningstar DBRS' expectations. Also with the April 2024 credit rating action, Morningstar DBRS changed the trends on Classes D and E to Negative from Stable, a factor of the expectation that there could be further value deterioration for a select number of underperforming properties backing large loans in the pool, most notably the Shops at Waldorf Center (Prospectus ID#2, 28.7% of the pool) and The Club Row Building (Prospectus ID#6, 17.4% of the pool), the details of which are outlined below.

The latest credit rating downgrades on the Class D, E, F, X-D and X-E certificates reflect the increased loss projections and reduced credit support for those bonds resulting from the transfer of the Club Row Building to special servicing in January 2025. The loan is secured by a Class B office building in Manhattan and has suffered declines in performance as a result of large tenant departures. Morningstar DBRS analyzed the loan with a liquidation scenario based on a conservative haircut to the issuance appraised value. Liquidated losses would erode the remaining nonrated certificate balance and the majority of the Class F balance, further reducing credit support for the Class E certificate, supporting the credit rating downgrade to C (sf) with this review. Morningstar DBRS also has concerns with three other loans in the top five, collectively accounting for 54.5% of the current pool balance that have exhibited increased credit risks, a factor in the credit rating downgrades for Classes D and E. The Shops at Waldorf Center and Walgreens Net Lease Portfolio III & IV (Prospectus ID#9&10, collectively 25.8% of the current pool balance) are secured by retail properties and are being monitored for upcoming rollover and potential store closures in the near-to-moderate term, factors that could contribute to value deterioration and increased credit risks through the ultimate repayment or disposition.

The credit rating confirmations for the most senior certificates and trend changes to Stable from Negative for Classes D and X-D reflect an otherwise healthy pool of loans primarily backed by retail properties with a pool weighted-average debt service coverage ratio (DSCR) of 1.69 times (x). The credit rating confirmations also reflect the $556.8 million in principal paydown since the previous credit rating action which includes the previous largest loan in the pool, Houston Galleria - Trust (Prospectus ID#1, previously 41.1% of the pool). The pool also benefits from a low concentration of office collateral. Outside of the loans of concern noted above, the majority of loans in the pool are performing well with a weighted-average DSCR of 2.19 times (x) as of the most recent financial reporting; further supporting the credit rating confirmations of the higher rated classes with this review.

As of the March 2025 remittance, 13 of the original 67 loans remained in the pool with an aggregate principal balance of $257.6 million, representing a collateral reduction of 77.5% since issuance. Specially serviced and watchlisted loans represent 20.9% and 50.5% of the pool balance, respectively. Loans on the servicer's watchlist are primarily being monitored for upcoming maturity dates in the first quarter of 2025. Since the previous credit rating action, total interest shortfalls have increased by approximately $700,000 while The Class F certificate was shorted partial interest with the March 2025 reporting cycle. Although both specially serviced loans previously contributing to these shortfalls were liquidated, the recent transfer of the Club Row Building and Homewood Suites Indianapolis (Prospectus ID#26, 3.4% of the current pool balance) loans may further contribute to interest shortfalls in the near-to-moderate term.

The largest loan in special servicing, The Club Row Building, is secured by a Class B office tower in the Grand Central submarket of Manhattan. The loan recently transferred to special servicing in January 2025 for maturity default and was previously monitored on the servicer's watchlist for a low DSCR following the departure of the former second and third largest tenants, WeWork (previously 7.6% of the net rentable area (NRA)) and American National Standards Institute (ANSI) (previously 5.5% of the NRA) in November 2023 and July 2024, respectively. As a result, occupancy declined to 63% as of the September 2024 rent roll with a DSCR that was less than breakeven as of the June 2024 annualized financials. On a positive note, Noor Staffing Group recently signed a 15,000 sf lease according to a November 7, 2024, online article, which would increase occupancy to approximately 71%. Rollover is moderate over the next 12 months with seven tenants, representing 4.8% of NRA, scheduled to roll. Morningstar DBRS analyzed the loan with a liquidation scenario to reflect the low occupancy and DSCR and heighted credit risk as the loan is now past its maturity date. As a result, after applying a 65% haircut to the issuance appraisal, Morningstar DBRS projects a total loss of $22.0 million with a loss severity of 49%.

The second loan in special servicing is Homewood Suites Indianapolis, secured by a 116-key extended stay lodging property in Indianapolis. The loan transferred to special servicing on February 25, 2025, after failing to repay the trust loan at the scheduled maturity date on February 6, 2025. A drop in occupancy between YE2022 and YE2023 and an increase in operating expenses has caused the DSCR to fall below breakeven; although, the YE2024 reporting exhibited slight improvement. The revenue per available room penetration rate was 95.1% as of the December 2024 STR report. Given the recent transfer to special servicing and lackluster performance, Morningstar DBRS applied a probability of default (POD) adjustment in its analysis, resulting in an expected loss (EL) that was slightly below the pool average.

The Shops at Waldorf Center loan is secured by a 497,000 sf anchored retail center located approximately 30 miles south of Washington, D.C. A loan modification closed in November 2022, which included a conversion to interest-only (IO) payments until May 2024 and a loan term extension to May 2025 with a one-year extension option. The DSCR declined to 1.19x as of the December 2024 financial reporting. As of December 2024, the property reported a vacancy rate of 22.4%, unchanged from YE2023, with an average rental rate of $18.9 per square foot (psf). These figures compared with the Suburban Maryland submarket YE2024 average rental and vacancy rates of $28.5 psf and 7.6%, respectively, according to Reis. The largest tenant, PetSmart (6.2% of NRA) had a lease expiration in January 2025; however, there are two five-year extension options remaining and PetSmart remains open at the property as of March 2025. In addition, six tenants, representing 17.7% of NRA, have leases scheduled to expire in the next 12 months. JPMorgan Chase (approximately 5,000 sf) and Sprouts Farmers Market (approximately 32,000 sf) recently signed leases and are scheduled to take occupancy in June and July 2025, respectively, implying a leased rate of approximately 85.0%. The collateral was appraised in June 2022 (as part of the transfer to special servicing that resulted in a loan modification) for $93.7 million, less than the $113.1 million appraised value from issuance but above the current loan balance of $74.1 million. Given the low DSCR and occupancy declines, Morningstar DBRS applied a stressed loan-to-value ratio to the loan by applying an 8.0% capitalization rate to the YE2023 net cash flow figure, in addition to a stressed POD that resulted in an EL that was approximately double the pool average.

Morningstar DBRS also has concerns with the third and fourth largest loans in the pool, Walgreens Net Lease Portfolio III and Walgreens Net Lease Portfolio IV, both secured by a portfolio of eight Walgreens locations across four states. Although the 15-year leases are structured with 12 five-year extension options, Walgreens has been widely reported to be struggling, with the stock price down over 70% in the last four years. The company previously announced planned store closures and most recently, was acquired by a private equity firm as part of an effort to overhaul performance. Both loans are due for the January 2025 loan payment as of the March 2025 reporting; however, a principal curtailment totalling $1.1 million was applied to the loan balances with that same remittance. Morningstar DBRS believes that was likely tied to the anticipated repayment date in January 2025. As a result of these developments and the questionable future for Walgreens, Morningstar DBRS is concerned with the refinance prospects for and applied a stressed POD in the analysis for both loans with this review. The resulting ELs were slightly below the pool average.

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

Classes X-A, X-B, X-C, X-D, and X-E are 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.

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 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.