Rating Action: Moody's downgrades two, confirms one and affirms seven classes of JPMBB 2013-C12
Global Credit Research - 30 Jul 2020
Approximately $893.6 million of structured securities affected
New York, July 30, 2020 -- Moody's Investors Service, ("Moody's") has downgraded the ratings on two classes, confirmed the rating on one class and affirmed the rating on seven classes in JPMBB Commercial Mortgage Securities Trust 2013-C12 as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf)
Cl. A-5, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Oct 17, 2019 Affirmed Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on Oct 17, 2019 Affirmed A3 (sf)
Cl. D, Confirmed at Baa3 (sf); previously on Apr 17, 2020 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Ba3 (sf); previously on Apr 17, 2020 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to B3 (sf); previously on Apr 17, 2020 B2 (sf) Placed Under Review for Possible Downgrade
Cl. X-A*, Affirmed Aaa (sf); previously on Oct 17, 2019 Affirmed Aaa (sf)
* Reflects interest-only classes
The ratings on six P&I classes were affirmed and the rating on one P&I class was confirmed due to the pool's share of defeasance and the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), being within acceptable ranges.
The rating on two P&I classes, Cl. E and Cl. F, were downgraded due to anticipated losses from specially serviced and troubled loans.
The rating on the IO class, Cl. X-A, was affirmed based on the credit quality of the referenced classes.
The actions conclude the review for downgrade initiated on April 17, 2020.
The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of commercial real estate from the collapse in US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. As a result, the degree of uncertainty around our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.
Moody's rating action reflects a base expected loss of 4.6% of the current pooled balance, compared to 3.9% at Moody's last review. Moody's base expected loss plus realized losses is now 3.2% of the original pooled balance, compared to 2.8% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in rating all classes except interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187 and "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1226187, "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in May 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1227875, and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
As of the July 17, 2020 distribution date, the transaction's aggregate certificate balance has decreased by 30% to $937.2 million from $1.3 billion at securitization. The certificates are collateralized by 65 mortgage loans ranging in size from less than 1% to 12.3% of the pool, with the top ten loans (excluding defeasance) constituting 53% of the pool. One loan, constituting 9.5% of the pool, has an investment-grade structured credit assessment. Thirteen loans, constituting 10% of the pool, have defeased and are secured by US government securities.
Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 18, compared to 19 at Moody's last review.
As of the July 2020 remittance report, loans representing 88% were current or within their grace period on their debt service payments, 4% were between 30 -- 59 days delinquent and 7% were 60+ days delinquent.
Fourteen loans, constituting 35% of the pool, are on the master servicer's watchlist, of which eight loans, representing 17% of the pool, indicate the borrower has requested relief in relation to coronavirus impact on the property. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.
Three loans, constituting 9% of the pool, are currently in special servicing. Two of the specially serviced loans, representing 8% of the pool, have transferred to special servicing since March 2020. The largest specially serviced loan is the Southridge Mall loan ($45.2 million -- 4.8% of the pool), which represents a pari-passu portion of a $113.2 million mortgage loan. The loan is secured by a 560,000 square feet (SF) portion of a 1.2 million SF regional mall in Greendale, Wisconsin, a suburb of Milwaukee. At securitization, the mall was anchored by non-collateral anchors Boston Store, Sears, J.C. Penney, and collateral anchors, Macy's and Kohl's. Sears and Boston Store vacated the property in 2017 and 2018, respectively. Subsequently Kohl's moved their store to a new retail development in late 2018. The former Sears space was partially backfilled by a Dick's Sporting Goods/Golf Galaxy, Round1 Bowling and Amusement, and T.J. Maxx, all of which opened for business between 2018 and 2019. As of March 2020, the collateral was 69% occupied and in-line occupancy was 76%. The mall has reopened since May 20, 2020 after a temporary closure due to the coronavirus outbreak. The loan transferred to special servicing in July 2020 due to imminent default in relation to the coronavirus outbreak. The loan is last paid through the April 2020 payment and has declined in performance since 2018. The loan has amortized 10% since securitization.
The second largest specially serviced loan is the Liberty Tree Mall & Strip Center ($29.7 million -- 3.2% of the pool), which is secured by a 452,000 SF enclosed retail property in Danvers, MA, approximately 20 miles northeast of Boston. The property is anchored by non-collateral anchors Target, and Kohl's, and collateral anchors, Marshall's and a 20-screen AMC/IMAX Theatre. As of December 2019, the collateral was 95% occupied and in-line occupancy was 77%. The mall has reopened since March 19, 2020 after a temporary closure due to the coronavirus outbreak. The loan transferred to special servicing in July 2020, and the borrower has requested relief in relation to the coronavirus outbreak. The loan is last paid through its May 2020 payment. The loan has amortized 15% since securitization.
The third largest specially serviced loan is the Park 50 Loan ($11.9 million -- 1.3% of the pool), which is secured by 13 flex/office and flex/industrial buildings located approximately 16 miles northeast of downtown Cincinnati, Ohio. The loan transferred to special servicing in August 2017 for delinquent payments and the REO title date was in October 2018.
Moody's has also assumed a high default probability for one poorly performing loan, constituting 1.1% of the pool, and has estimated an aggregate loss of $17.9 million (a 26% expected loss on average) from the specially serviced and troubled loans.
Moody's received full year 2018 operating results for 100% of the pool, and full or partial year 2019 operating results for 100% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 96%, compared to 95% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 21% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.6%.
Moody's actual and stressed conduit DSCRs are 1.59X and 1.14X, respectively, compared to 1.66X and 1.16X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.
The loan with a structured credit assessment is the Americold Cold Storage Portfolio ($88.7 million -- 9.5% of the pool), which represents a pari-passu portion of a $177.5 million mortgage loan. The loan is secured by a portfolio of 15 cold storage facilities located across nine U.S. states, with a total storage capacity of 3.6 million SF. The loan sponsor is Americold Realty Trust, the largest US operator of cold storage facilities. The property is also encumbered by $102 million of mezzanine debt. The loan benefits from amortization and Moody's structured credit assessment and stressed DSCR are a2 (sca.pd) and 1.98X, respectively.
The top three conduit loans represent 25% of the pool balance. The largest loan is the Legacy Place Loan ($115.5 million -- 12.3% of the pool), which represents a pari-passu portion of a $184.8 million mortgage loan. The loan is secured by a 484,000 SF lifestyle retail center in Dedham, Massachusetts, a suburb of Boston. The property was developed in 2009 and consists of six buildings and parking for approximately 2,800 vehicles. The property is anchored by a Whole Foods, Citizen's Bank, L.L. Bean and Kings Bowling Alley. Both Whole Food and L.L. Bean recently extended their lease terms in January of 2020 for an additional 10 years and 7 years, respectively. The property was 93% leased as of March 2020, essentially unchanged from the same period last year. Moody's LTV and stressed DSCR are 95% and 0.94X, respectively, compared to 96% and 0.93X at the last review.
The second largest loan is the IDS Center Loan ($81.3 million -- 8.7% of the pool), which represents a pari-passu portion of a $162.7 million mortgage loan. The loan is secured by a 1.4 million SF mixed-use property located in downtown Minneapolis, Minnesota. The collateral consists of a 57-story skyscraper office tower, an eight-story annex building, a 100,000 SF retail center, and an underground garage. As of March 2020, the property was 80% leased, the same as year-end 2019. Moody's LTV and stressed DSCR are 113% and 0.89X, respectively, compared to 99% and 1.01X at the last review.
The third largest loan is the 408-416 Fulton Street Loan ($35.0 million -- 3.7% of the pool), which is secured by a 55,287 SF retail property located in Brooklyn, NY. The property was originally built 1937 and renovated in 2013. The occupancy declined to 35% in June 2019 due to largest tenant, Apogee (87% of NRA) terminating their lease early. Shortly after, Zwanger Pesiri, a radiology chain, leased out 12,000 SF (22% of NRA) of the vacant Apogee space. Moody's LTV and stressed DSCR are 129% and 0.69X, respectively, compared to 125% and 0.71X at the last review.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.
Moody's did not use any stress scenario simulations in its analysis.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Yoni Lobell Associate Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Romina Padhi VP - Senior Credit Officer Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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