DBRS Limited (DBRS Morningstar) upgraded the ratings on four classes of the Commercial Mortgage Pass-Through Certificates, Series 2011-C4 issued by JP Morgan Chase Commercial Mortgage Securities Trust 2011-C4.
Class E to AA (sf) from AA (low) (sf)
Class F to A (sf) from BBB (low) (sf)
Class G to BBB (sf) from BB (low) (sf)
Class H to BB (low) (sf) at B (sf)
DBRS Morningstar also confirmed the ratings on the remaining classes as follows:
Class C at AAA (sf)
Class D at AAA (sf)
All trends are Stable. The rating upgrades and confirmations reflect the significant deleveraging of the pool and sufficient credit support relative to the remaining collateral in the trust. As of the April 2022 remittance, the trust balance had been reduced by 89.7% since issuance, following the recent payoff of the IPCC - Capview Portfolio A and B loans, which contributed approximately $22.7 million in principal paydown to the Class C certificate. Only one loan, Newport Centre (Prospectus ID#1, 100.0% of the pool) remains outstanding in the pool.
The Newport Centre loan is secured by a 782,000-square-foot (sf) portion of a 1.15 million-sf regional mall in Jersey City, New Jersey. The mall is owned by a joint venture between Melvin Simon & Associates and the LeFrak family, who also developed the Newport Master Planned Community where the property is located. The management company for Simon Property Group manages the mall. The loan was transferred to special servicing in July 2020 when the borrower made a Coronavirus Disease (COVID-19) relief request, and the loan returned to the master servicer in January 2021 following a modification that allowed for a brief deferral of reserve payments.
The loan was transferred to special servicing for a second time after the borrower failed to repay the loan at the May 2021 maturity date. A modification was granted in August 2021, the terms of which included an extension of the maturity date to May 2023 and an additional 12-month extension option. In addition, the borrower was required to reinstate the loan, execute a new recourse guaranty for 10% of the unpaid principal balance, and maintain the loan in cash management for the entire extension term. The loan was returned to the master servicer in November 2021 and remains current.
Despite slight cash flow declines since the start of the pandemic, property operations continue to comfortably cover debt service payments. According to the September 2021 reporting, the annualized debt service coverage ratio was 1.74 times (x), compared with 1.85x at YE2020 and 2.08x at YE2019. The slight year-over-year (YOY) decrease reflects increased expenses and decreased expense reimbursements. Occupancy has historically been strong, reported at 99.9% as of February 2022, up from 96.0% as of December 2019, with no significant leases rolling in the near term. In-line sales for the trailing 12-month period ended February 28, 2022, were reported to be $728 per square foot (psf), according to the most recent sales report, up from YE2020 sales of $522 psf.
Newport Centre is anchored by Macy's (23.6% of total net rentable area (NRA), expiring January 2028), Sears (19.8% of total NRA, subject to a ground lease that expires in October 2027), JCPenney (18.5% of total NRA, expiring January 2050), Kohl's (14.9% of total NRA, expiring January 2028), and an 11-screen AMC Theatres (4.9% of total NRA, expiring January 2026), all of which have reported difficulties both before and during the pandemic. Although there are concerns with the property's anchor mix, the property is well situated in an urban infill submarket, with high barriers to entry and minimal direct competition in the immediate area.
DBRS Morningstar remains cautious regarding the near-term refinance outlook for regional malls in general given the lack of liquidity for this property type and changing consumer trends. Mitigating this concern is the collateral's continued support by the sponsor, historical performance including the pandemic, strong sales, and an ongoing cash flow sweep that may be used to pay down the loan on a quarterly basis. Additionally, given the subject's ideal location in Jersey City-with direct access to Manhattan via the Holland Tunnel and PATH train-and the lack of competition, DBRS Morningstar believes the asset is well positioned to continue to attract shoppers and projects stable to improved performance through loan maturity. DBRS Morningstar also notes the mall was able to hold its value even throughout the pandemic, based on the April 2021 appraised value of $315.0 million, which is only a 6.5% decline from the issuance value of $337.0 million and is well in excess of the current loan amount of $151.0 million. As part of its analysis, DBRS Morningstar incorporated a conservative stress test on the property cash flow to determine the durability of the ratings and further support the upgrades.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.
DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for this transaction.
The DBRS Viewpoint platform provides additional information on this transaction and underlying loans including DBRS Morningstar metrics, commentary, servicer-reported cash flows, and other performance-related data.
For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is North American CMBS Surveillance Methodology (March 4, 2022), which can be found on dbrsmorningstar.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.
The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.
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@dbrsmorningstar.com.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
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Ratings
Date Issued Debt Rated Action Rating Trend Attributesi
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CA = Lead Analyst based in Canada
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U = UK endorsed
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18-May-22 Commercial Mortgage Pass-Through Certificates, Series 2011-C4, Class C Confirmed AAA (sf) Stb CA
18-May-22 Commercial Mortgage Pass-Through Certificates, Series 2011-C4, Class D Confirmed AAA (sf) Stb CA
18-May-22 Commercial Mortgage Pass-Through Certificates, Series 2011-C4, Class E Upgraded AA (sf) Stb CA
18-May-22 Commercial Mortgage Pass-Through Certificates, Series 2011-C4, Class F Upgraded A (sf) Stb CA
18-May-22 Commercial Mortgage Pass-Through Certificates, Series 2011-C4, Class G Upgraded BBB (sf) Stb CA
18-May-22 Commercial Mortgage Pass-Through Certificates, Series 2011-C4, Class H Upgraded BB (low) (sf) Stb CA
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