Approximately $637 million of structured securities affected
New York, May 28, 2021 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on five classes and downgraded the ratings on four
classes in JPMBB Commercial Mortgage Securities Trust 2015-C32,
Commercial Mortgage Pass-Through Certificates, Series 2015-C32
as follows
Cl. A-2, Affirmed Aaa (sf); previously on Sep
28, 2018 Affirmed Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Sep
28, 2018 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Sep
28, 2018 Affirmed Aaa (sf)
Cl. A-5, Affirmed Aaa (sf); previously on Sep
28, 2018 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Sep
28, 2018 Affirmed Aaa (sf)
Cl. A-S, Downgraded to Aa3 (sf); previously on
Sep 28, 2018 Affirmed Aa1 (sf)
Cl. B, Downgraded to Baa1 (sf); previously on Sep 28,
2018 Affirmed Aa3 (sf)
Cl. X-A*, Downgraded to Aa1 (sf); previously
on Feb 13, 2019 Upgraded to Aaa (sf)
Cl. X-B*, Downgraded to Baa1 (sf); previously
on Sep 28, 2018 Affirmed Aa3 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The ratings on five P&I classes were affirmed due to their credit
support and because 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), are within acceptable ranges.
The ratings on two P&I classes were downgraded due to a decline in
pool performance and higher anticipated losses from the significant exposure
to specially serviced loans. Specially serviced loans now represent
36% of the pool and are primarily secured by hotel and retail properties.
Furthermore, ten of the specially serviced loans, approximately
31% of the pool, are either more than 90 days delinquent,
in foreclosure or have already become real estate owned (REO).
Appraisal reductions have also been recognized on seven of the specially
serviced loans causing increased interest shortfall risk to the trust.
Moody's anticipates interest shortfalls will continue and may increase
from their current levels due the performance of the specially serviced
loans.
The ratings on the two IO Classes, Class X-A and Class X-B,
were downgraded based on the credit quality of their respective referenced
classes.
The coronavirus pandemic has had a significant impact on economic activity.
Although global economies have shown a remarkable degree of resilience
to date and are returning to growth, the uneven effects on individual
businesses, sectors and regions will continue throughout 2021 and
will endure as a challenge to the world's economies well beyond the end
of the year. While persistent virus fears remain the main risk
for a recovery in demand, the economy will recover faster if vaccines
and further fiscal and monetary policy responses bring forward a normalization
of activity. As a result, there is a heightened degree of
uncertainty around our forecasts. Our analysis has considered the
effect on the performance of commercial real estate from a gradual and
unbalanced recovery in US economic activity. 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.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Moody's rating action reflects a base expected loss of 18.1%
of the current pooled balance, compared to 4.9% at
Moody's last review. Moody's base expected loss plus realized
losses is now 14.1% of the original pooled balance,
compared to 4.7% 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 principal methodology used in rating all classes except interest-only
classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published
in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778.
The methodologies used in rating interest-only classes were "Approach
to Rating US and Canadian Conduit/Fusion CMBS" published in September
2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778
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.
DEAL PERFORMANCE
As of the May 17, 2021 distribution date, the transaction's
aggregate certificate balance has decreased by 24% to $869
million from $1.15 billion at securitization. The
certificates are collateralized by 78 mortgage loans ranging in size from
less than 1% to 8.3% of the pool, with the
top ten loans (excluding defeasance) constituting 51% of the pool.
One loan, constituting 2.8% of the pool, has
an investment-grade structured credit assessment. Two loans,
constituting 2.0% 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 27,
compared to a Herf of 34 at Moody's last review.
As of the May 2021 remittance report, loans representing 68%
were current on their debt service payments, 17% were 90
or more days delinquent, 1% were in foreclosure and 6%
were already REO.
Eleven loans, constituting 12% of the pool, are on
the master servicer's watchlist, of which one loan,
representing 6% 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.
One loan has been liquidated from the pool, resulting in a realized
loss of $4.0 million (for a loss severity of 31%).
Eleven loans, constituting 36% of the pool, are currently
in special servicing. Nine of the specially serviced loans,
representing 34% of the pool, have transferred to special
servicing since April 2020.
The largest specially serviced loan is the Civic Opera Building ($71.8
million -- 8.3% of the pool), which represents
a pari-passu portion of a $157 million mortgage loan.
The loan is secured by a 44-story office building located within
the West Loop submarket of Chicago, Illinois. The property,
which was constructed in 1929, was fully restored in 1998 and most
recently renovated in 2015 with approximately 915,000 SF of rentable
office and storage. Additionally, the property contains the
Civic Opera House, a 3,563-seat theater and the second-largest
opera auditorium in North America. The property's occupancy
has declined since securitization and the office portion was 74%
in September 2020, compared to 80% in 2019 and 89%
in 2017. The declining occupancy was primarily due to the largest
tenant at securitization (7% of NRA), along with a few smaller
tenants, vacating at their lease expiration in 2018. The
loan had an initial 3-year interest only period and began to amortize
in September 2018. As a result of the declining revenue and increased
debt service payments the 2019 NOI DSCR was 1.08X, compared
to 1.49X in 2017. In July 2020 the loan transferred to special
servicing due to imminent default and the property's performance
had further declined in 2020 with an annualized September 2020 NOI DSCR
of 0.86X. As of the May 2021 remittance statement,
the loan was more than 90 days delinquent and last paid through its December
2020 payment date. The special servicer is currently dual tracking
the forbearance negotiations with potential legal remedies as the loan.
The second largest specially serviced loan is the Hilton Suites Chicago
Magnificent Mile ($70.2 million -- 8.1%
of the pool), which is secured by a 30-story, 345-key,
full-service Hilton Suites hotel located in Chicago, Illinois.
The property operates under a Hilton franchise agreement which expires
in 2025. Prior to 2020 the property had already faced declining
revenue per available room (RevPAR) due to new hotel supply in the submarket
since securitization. For the trailing-twelve-month
(TTM) period ending March 2020 the property's NOI had fallen 36%
as compared to year-end 2018. As a result of the declining
NOI, the TTM March 2020 NOI DSCR declined to 0.96X,
compared to 1.08X in 2019 and 1.50X in 2018. The
loan transferred to special servicing in May 2020 as the property's
performance had been further negatively impacted by the coronavirus pandemic
and the loan was due to mature in October 2020. The borrower was
unable to refinance, and the loan is last paid through its May 2020
payment date. An updated appraisal has not been reported and the
master servicer has recognized a 25% appraisal reduction on this
loan. The special servicer has indicated they have engaged counsel
on the foreclosure process and cash flow is currently being trapped through
a hard lock box.
The third largest specially serviced loan is the Palmer House Retail Shops
($59.6 million -- 6.9% of the pool),
which is secured by an approximately 134,500 SF mixed-use
property located in downtown Chicago below the non-collateral Palmer
House Hilton Hotel. The property includes a parking garage (49%
of NRA), retail space (40%) and office space (11%).
The property's performance has been significantly impacted by the
pandemic as the access to the collateral's retail portion is provided
through the non-collateral Palmer House Hilton Hotel, which
has been closed since March 2020. Additionally, the parking
operator, System Parking Inc. (49% of the collateral
NRA), exercised their one-time termination option and vacated
the property in July 2020. The special servicer has filed a foreclosure
complaint in December 2020 and a receiver was appointed in February 2021.
As of the May 2021 remittance date the loan is last paid through its April
2020 payment date and the special servicer is dual tracking foreclosure
process while still in discussions with the borrower regarding potential
payment relief.
The fourth largest specially serviced loan is The Outlet Shoppes at Gettysburg
($36.3 million -- 4.2% of the pool),
which is secured by a 249,937 SF, open-air outlet center
located approximately one mile east of Gettysburg National Military Park
in Gettysburg, PA. The property is sponsored by a joint venture
between CBL & Associates Limited Partnership ("CBL") and
Horizon Group Properties Inc. ("Horizon"). The
property's NOI has declined annually since 2016 and the 2019 NOI
was approximately 23% below the NOI for year-end 2015.
Property performance further declined in 2020 and the property was 79%
leased as of December 2020 with an actual NOI DSCR of 1.08X.
The loan originally transferred to special servicing in July 2020 as a
result of the declining performance and a loan modification was subsequently
executed in August 2020 which included deferral of P&I payments.
The loan returned to the master servicer in late 2020, however,
the loan recently transferred back to special servicing in April 2021
and is currently being monitored by the special servicer.
The remaining seven specially serviced loans are either in foreclosure,
REO or more than 90 days delinquent and are primarily secured by retail
and hotel properties.
Moody's has also assumed a high default probability for one poorly
performing loan, constituting 0.3% of the pool.
Moody's estimates an aggregate $132.9 million loss for the
specially serviced and troubled loans (45% expected loss on average).
As of the May 2021 remittance statement cumulative interest shortfalls
were $3.0 million and impact up to Cl. E.
Moody's anticipates interest shortfalls will continue because of the exposure
to specially serviced loans and/or modified loans. Interest shortfalls
are caused by special servicing fees, including workout and liquidation
fees, appraisal entitlement reductions (ASERs), loan modifications
and extraordinary trust expenses.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is largely
driven by each loan's DSCR, and 2) Moody's assessment of the severity
of loss upon a default, which is largely driven by each loan's loan-to-value
ratio, referred to as the Moody's LTV or MLTV. As described
in the CMBS methodology used to rate this transaction, we make various
adjustments to the MLTV. We adjust the MLTV for each loan using
a value that reflects capitalization (cap) rates that are between our
sustainable cap rates and market cap rates. We also use an adjusted
loan balance that reflects each loan's amortization profile.
The MLTV reported in this publication reflects the MLTV before the adjustments
described in the methodology.
Moody's received full year 2019 operating results for 90% of the
pool, and full or partial year 2020 operating results for 100%
of the pool (excluding specially serviced and defeased loans).
Moody's weighted average conduit LTV is 109%, compared
to 120% 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 16% to the most recently available net operating income (NOI).
Moody's value reflects a weighted average capitalization rate of
10.0%.
Moody's actual and stressed conduit DSCRs are 1.40X and 1.02X,
respectively, compared to 1.30X and 0.91X 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 U-Haul Portfolio
Loan ($24.5 million -- 2.8% of the pool),
which represents a pari-passu portion of a $108.0
million senior mortgage loan. The whole loan has an additional
$111 million of subordinate debt. This loan is secured by
105 self-storage properties located across 35 states. As
of December 2020, the portfolio's average occupancy rate was 88%,
compared to 84% in 2019 and 86% in 2018. The portfolio's
financial performance has improved since securitization. Moody's
structured credit assessment and stressed DSCR are aaa (sca.pd)
and 2.71X, respectively.
The top three conduit loans represent 14% of the pool balance.
The largest loan is the Gateway Business Park Loan ($50.9
million -- 5.9% of the pool), which is secured
by a fee simple interest in a 514,047 SF, eight building office
complexes located in Mount Laurel, NJ. The largest tenant
is Canon Financial Services, Inc. (9.7% of
NRA), which utilizes the space as their US headquarters on a lease
expiring in June 2023. As of September 2020, the portfolio
occupancy was 83%, compared to 74% in 2019 and 83%
in 2018. The property's NOI has generally been stable since
2017, however, the property's revenue has slightly declined
in recent years. The loan's actual NOI DSCR was 1.22X as
of September 2020. The loan has remained current and has amortized
9% since securitization. Moody's LTV and stressed DSCR are
131% and 0.83X, respectively, compared to 127%
and 0.85X at the last review.
The second largest loan is the Frandor Shopping Center Loan ($36.3
million -- 4.2% of the pool), which is secured
by a 455,152 SF, anchored retail shopping center located in
Lansing, MI, approximately one mile from Michigan State University.
As of December 2020, the property was 91% occupied,
compared to 90% in 2019 and 91% in 2018. The largest
tenant, Kroger, occupies 8% of the NRA and has a lease
expiration in June 2026. The loan received a performing consent
in 2020 as a result of the pandemic to allow for the use of reserve funds
to cover debt service payments for the June, July and August.
The loan has now remained current and has amortized 10% since securitization.
Moody's LTV and stressed DSCR are 100% and 1.03X,
respectively, compared to 119% and 0.87X at the last
review.
The third largest loan is the One Shell Square Loan ($32.9
million -- 3.8% of the pool), which represents
a pari-passu portion of a $115.2 million mortgage
loan. The property was also encumbered with a $20.0
million mezzanine debt at securitization. The loan is secured by
a 51-story, LEED Gold certified, Class-A office
tower as well as an adjoining 10-level parking garage located within
the Central Business District (CBD) of New Orleans, Louisiana.
The property was constructed in 1972 and offers approximately 1.24
million square feet of leasable office space, several retail spaces
in the interior lobby and an adjoining parking garage. The largest
tenant, Shell Oil Company, reduced its presence at the property
since securitization and currently accounts for 29% of NRA.
The building was renamed to Hancock Whitney Center when the second largest
tenant, Hancock Whitney (17% of NRA), moved their regional
headquarters to the property in 2018. As of September 2020,
the property was 86% occupied, compared to 89% at
year-end 2019, and 91% at year-end 2018.
After an initial interest-only period, the loan has amortized
8.6% since securitization. The loan is current through
its December 2020 payment and Moody's LTV and stressed DSCR are 114%
and 0.95X, respectively, compared to 110% and
0.98X at the last review.
REGULATORY DISCLOSURES
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 http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.
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.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK 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 Lead 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
Matthew Halpern
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
