Approximately $639.5 million of structured securities affected
New York, November 25, 2020 -- Moody's Investors Service, ("Moody's") has affirmed the ratings
on seven and downgraded the ratings on two classes in JPMDB Commercial
Mortgage Securities Trust 2016-C2 ("JPMDB 2016-C2"),
Commercial Mortgage Pass-Through Certificates, Series 2016-C2
as follows:
Cl. A-2, Affirmed Aaa (sf); previously on Jan
31, 2020 Affirmed Aaa (sf)
Cl. A-3A, Affirmed Aaa (sf); previously on Jan
31, 2020 Affirmed Aaa (sf)
Cl. A-3B, Affirmed Aaa (sf); previously on Jan
31, 2020 Affirmed Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jan
31, 2020 Affirmed Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jan
31, 2020 Affirmed Aaa (sf)
Cl. A-S, Affirmed Aa3 (sf); previously on Jan
31, 2020 Affirmed Aa3 (sf)
Cl. B, Downgraded to Baa1 (sf); previously on Jan 31,
2020 Affirmed A3 (sf)
Cl. X-A*, Affirmed Aa1 (sf); previously on
Jan 31, 2020 Affirmed Aa1 (sf)
Cl. X-B*, Downgraded to Baa1 (sf); previously
on Jan 31, 2020 Affirmed A3 (sf)
*Reflects Interest-Only Classes
RATINGS RATIONALE
The ratings on six principal and interest (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 rating on P&I class, Cl. B, was downgraded
due to a decline in pool performance as a result of higher anticipated
losses from specially serviced and troubled loans. Specially serviced
loans now represent 26.3% of the deal, which include
the Quaker Bridge Mall (10.6% of the pool), and three
hotel properties. In aggregate, loans secured by retail and
hotel properties represent 22.5% and 21.5%
of the deal, respectively.
The rating on the interest only (IO) class, Cl. X-A,
was affirmed based on the credit quality of the referenced classes.
The rating on the interest only (IO) class, Cl. X-B,
was downgraded due to the decline in credit quality of the referenced
class.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high. 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 9.5%
of the current pooled balance, compared to 5.2% at
Moody's last review. Moody's base expected loss plus realized
losses is now 8.4% of the original pooled balance,
compared to 5.1% 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/viewresearchdoc.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/viewresearchdoc.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/viewresearchdoc.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 November 18, 2020 distribution date, the transaction's
aggregate certificate balance has decreased by 11.9% to
$786.8 million from $892.8 million at securitization.
The certificates are collateralized by 28 mortgage loans ranging in size
from less than 1% to 10.6% of the pool, with
the top ten loans (excluding defeasance) constituting 63.0%
of the pool. Two loans, constituting 11.4%
of the pool, have investment-grade structured credit assessments.
One loan, constituting 1.8% of the pool, has
defeased and is 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 20 at Moody's last review.
As of the November 18, 2020 remittance report, loans representing
80.4% were current or within their grace period on their
debt service payments, 2.8% were less than one month
delinquent, 10.6% were greater than 60 days delinquent
and 6.2% were greater than 90 days delinquent.
Eight loans, constituting 17.6% of the pool,
are on the master servicer's watchlist. 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.
No loans have been liquidated from the pool since securitization.
Five loans, constituting 26.3% of the pool,
are currently in special servicing. All of them have transferred
to special servicing since April 2020, and four, constituting
25.4% of the pool, have been modified.
The largest specially serviced loan is the Quaker Bridge Mall Loan ($83.3
million -- 10.6% of the pool), which represents
a pari-passu portion of a $150 million senior mortgage loan.
The property is also encumbered with a $30 million B Note.
The loan is secured by the borrower's fee interest in 357,221 square
feet (SF) of a 1.1 million SF super-regional mall located
in Lawrenceville, New Jersey. Non-collateral anchors
include Macy's and J.C. Penney. Prior non-collateral
anchor Sears closed and vacated its store in September 2018. Another
anchor, Lord & Taylor, owns its improvements, but
not the related land, which is ground leased from the borrower.
In April 2020, Lord & Taylor announced their intention to vacate
the mall as a part of the chapter-11 bankruptcy filing.
As of June 2020, the total property was 83% leased unchanged
since 2017, but only 65% occupied excluding Sears.
The in-line occupancy as of July 2020 was 80%, compared
to 83% as of December 2019. The loan transferred to special
servicing on November 10, 2020 in relation to the coronavirus impact
on the property. The loan is last paid through August 2020.
The second specially serviced loan is the Equity Inns Portfolio ($44.8
million -- 5.7% of the pool), which represents
a pari-passu portion of a $232.0 million senior mortgage
loan. The cross-collateralized portfolio consists of 15
limited-service and 6 extended-stay hotel properties located
across 13 states. The properties contain a total of 2,690
guestrooms, which were built between 1979 and 2002 and subsequently
renovated. The seven different flags represented within the portfolio
include Courtyard, Hampton Inn, Hilton Garden Inn, Homewood
Suites, Residence Inn, SpringHill Suites and TownePlace Suites.
As of December 2019, the occupancy rate, ADR and RevPAR for
the portfolio were 75%, $119 and $89,
respectively, compared 74%, $117 and $88,
respectively in December 2018. The loan transferred to special
servicing in May 2020 due to imminent balloon/maturity default as a result
of the coronavirus impact on the properties. The loan was scheduled
to mature in October 2020 and remains current on debt service payments.
The borrower had requested payment relief. The loan modification
was closed in August 2020, with a 2-year maturity extension
in return for the borrower committing to keep payments current and covering
all operating shortfalls. The borrower will paydown the loan in
year two of the extension by $3 million in twelve equal payments.
The loan is expected to be return to the master servicer.
The third largest loan in special servicing is the DoubleTree Houston
Intercontinental Airport Loan ($41.8 million -- 5.3%
of the pool), which is secured by a 313 key full service hotel located
in Houston, TX. The loan was transferred to special servicing
in June 2020 due a default notice from the borrower. The borrower
had submitted a request for lender consent to PPP loan and mortgage relief.
The property was experiencing monthly operating shortfalls which the borrower
was not willing to fund going forward and has indicated a willingness
to return the collateral to the lender. The borrower consented
to appointment of a receiver. A receiver has taken over management
of the hotel and is working to stabilize operations and address past due
capital needs before marketing the property for sale. The loan
is currently 90+ days delinquent and last paid through August 2020.
The four largest loan in special servicing is the Palisades Center loan
($30.0 million - 3.8% of the pool).
The loan is discussed below in further detail. The other loan in
special servicing is the Hampton Inn Carrollton loan (($7.0
million -- 0.9% of the pool), which is secured
by a 77-room limited serviced hotel located in Carrollton,
GA . The loan was transferred to special servicing in August 2020
and is currently 90+ days delinquent.
Moody's has also assumed a high default probability for two poorly performing
loan secured by limited-serviced hotels located in Seatac,
WA and Lehi, UT, representing 2.6% of the pool.
Both loans are current and, on the servicer's watchlist due
to the coronavirus impact on the properties and low DSCR. Moody's
has estimated an aggregate loss of $27.5 million (39%
expected loss on average) from the troubled loans and some specially serviced
loans.
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 97% of the
pool, and partial year 2020 operating results for 49% of
the pool (excluding specially serviced and defeased loans). Moody's
weighted average conduit LTV is 124%, compared to 119%
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 22% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.3%.
Moody's actual and stressed conduit DSCRs are 1.46X and 0.91X,
respectively, compared to 1.52X and 0.94X 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 largest loan with a structured credit assessment is the 787 Seventh
Avenue Loan ($60.0 million -- 7.6% of
the pool), which is secured by the borrower's fee interest in a
1.7 million square feet (SF), 50-story, Class
A office building located in the Midtown West office submarket of New
York City. The property is located on Seventh Avenue between West
51st and West 52nd Streets in Manhattan. The loan represents a
pari-passu portion of a $566.0 million senior mortgage
loan. The property is also encumbered with a $214.0
million junior mortgage note, and a $220 million mezzanine
loan. Major tenants at the property include BNP Paribas,
Sidley Austin, and Willkie Farr & Gallagher. The property
was 97% leased as June 2020, compared to 99% as of
July 2019, and 100% as of September 2017. Property
performance has been stable since securitization. This loan is
interest-only throughout the ten-year term. Moody's
structured credit assessment and stressed DSCR are a1 (sca.pd)
and 1.44X, respectively, the same as the last review.
The second loan with a structured credit assessment is the Palisades Center
loan ($30.0 million -- 3.8%
of the pool), which represents a pari-passu portion of a
$259.1 million senior mortgage loan. The $30
million trust portion is pari-passu with the $229.1
million senior A note within the Palisades Center Trust 2016-PLSD
large loan transaction. The property is also encumbered with a
$159.4 million subordinate companion loan and $141.5
million in mezzanine debt. The loan is secured by a 1.9
million SF portion of a 2.2 million SF super regional mall located
in West Nyack, New York. The mall is anchored by Home Depot,
Target, BJ's Wholesale Club and Dick's Sporting Goods, and
shadow anchored by Macy's . The property's performance has continued
to decline since securitization. In July 2017, JC Penney
closed and vacated their three-level 157,000 SF anchor space,
which is part of the loan collateral. The JC Penney space remains
vacant. In addition, Lord & Taylor (120,000 SF)
closed in January 2020 and Bed Bath and Beyond (45,000 SF with lease
expiring in January 2022) closed in June 2020. The loan was transferred
in April 2020 to special servicing as a result of the closure of the center
related to the coronavirus outbreak. The property's NCF has continually
declined since securitization and was $36.9 million in 2019,
down from $40.5 million in 2018 and $44.9
million in 2016. The loan status was 60 days delinquent as of the
June payment date but is current as of the November payment date.
The loan matures in April 2021 and may face significant refinance risk
as a result of the declining performance and the current retail environment.
Moody's structured credit assessment and stressed DSCR on the pooled senior
note are a1 (sca.pd) and 1.25X, respectively.
The top three performing conduit loans represent 20.1% of
the pool balance. The largest loan is the 100 East Pratt Loan ($60.0
million -- 7.6% of the pool), which represents
a pari-passu portion of a $110.4 million senior mortgage
loan. The loan is secured by an approximately 663,000 SF,
28-story, Class A office building located in downtown Baltimore,
Maryland. The property also includes an 8-level parking
garage with 932 parking spaces. As of June 2020, the property
was 98% leased, compared to 99% as of December 2019
and December 2018. The property serves as the global headquarters
for T. Rowe Price, a global asset management firm that occupies
443,000 SF (67% of net rentable area) on a long-term
lease through December 2027. Performance has been stable.
Moody's utilized a partial lit/dark analysis due to the exposure to this
single tenant. Moody's LTV and stressed DSCR are 101% and
1.08X, respectively, the same as at the last review.
The second largest loan is the Williamsburg Premium Outlets Loan ($50.0
million -- 6.4% of the pool), which is secured
by a 522,000 SF open-air outlet center located in Williamsburg,
Virginia, approximately 45 miles southeast of Richmond. The
loan represents a pari-passu portion of a $185.0
million first mortgage loan. The property is located along I-64,
the primary highway for tourists traveling from Norfolk and Virginia Beach
from Richmond and Washington DC. The property was 85% leased
as of June 2020, compared to 86% as of December 2019 and
99% as of December 2018. The property reopened in May 2020
after temporary closure The loan is interest only for its entire term
and Moody's LTV and stressed DSCR are 105% and 1.0X,
respectively, compared to 90% and 1.11X at the last
review.
The third largest loan is the Four Penn Center Loan ($48.0
million -- 6.1% of the pool), which is secured
by the borrower's fee simple interest in a 522,600 SF,
Class A multi-tenant office building located in the central business
district of Philadelphia, Pennsylvania. As of June 2020,
the property was 62% occupied, compared to 84% at
securitization. Property performance declined as of year-end
2018 due to the departure of two tenants that vacated at lease expiration:
Elsevier, Inc. (134,002 SF) in June 2018, and
Federal Insurance Company (58,860 SF) in March 2018. The
loan is currently on the servicer's watchlist due to low occupancy.
However, the lender recently approved a lease for a new tenant to
occupy 173,000 SF (33% of the gross leasable area).
The new tenant is expected to take occupancy in 2021 and the tenant will
have 12 months of free rent with an expected rent commencement in 2022.
Moody's LTV and stressed DSCR are 138% and 0.78X,
respectively, the same as 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 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.
Dariusz Surmacz
Vice President - Senior 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
