$297.6 million of structured securities affected
New York, February 02, 2021 -- Moody's Investors Service, (Moody's) has assigned definitive ratings
to six classes of CMBS securities, issued by J.P.
Morgan Chase Commercial Mortgage Securities Trust 2021-2NU,
Commercial Mortgage Pass-Through Certificates, Series 2021-2NU:
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa2 (sf)
Cl. HRR, Definitive Rating Assigned Ba1 (sf)
Cl. X-A*, Definitive Rating Assigned Aa1 (sf)
* Reflects interest-only classes
RATINGS RATIONALE
The certificates are collateralized by a single, fixed-rate
loan secured by the borrower's leasehold interest in 2 + U (the "property"),
a 38-story urban office development with street-level retail
space located at 1201 Second Avenue in the central business district (CBD)
of Seattle, WA. Our ratings are based on the credit quality
of the loan and the strength of the securitization structure.
Moody's approach to rating this transaction involved the application
of both our Large Loan and Single Asset/Single Borrower CMBS methodology
and our IO Rating methodology. The rating approach for securities
backed by a single loan compares the credit risk inherent in the underlying
collateral with the credit protection offered by the structure.
The structure's credit enhancement is quantified by the maximum deterioration
in property value that the securities are able to withstand under various
stress scenarios without causing an increase in the expected loss for
various rating levels. In assigning single borrower ratings,
we also consider a range of qualitative issues as well as the transaction's
structural and legal aspects.
The property is well located in downtown Seattle, within the Financial
District of Seattle's CBD submarket. The submarket has historically
enjoyed an influx of office employees to the immediate area given its
strong tech influence and increasing demand. The building has good
access to major traffic routes, located just three blocks south
of Interstate 5, one block south of the Third Avenue transit corridor
which provides access to the Link Light Rail and over 200 bus lines.
The property also sits at the center of Seattle's arts, cultural,
and entertainment attractions such as Benaroya Hall, Seattle Art
Museum, Pike Place Market and numerous art galleries.
The property is a newly constructed (2019), 38-story,
Class A urban office development with street-level retail space
located in the heart of the Seattle CBD. The building was designed
by Pickard Chilton and developed by Skanska to a very high level of specification.
LEED Platinum certification is being pursued by the loan sponsor and is
in process. As of November 30, 2020, the property was
approximately 98.9% leased to nine tenants. The tenant
roster is predominately represented by the technology sector and features
creditworthy companies, including Qualtrics (39.2%
of NRA; SAP SE - A2, senior unsecured), Indeed
(28.4% of NRA; Recruit Holdings Co., Ltd
- A3, senior unsecured) and Dropbox (17.2%
of NRA; NR).
The securitization consists of a $297,600,000 portion
of a seven-year, interest-only, first lien mortgage
loan with an outstanding principal balance of $457,600,000.
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.
The Moody's first-mortgage DSCR is 2.23x and Moody's
first-mortgage stressed DSCR (at a 9.25% constant)
is 1.08x. Moody's DSCR is based on our assessment of the
property's stabilized NCF.
The $297,600,000 senior portion of a $457,600,000
whole loan represents a Moody's LTV of 82.6%. Taking
into consideration the additional subordinate note with a principal balance
of $160,000,000, the total debt Moody's LTV would
increase to 127.0%
Moody's also grades properties on a scale of 0 to 5 (best to worst) and
considers those grades when assessing the likelihood of debt payment.
The factors considered include property age, quality of construction,
location, market, and tenancy. The property's weighted
average property quality grade is 0.75.
Notable strengths of the transaction include: strong location,
asset quality, solid tenant roster, and limited rollover.
Notable concerns of the transaction include: the effects of the
coronavirus, the lack of asset diversification, new supply,
subleasing activity, limited operating history and certain credit
negative loan structure and legal features.
The principal methodology used in rating all classes except interest-only
classes was "Moody's Approach to Rating Large Loan and Single Asset/Single
Borrower CMBS" published in September 2020 and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1190579.
The methodologies used in rating interest-only classes were "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published
in September 2020 and available at https://www.moodys.com/viewresearchdoc.aspx?docid=PBS_1190579
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.
Moody's approach for single borrower and large loan multi-borrower
transactions evaluates credit enhancement levels based on an aggregation
of adjusted loan level proceeds derived from our Moody's loan level LTV
ratios. Major adjustments to determining proceeds include leverage,
loan structure, and property type. These aggregated proceeds
are then further adjusted for any pooling benefits associated with loan
level diversity, other concentrations and correlations.
Moody's analysis considers the following inputs to calculate the proposed
IO rating based on the published methodology: original and current
bond ratings and credit estimates; original and current bond balances
grossed up for losses for all bonds the IO(s) reference(s) within the
transaction; and IO type corresponding to an IO type as defined in
the published methodology.
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 may indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously anticipated.
Factors that may cause an upgrade of the ratings include significant loan
pay downs or amortization, an increase in the pool's share of defeasance
or overall improved pool performance. Factors that may cause a
downgrade of the ratings include a decline in the overall performance
of the pool, loan concentration, increased expected losses
from specially serviced and troubled loans or interest shortfalls.
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.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
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.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1262330
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 quantitative analysis entails an evaluation of scenarios that
stress factors contributing to sensitivity of ratings and take into account
the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its assumptions
of the likelihood of the events in such scenarios occurring.
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_1243406.
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.
Eun Choi
Senior Vice President
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
Blair Coulson
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
