DBRS Limited (DBRS Morningstar) confirmed its ratings on the Commercial Mortgage Pass-Through Certificates, Series 2014-C21 issued by JPMBB Commercial Mortgage Securities Trust 2014-C21 as follows.
Class A-4 at AAA (sf)
Class A-5 at AAA (sf)
Class A-S at AAA (sf)
Class A-SB at AAA (sf)
Class X-A at AAA (sf)
Class X-B at AA (sf)
Class B at AA (low) (sf)
Class C at A (low) (sf)
Class EC at A (low) (sf)
Class D at BBB (low) (sf)
Class X-C at BB (low) (sf)
Class E at B (high) (sf)
Class X-D at B (sf)
Class F at B (low) (sf)
All trends are Stable.
The rating confirmations and Stable trends reflect DBRS Morningstar's current outlook and loss expectations for the transaction, which remains relatively unchanged from the November 2022 rating action. Since then, Charlottesville Fashion Square (Prospectus ID#16) was disposed from the pool with a better recovery than DBRS Morningstar had previously anticipated.
To date, seven loans have been liquidated from the trust, with losses totaling $30.0 million. Losses have been contained to the nonrated class, which has been reduced by 52.8% to $26.9 million as of May 2023. At issuance, the transaction consisted of 73 fixed-rate loans secured by 84 commercial and multifamily properties, with a total trust balance of $1.26 billion. As of the May 2023 remittance, 55 loans remained in the trust, with an aggregate principal balance of $910.9 million, reflecting collateral reduction of 28.0% since issuance. Sixteen loans have been fully defeased, representing 18.5% of the current pool balance. The transaction is concentrated by property type, with retail and office properties representing 32.4% and 15.1% of the pool, respectively. Twelve loans, representing 30.2% of the pool, are on the servicer's watchlist. There are currently no loans in special servicing.
The loan with the highest DBRS Morningstar expected loss, Westminster Mall (Prospectus ID#6; 5.0% of the pool), is secured by a 771,884-square-foot (sf) portion of a 1.2 million-sf regional mall in Orange County, California. The property has experienced year-over-year cash flow declines since issuance following the loss of the former noncollateral anchor Sears. Shopoff Realty Investments (Shopoff) purchased two parcels, totalling 26 acres of the Westminster Mall in 2022. The Macy's parcel, totalling 11.9 acres included an operating Macy's department store (subsequently leased back to Macy's) and adjacent parking lot. The Sears parcel totalling 14.1 acres included a vacant former Sears building and adjacent parking lot. Shopoff announced plans to bookend the mall by repositioning the two parcels into into a mixed-use community of multifamily homes that are adjacent to walkable community spaces, restaurants, retail and a nearby hotel. The Westminster City Council approved a new framework for the redevelopment of those two sites in December 2022.
According to the March 2023 rent roll, the property reported an occupancy rate of 88.3%, marginally below the YE2021 occupancy rate of 90.5%. At YE2019, prior to the Coronavirus Disease (COVID-19) pandemic, the property reported an occupancy rate of approximately 95.0%. There is concentrated lease rollover in the near term, as tenant leases representing approximately 17.5% of the net rentable area (NRA) have already expired or are scheduled to expire within the next 12 months. For YE2022, the loan reported a debt service coverage ratio (DSCR) of 0.23 times (x), compared with YE2021, YE2020, and YE2019 DSCRs of 0.37x, 0.89x, and 1.21x, respectively. Despite the declining trend in cash flow, the loan has remained current. DBRS Morningstar believes the sponsor's commitment is likely related to the redevelopment value for the property given the Shopoff acquisition and plans for the vacant anchor spaces. However, the near-term maturity will likely require the sponsor, Washington Prime Group, to come out of pocket to repay the trust loan, and it is unclear what the sponsor's financial position is given the firm was taken private after filing for bankruptcy in 2021. Given these risks, DBRS Morningstar analyzed this loan with a significantly stressed probability of default (POD) penalty, with the resulting expected loss almost 4x the pool average.
The loan with the second-highest DBRS Morningstar expected loss is 200 West Monroe (Prospectus ID#18; 2.6% of the pool), is secured by a 23-story, Class B office property in Chicago. The loan is being monitored on the servicer's watchlist for deteriorating operating performance, largely related to declines in occupancy over the last several years. According to the March 2023 rent roll, the property was 68.5% occupied, down from 84.2% at issuance, with a DSCR of 0.49x as of YE2022, compared with 1.37x at issuance. The subject benefits from a granular tenant roster, with no tenant representing more than 6.0% of the NRA. In addition, near-term lease rollover is limited, with tenant leases representing less than 10.0% of the total NRA scheduled to roll within the next 12 months. According to a Reis report, dated Q4 2022, office properties within the Central Loop submarket reported a vacancy rate of 14.2% with a projected five-year vacancy rate of 13.7%. DBRS Morningstar analyzed this loan with an elevated POD penalty and stressed loan-to-value ratio (LTV), reflecting the increased risks since issuance. The resulting expected loss was approximately 3x higher than the pool average.
Although the majority of loans secured by office properties reported generally healthy credit metrics, there is continued uncertainty related to end-user demand and investor appetite for this property type. DBRS Morningstar anticipates higher vacancy rates in the broader office market, challenging landlords' efforts to backfill vacant space, and, in certain instances, contributing to value declines, particularly for assets in noncore markets and/or with disadvantages in location, building quality, or amenities offered. Where applicable, DBRS Morningstar increased the POD penalties and, in certain cases, applied stressed LTVs for loans that are secured by office properties.
At the time of the last rating action, DBRS Morningstar shadow-rated one loan-Miami International Mall-investment grade. DBRS Morningstar expects the property to have some volatility in the near term following noncollateral anchor tenant Sears' closure at this location. In addition, competition is likely to increase as there are plans to construct a new mall, American Dream Miami, near the subject. Although the loan's credit metrics remain strong, DBRS Morningstar took a conservative approach in its analysis by removing the shadow rating to reflect the projected near-term weakening of the collateral's performance.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
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/396929 (May 17, 2022).
Classes X-A, X-B, X-C, and X-D are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.
All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.
Notes:
All figures are in U.S. dollars unless otherwise noted.
The principal methodology is North American CMBS Surveillance Methodology (March 16, 2023; https://www.dbrsmorningstar.com/research/410912).
Other methodologies referenced in this transaction are listed at the end of this press release.
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.
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 rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the rating process for this rating action.
DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This is a solicited credit rating.
Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.
DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577
The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.
North American CMBS Multi-Borrower Rating Methodology (March 16, 2023)/North American CMBS Insight Model version 1.1.0.0 (https://www.dbrsmorningstar.com/research/410913)
Rating North American CMBS Interest-Only Certificates (December 19, 2022; https://www.dbrsmorningstar.com/research/407577)
DBRS Morningstar North American Commercial Real Estate Property Analysis Criteria (September 12, 2022; https://www.dbrsmorningstar.com/research/402646)
North American Commercial Mortgage Servicer Rankings (September 8, 2022; https://www.dbrsmorningstar.com/research/402499)
Interest Rate Stresses for U.S. Structured Finance Transactions (August 30, 2022; https://www.dbrsmorningstar.com/research/402153)
Legal Criteria for U.S. Structured Finance (December 7, 2022; https://www.dbrsmorningstar.com/research/407008)
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
SEARS HOLDINGS CORPORATION 
