DBRS Morningstar Confirms All Ratings on J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-WPT

DBRS Limited (DBRS Morningstar) confirmed the ratings on the following classes of Commercial Mortgage Pass-Through Certificates, Series 2018-WPT issued by J.P. Morgan Chase Commercial Mortgage Securities Trust 2018-WPT:

-- Class A-FL at AAA (sf)
-- Class A-FX at AAA (sf)
-- Class XA-FX at AAA (sf)
-- Class B-FL at AA (low) (sf)
-- Class B-FX at AA (low) (sf)
-- Class C-FL at A (low) (sf)
-- Class C-FX at A (low) (sf)
-- Class X-FL at BBB (high) (sf)
-- Class XB-FX at BBB (high) (sf)
-- Class D-FL at BBB (sf)
-- Class D-FX at BBB (sf)
-- Class E-FL at BBB (low) (sf)
-- Class E-FX at BBB (low) (sf)
-- Class F-FL at BB (low) (sf)
-- Class F-FX at BB (low) (sf)
-- Class G-FL at B (low) (sf)
-- Class G-FX at B (low) (sf)

All trends are Stable.

The transaction has performed in line with DBRS Morningstar’s expectations since issuance. The collateral loan is secured by the fee and leasehold interests in a portfolio of 147 properties, comprising nearly 9.9 million square feet (sf) of office and flex space, in four states across the United States. Built between 1972 and 2013, the portfolio includes 88 office properties (6.5 million sf) and 59 flex buildings (3.4 million sf). Located across Pennsylvania, Florida, Minnesota, and Arizona, the collateral encompasses five distinct metropolitan statistical areas (MSAs) and more than 15 submarkets. The largest concentration of portfolio properties is found in the Philadelphia MSA with 69 properties totalling 40.3% of the mortgage balance at issuance, followed by the Tampa MSA (34 properties; 16.5% of the original loan balance), the Minneapolis MSA (19 properties; 13.0% of the original loan balance), the Phoenix MSA (14 properties; 12.9% of the original loan balance), and the Southern Florida MSA (11 properties; 17.3% of the original loan balance). Although none of the subject properties are in what DBRS Morningstar would consider urban markets, the assets are generally in dense suburban markets that benefit from favourable accessibility and close proximity to their respective central business districts.

At issuance, total loan proceeds of $1.3 billion ($129 per square foot (psf)) were used to pay off $827.5 million ($84 psf) of existing debt and an existing credit line totalling $227.6 million ($23 psf), redeem a preferred equity interest held by Square Mile Capital Management LLC, fund upfront reserves of approximately $32.9 million, pay initial public offering-related expenses, defer limited partnership distribution and asset management fees, and cover closing costs. The mortgage loan was split into (1) a floating-rate component of approximately $255.0 million, with a two-year initial term and three one-year extension options and (2) a five-year fixed-rate loan totalling $1.02 billion, comprising the $850.0 million trust balance and three companion loans totalling $170.0 million. The companion loans were secured across three other DBRS Morningstar-rated deals, BMARK 2018-5, BMARK 2018-6, and BMARK 2018-7, as well as a fourth deal, BMARK 2018-8, which was not rated by DBRS Morningstar. In July 2020, the sponsor submitted an unscheduled principal payment (curtailment) of nearly $3.0 million, which paid down the most senior bond in the transaction, Class A-FL, by that amount.

As of YE2020, the portfolio exhibited a physical occupancy of 86.0%, a slight decline from the 88.6% reported at issuance and suggestive of stable performance thus far during the Coronavirus Disease (COVID-19) pandemic. Historically, the portfolio has exhibited stable performance through downturns, with the occupancy rate from 88.5% to 91.6% between 2008 and 2010, amid the Great Recession. Much of the portfolio’s stable performance is attributable to its highly granular rent roll with more than 500 tenants, none of which accounts for more than 4.2% of the total net rentable area. The loan continues to perform in line with issuance expectations, most recently reporting a YE2020 debt service coverage ratio (DSCR) of 1.54 times (x), in line with the YE2019 DSCR of 1.53x. The loan was added to the servicer’s watchlist in May 2021 for its upcoming maturity in July 2021; however, the borrower has requested to exercise the second extension option provided in the loan documents, and the loan is expected to be removed from the watchlist in the near term.

The loan sponsor is Workspace Property Trust, L.P. (Workspace), a privately held, full-service commercial real estate company specializing in the acquisition, development, management, and operation of office and flex properties. Led by a management team with more than 75 years of combined real estate experience, the company acquired 39 of the assets in January 2016 and the remaining 108 assets in October 2016. Liberty Property Trust held the subject properties prior to Workspace’s acquisitions. A portion of the portfolio was previously securitized in the JPMCC 2016-WPT transaction.

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.

Classes XA-FX, X-FL, and XB-FX 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.

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. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar-rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American CMBS Surveillance Methodology (March 26, 2021), 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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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