Press Release|CMBS
KBRA Downgrades Five Ratings and Affirms One Rating for JPMBB 2014-C18
27 Nov 2024 | New York
KBRA downgrades ratings for five classes and affirms one other rating for JPMBB 2014-C18, a $184.0 million CMBS conduit transaction. The rating actions follow a surveillance review of the transaction, which has exhibited an increase in KBRA's estimated losses on four of the K-LOCs (83.6% of the pool balance) since KBRA’s last ratings change in December 2021. In addition, the ratings consider the likelihood of interest shortfalls reaching higher in the capital structure as the special servicer works through the resolution of the remaining assets.
As of the November 2024 remittance period, there are four specially serviced assets (70.3% of the pool balance), including two which are REO (10.4%) and one that is past maturity (6.6%), and one that has been modified with a forbearance (53.2%). KBRA identified all six remaining loans as K-LOCs, of which four (83.6%) have estimated losses. The details of the assets are outlined below.
Miami International Mall (largest, 53.3%, Performing Matured Balloon)
- The loan is collateralized by a 306,855 sf portion of a 1.1 million sf super-regional mall in Miami, Florida, approximately 12 miles west of the Miami CBD and six miles west of Miami International Airport. Non-collateral anchors include Macy's (Macy's Men's & Home and Macy's Women's and Kid's), JCPenney, and Kohl's.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on its status with the special servicer due to a maturity default in February 2024. In March 2024, a 12-month forbearance through February 2025 was executed along with a $2.0 million paydown by the borrower. The loan modification also includes an option for an additional 12-month forbearance conditioned on a further $3.0 million in paydown. Based on the June 2024 rent roll, the property was 78.3% occupied, compared to 78.2% at last review and 91.8% at closing. Additionally, there is significant tenant rollover risk with leases comprising 55.8% of base rent scheduled to expire through YE 2025, including four of the top five tenants (24.6% of total base rent). The Green Street Mall Grade for the property is B+, in-line with the B+ grade of Westland Mall and lower than the A+ grade of the Shops at Merrick Park, both located within a 10-mile radius of the subject property.
- An appraisal dated July 2024 valued the asset at $159.0 million, which represents a 59.3% decrease from the $391.0 million appraised value at securitization. The servicer-reported occupancies and DSCs are: 78.0% / 3.09x (YTD June 2024), 78.0% / 2.34x (FY 2023), 79.0% / 2.29x (FY 2022); at closing these were 93.8% / 2.67x. KBRA's analysis resulted in an estimated loss of $42.3 million (27.1% estimated loss severity) on a whole loan balance of $156.8 million based on a value of $114.5 million ($373 per sf). The value is calculated using a direct capitalization of KBRA’s NCF of $13.7 million using a rate of 12.0%.
Meadows Mall (2nd largest, 19.9%)
- The loan is collateralized by a 308,190 sf portion of a 945,063 sf, super-regional mall located in Las Vegas, Nevada, approximately five miles west of the Las Vegas Strip. The mall currently includes JCPenney and Macy’s as non-collateral anchors.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on its declining financial performance and prior specially serviced status. The loan failed to pay off at its July 2023 maturity. A modification agreement was executed in February 2024, which extended the maturity date to July 2026. For the YTD Ended June 2024, the servicer reported an annualized NCF of $10.5 million, which represents a 32.1% decrease from securitization ($15.5 million). The decline in financial performance is largely due to decreases in occupancy and base rent. There is significant tenant rollover risk with leases comprising 48.2% of base rent scheduled to expire through YE 2025, including three of the top five tenants (15.2% of total base rent). The Green Street Mall Grade for the property is B-, lower than the A+ grades of Fashion Show and Grand Canal Shoppes at The Venetian Resort, both located within a 5-mile radius of the subject property.
- An appraisal dated July 2023 valued the asset at $112.0 million, which represents a 52.3% decrease from the $235.0 million appraised value at securitization. The servicer-reported occupancies and DSCs are: 84.0% / 1.01x (YTD June 2024), 89.0% / 1.00x (FY 2023), 89.0% / 0.94x (FY 2022); at closing these were 95.8% / 1.49x. KBRA's analysis resulted in an estimated loss given default of $50.9 million (45.9% estimated loss severity) on a whole loan balance of $110.9 million based on a value of $60.1 million ($195 per sf). The value is calculated using a direct capitalization of KBRA’s NCF of $9.0 million using a rate of 15.0%.
Rosedale Commons (3rd largest, 9.8%)
- The loan is collateralized by a 168,049 sf, anchored retail center located in Roseville, Minnesota, approximately five miles north of the Twin Cities, Minneapolis and St. Paul. The development is comprised of two single-story buildings and offers 831 surface parking spaces.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform based on declining financial performance. The servicer-reported annualized NCF for the YTD Ended June 2024 was $1.7 million, representing a 21.8% decrease from $2.2 million underwritten by the issuer at closing. The decline in NCF is primarily a result of the former second largest tenant, Bed Bath & Beyond (11.7% of base rent), vacating the property after filing for bankruptcy in April 2023. However, based on leasing updates from the servicer, HomeGoods has taken occupancy of the former Bed Bath & Beyond space as of October 2024. KBRA is awaiting updated financials. Based on the July 2024 rent roll, inclusive of leasing updates, the subject was 87.6% leased, compared to 79.8% at last review and 95.2% at closing. Near-term lease rollover is minimal with leases representing 10.7% of total base rent scheduled to expire through YE 2025.
- The loan was structured with a 15-year term and is scheduled to mature in January 2029. The servicer-reported occupancies and DSCs are: 86.0% / 1.18x (YTD June 2024), 87.0% / 1.30x (FY 2023), 82.0% / 1.30x (YTD August 2021); at closing these were 95.2% / 1.51x. At this time, KBRA does not estimate a loss on this loan.
The remaining three assets account for 17.4% of the pool balance.
- Two Towne Square (4th largest, 6.6%, Non-Performing Matured Balloon) is collateralized by a 182,075 sf, Class-A suburban office building located in Southfield, Michigan, approximately 17 miles northwest of Detroit. The property is 90.2% occupied according to the January 2024 rent roll, which compares to 88.2% at last review and 79.4% at issuance. An appraisal dated May 2024 valued the asset at $22.0 million, which is 3.3% above the property’s $21.3 million value at issuance. At this time, KBRA does not estimate a loss on this loan.
- Geneva Shopping Center (5th largest, 5.9%, REO) is collateralized by a 189,227 sf anchored retail center located in Geneva, New York, approximately 40 miles west of Syracuse and 40 miles east of Rochester. The property is 44.4% occupied following the former largest tenant Tops Market's departure after it filed for bankruptcy in February 2018. An appraisal dated February 2024 valued the asset at $5.0 million, which is 75.5% below the property’s $20.4 million value at issuance. KBRA’s analysis resulted in an estimated loss of $6.5 million (59.8% estimated loss severity) on a loan balance of $10.9 million, which is based on a value of $5.7 million.
- One Thorn Run Center (6th largest, 4.5%, REO) is collateralized by a 102,041 sf suburban office building located in Coraopolis, Pennsylvania, approximately 15 miles northwest of the Pittsburgh CBD and adjacent to Pittsburgh International Airport. The property is 64.6% occupied according to the August 2024 rent roll, which compares to 97.1% at issuance. An appraisal dated August 2024 valued the asset at $8.2 million, which is 43.7% below the property’s $14.6 million value at issuance. KBRA’s analysis resulted in an estimated loss of $1.9 million (22.9% estimated loss severity) on a loan balance of $8.3 million, which is based on a value of $7.1 million.
Details concerning the classes with rating changes are listed below while the C (sf) rating on Class F was affirmed:
- Class B to A (sf) from AA- (sf)
- Class EC to BBB (sf) from A- (sf)
- Class C to BBB (sf) from A- (sf)
- Class D to CCC (sf) from B- (sf)
- Class E to CC (sf) from CCC- (sf)
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as the magnitude and extent of interest shortfalls, if any, on the certificates.
To access ratings and relevant documents, click here.