JPMorgan and Barclays plan to issue a $1.4 billion CMBS conduit transaction collateralized by 61 commercial mortgage loans that are secured by 100 properties, according to a Kroll Bond Rating Agency presale report.
JPMorgan Chase, Barclays, KeyBank and Starwood Mortgage Funding II are the loan sellers.
KBRA expects to rate 15 of the 18 classes of notes on offer under the JPMBB 2014-C19 transaction. For a breakdown of the deal by tranche, see chart below.
The loans have principal balances ranging from $1.5 million to $125.0 million for the largest loan in the pool, which is secured by The Outlets at Orange (8.9%), a 787,697 sf retail outlet center located in Orange, California.
A sizeable portion of the aggregate pool balance (65.8%) consists of loans with interest only (IO) periods, which is represented by both full-term IO (36.4%) and partial term IO (29.4%) loans.
IO loans increase the risk of losses in CMBS deals because paying only interest and no principal for long periods of time results in higher leverage during the loan’s term. In the event of a default, IO loans are also subject to a greater loss than a loan that has been amortizing. That's particularly true in the earlier years of the loan’s life, explained KBRA.
The pool also has a sizeable retail concentration (41.6%). The retail exposure is comprised of six different subtypes and the largest are mall related assets (18.4% of the pool) and anchored retail (15.2%).
KBRA highlighted in the presale report that that the pool’s single tenant exposure at 9% is marginally above the average single tenant exposure of 8.7% in the last 17 conduits it rated. More than half of the single tenant exposure (5.6%) is represented by freestanding retail properties. “Properties with multiple tenants that rely on a diversified tenant roster for their income stream can present less credit risk than properties that derive all of their cash flow from a single lessee,” according to the presale report.