Approximately $523.75 Million of Structured Securities Affected
New York, March 23, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 11 classes
of J.P. Morgan Chase Commercial Mortgage Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2002-C3
as follows:
Cl. X-1 Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. A-1, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Mar 9, 2011 Confirmed at Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Mar 9,
2011 Confirmed at Aaa (sf)
Cl. D, Affirmed at Baa2 (sf); previously on Jun 9,
2010 Downgraded to Baa2 (sf)
Cl. E, Affirmed at Ba2 (sf); previously on Jun 9,
2010 Downgraded to Ba2 (sf)
Cl. F, Affirmed at B3 (sf); previously on Jun 9,
2010 Downgraded to B3 (sf)
Cl. G, Affirmed at Caa3 (sf); previously on Jun 9,
2010 Downgraded to Caa3 (sf)
Cl. H, Affirmed at C (sf); previously on Jun 9,
2010 Downgraded to C (sf)
Cl. J, Affirmed at C (sf); previously on Jun 9,
2010 Downgraded to C (sf)
RATINGS RATIONALE
The affirmations are due to key parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the Herfindahl Index (Herf) remaining within acceptable
ranges. Based on our current base expected loss, the credit
enhancement levels for the affirmed classes are sufficient to maintain
their current ratings.
Moody's rating action reflects a cumulative base expected loss of
5.0% of the current balance. At last review,
Moody's cumulative base expected loss was 5.2%.
Moody's stressed scenario loss is 8.7% of the current
balance. Moody's provides a current list of base and stress
scenario losses for conduit and fusion CMBS transactions on moodys.com
at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for investment grade classes could decline below the current levels.
If future performance materially declines, the expected level of
credit enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these
expectations. Performance that falls outside an acceptable range
of the key parameters may indicate that the collateral's credit
quality is stronger or weaker than Moody's had anticipated during
the current review. Even so, deviation from the expected
range will not necessarily result in a rating action. There may
be mitigating or offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to amortization
and loan payoffs or a decline in subordination due to realized losses.
Primary sources of assumption uncertainty are the current sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011. The hotel and multifamily sectors are continuing
to show signs of recovery, while recovery in the office and retail
sectors will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating U.S. Conduit Transactions" published
in September 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR,
and Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit
model results at the B2 level are driven by a paydown analysis based on
the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity,
is a primary determinant of pool level diversity and has a greater impact
on senior certificates. Other concentrations and correlations may
be considered in our analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or determined based
on a multiple or ratio of either of these two data points. For
fusion deals, the credit enhancement for loans with investment-grade
credit estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the underlying rating of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the underlying rating level, is
incorporated for loans with similar credit estimates in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan size,
where a higher number represents greater diversity. Loan concentration
has an important bearing on potential rating volatility, including
risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 31,
essentially the same as at Moody's prior full review.
Moody's ratings are determined by a committee process that considers
both quantitative and qualitative factors. Therefore, the
rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of quantitative
tools -- MOST® (Moody's Surveillance Trends) and CMM
(Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated June 9, 2010. Please
see the ratings tab on the issuer / entity page on moodys.com for
the last rating action and the ratings history.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
DEAL PERFORMANCE
As of the March 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 30% to $523.75
million from $745.33 million at securitization. The
Certificates are collateralized by 74 mortgage loans ranging in size from
less than 1% to 5% of the pool, with the top ten loans
representing 30% of the pool. Thirteen loans, representing
35% of the pool, have defeased and are collateralized with
U.S. Government securities.
Sixteen loans, representing 20% of the pool, are on
the master servicer's watchlist. The watchlist includes loans
which meet certain portfolio review guidelines established as part of
the CRE Finance Council (CREFC) monthly reporting package. As part
of our ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could impact
performance.
Six loans have been liquidated from the pool since securitization,
resulting in an aggregate $43.0 million loss (56%
loss severity on average). Five loans, representing 7%
of the pool, are currently in special servicing. The master
servicer has recognized an aggregate $16.5 million appraisal
reduction for the specially serviced loans. Moody's has estimated
an aggregate $18.5 million loss (52% expected loss
on average) for the specially serviced loans.
Moody's has assumed a high default probability for three poorly
performing loans representing 2% of the pool and has estimated
a $2.7 million aggregate loss (24% expected loss
based on a 40% probability default) from these troubled loans.
As of the most recent remittance statement date, the transaction
has experienced unpaid accumulated interest shortfalls totaling $2.9
million affecting Classes G through NR. Interest shortfalls are
caused by special servicing fees, appraisal reductions, extraordinary
trust expenses and interest payment reductions due to loan modifications.
Moody's expects interest shortfalls to increase due to the pool's
high exposure to specially serviced loans.
Moody's was provided with full or partial year 2010 operating results
for 80% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 79%, essentially
the same as at Moody's prior review. Moody's net cash
flow reflects a weighted average haircut of 12% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.6%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.43X and 1.40X, respectively,
compared to 1.45X and 1.32X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's
NCF and a 9.25% stressed rate applied to the loan balance.
The top three performing conduit loans represent 13% of the pool
balance. The largest loan is the Anderson Mall Loan ($26.6
million -- 5.1%), which is secured by a 393,236
square foot (SF) mall located in Anderson, South Carolina.
As of September 2010 the property was 94% leased compared to 90%
at last review. Anchor tenants include Belk, Dillard's,
JC Penny and Sears. This loan is currently on the master servicer's
watchlist due to decline in in-line vacancy and increased operating
expenses. The loan matures in October 2012. Moody's
LTV and stressed DSCR are 106% and 1.02X, respectively,
essentially the same as at last review.
The second largest loan is the Crossways Shopping Center Loan ($20.2
million -- 3.9% of the pool), which is secured
by a 378,645 SF retail center located in Chesapeake, Virginia.
As of April 2010 the property was 96% leased, essentially
the same as at last review. Tenants include Value City Furniture
(15% of the of the net rentable area (NRA ); lease expiration
April 2016), DSW Shoes (10% of the NRA; lease expiration
July 2011) and Ross Dress for Less (8% of the NRA; lease expiration
January 2013). The loan matures in September 2012. Performance
is stable. Moody's LTV and stressed DSCR are 61% and
1.75X, respectively compared to 61% and 1.7X
as at last review.
The third largest loan is the 276 Fifth Avenue Loan ($19.7
million -- 3.6% of the pool), which is secured
by 166,017 SF Class B office building located in the Penn Station
submarket of New York City. As of February 2011 the property was
89% leased compared to 80% at last review. The loan
matures in December 2012. Moody's LTV and stressed DSCR are
59% and 1.75X, respectively, compared to 65%
and 1.57X at last review.
New York
Polina Margolina
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms 11 CMBS Classes of JPMCC 2002-C3
