Approximately $772.2 Million of Structured Securities Affected
New York, April 26, 2012 -- Moody's Investors Service affirmed the ratings of 13 classes of J.P.
Morgan Commercial Mortgage Finance Corp. Series 2003-CIBC7
as follows:
Cl. A-4, Affirmed at Aaa (sf); previously on
Jan 14, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Jan 14, 2004 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Jul 23,
2007 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Jul 23,
2007 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aa3 (sf); previously on Sep 2,
2010 Confirmed at Aa3 (sf)
Cl. E, Affirmed at A3 (sf); previously on Sep 2,
2010 Downgraded to A3 (sf)
Cl. F, Affirmed at Ba1 (sf); previously on Sep 2,
2010 Downgraded to Ba1 (sf)
Cl. G, Affirmed at Ba3 (sf); previously on Sep 2,
2010 Downgraded to Ba3 (sf)
Cl. H, Affirmed at Caa3 (sf); previously on Sep 2,
2010 Downgraded to Caa3 (sf)
Cl. J, Affirmed at Ca (sf); previously on Sep 2,
2010 Downgraded to Ca (sf)
Cl. K, Affirmed at C (sf); previously on Sep 2,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Sep 2,
2010 Downgraded to C (sf)
Cl. X-1, Affirmed at Ba3 (sf); previously on
Feb 22, 2012 Downgraded to Ba3 (sf)
RATINGS RATIONALE
The affirmations of the principal classes are due to key parameters,
including Moody's loan to value (LTV) ratio, Moody's stressed 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.
The rating of the IO Class, Class X-1, is consistent
with the expected credit performance of its reference classes and thus
is affirmed.
Moody's rating action reflects a cumulative base expected loss of 3.3%
of the current balance. At last full review, Moody's cumulative
base expected loss was 4.4%. Moody's provides a current
list of base expected 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 extent of the slowdown
in growth in the current macroeconomic environment and commercial real
estate property markets. While commercial real estate property
values are beginning to move in a positive direction, a consistent
upward trend will not be evident until the volume of investment activity
increases, distressed properties are cleared from the pipeline,
and job creation rebounds. The hotel and multifamily sectors continue
to show positive signs and improvements in the office sector continue
with minimal additions to supply. However, office demand
is closely tied to employment, where unemployment remains above
long-term averages and business confidence remains below long-term
averages. Performance in the retail sector has been mixed with
lackluster holiday sales driven by sales and promotions. Consumer
confidence remains low. Across all property sectors, the
availability of debt capital continues to improve with increased securitization
activity of commercial real estate loans supported by a monetary policy
of low interest rates. Moody's central global macroeconomic scenario
reflects: an overall downward revision of real growth forecasts
since last quarter, amidst ongoing and policy-induced banking
sector deleveraging leading to a tightening of bank lending standards
and credit contraction; financial market turmoil continuing to negatively
impact consumer and business confidence; persistently high unemployment
levels; and weak housing markets resulting in a further slowdown
in growth.
The methodologies used in this rating were "Moody's Approach to Rating
Fusion U.S. CMBS Transactions" published in April 2005,
and "Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in February 2012. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
Moody's review incorporated the use of the excel-based CMBS Conduit
Model v 2.61 which is used for both conduit and fusion transactions.
Conduit model results at the Aa2 (sf) 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 (sf) level are driven by
a pay down 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 (sf) and B2 (sf), 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 review also incorporated the CMBS IO calculator version
1.0, which uses the following inputs to calculate the proposed
IO rating based on the published methodology: original and current
bond ratings and credit estimates; original and current bond balances
grossed up for losses for all bonds the IO(s) reference(s) within the
transaction; and the IO type corresponding to an IO type as defined
in the published methodology. The calculator then returns a calculated
IO rating based on both a target and mid-point. For example,
a target rating basis for a Baa3 (sf) rating is a 610 rating factor.
The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e.
the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf)
rating factor of 940). If the calculated IO rating factor is 700,
the CMBS IO calculator version 1.0 would provide both a Baa3 (sf)
and Ba1 (sf) IO indication for consideration by the rating committee.
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 40,
up from 38 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 a review utilizing MOST®
(Moody's Surveillance Trends) Reports and a proprietary program that highlights
significant credit changes that have occurred in the last month as well
as cumulative changes since the last full transaction review. On
a periodic basis, Moody's also performs a full transaction
review that involves a rating committee and a press release. Moody's
prior transaction review is summarized in a press release dated May 25,
2011. Please see the ratings tab on the issuer / entity page on
moodys.com for the last rating action and the ratings history.
DEAL PERFORMANCE
As of the April 12, 2012 distribution date, the transaction's
aggregate certificate balance has decreased by 48% to $772.2
million from $1.473 billion at securitization. The
Certificates are collateralized by 151 mortgage loans ranging in size
from less than 1% to 7% of the pool, with the top
ten loans representing 28% of the pool. Twenty-three
loans, representing 25% of the pool, have defeased
and are secured by U.S. government securities. There
are two loans, representing 10% of the pool, with investment
grade credit estimates.
Twenty-six loans, representing 14% 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.
Nine loans have been liquidated from the pool since securitization,
resulting in a realized loss of $38.6 million (37%
loss severity overall). Six loans, representing 3%
of the pool, are in special servicing. Moody's has
estimated an $8.3 million loss (37% expected loss)
for these specially serviced loans.
Moody's has assumed a high default probability for ten poorly performing
loans representing 7.0% of the pool and has estimated a
$9.9 million loss (19% expected loss based on a 50%
probability of default) from these ten troubled loans.
Moody's was provided with full year 2010 and partial year 2011 operating
results for 94% and 57% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 72%, compared to 84% at last full review.
Moody's net cash flow reflects a weighted average haircut of 10.8%
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 1.57X and 1.66X, respectively,
compared to 1.46X and 1.42X, respectively, at
last full 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 largest loan with a credit estimate is the One Post Office Square
loan ($54.4 million -- 7.0% of the pool),
which is secured by a 766,462 SF Class A office building located
in Boston's financial district. The loan represents a 50%
pari passu interest in a $108.8 million A note. The
property is also encumbered by a $49.9 million non-pooled
B note. The largest tenants include Putnam Investments (32%
of the net rentable area (NRA); lease expiration March 2019) and
Sullivan & Worcester (18% of the NRA; lease expiration
December 2021). As of December 2011, the property was 89%
leased versus 94% as of July 2010. Financial performance
declined slightly in concert with lower occupancy and new tenant leases
with lower expense recoveries over new base years. Moody's credit
estimate and stressed DSCR are Aa1 and 2.44X, respectively,
compared to Aa1 and 2.18X at last review.
The second loan with a credit estimate is the Brown Noltemeyer Apartments
Portfolio ($25.7 million -- 3.3%),
which encompasses five cross-collateralized and cross-defaulted
loans secured by eight multifamily properties located in Louisville,
Kentucky. The loans are amortizing on a 17-year schedule
and have paid down 7.5% since last review and 38%
since securitization. Performance is consistent with the prior
review based on December 2010 financial results. Moody's credit
estimate and stressed DSCR are Aa1 and 2.48X, respectively,
compared to Aa1 and 2.25X at last review.
The top three conduit loans represent 9.4% of the pool.
The largest conduit loan is the Potomac Run loan ($41.2
million -- 5.3% of the pool), which
is secured by a 361,375 SF community shopping center located 25
miles from Washington, D.C. in Sterling, Virginia.
The property contains 12 retail tenants with 12,000 SF or more and
is shadow anchored by Target. As of June 2011, the property
was 98% leased, the same as last review and securitization.
The electronics retailer HH Gregg signed a lease in March 2010 for the
33,000 SF of former Circuit City space. Financial performance
has improved since last review due to the HH Gregg lease. Moody's
LTV and stressed DSCR are 96% and 1.04X, respectively,
compared to 116% and 0.86X at last review.
The second largest conduit loan is the Danka Portfolio loan ($18.3
million -- 2.4% of the pool), which
is secured by three single tenant office and industrial buildings located
in St. Petersburg, Florida. The single tenant is Danka
Office Imaging Company, a subsidiary of business solutions provider
Konica Minolta. Due to concerns about exposure to a single,
non-credit tenant, Moody's analysis included a "dark" scenario,
which accounts for single-tenant risk by incorporating the expected
value of the property if the tenant vacates. Moody's LTV and stressed
DSCR are 72% and 1.67X, respectively, compared
to 73% and 1.65X at last review.
The third largest conduit loan is the River Landing Apartments loan ($13.1
million -- 1.7% of the pool), which is secured
by a 340-unit multi-family property located in Myrtle Beach,
South Carolina. Financial performance has improved since last review.
Moody's LTV and stressed DSCR are 80% and 1.18X, respectively,
compared to 96% and 0.98X at last review.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
to it. Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has
issued the rating.
Gregory Reed
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Michael M. Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms 13 CMBS Classes of JPMC 2003-CIBC7
