Approximately $657.4 Million of Structured Securities Affected
New York, April 22, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 17 classes
of J.P. Morgan Chase Commercial Mortgage Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2004-C1
as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Apr 2, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Apr 2, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Apr 2, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Apr 2, 2004 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Oct 29,
2008 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Oct 29,
2008 Upgraded to Aaa (sf)
Cl. D, Affirmed at A1 (sf); previously on Oct 29,
2008 Upgraded to A1 (sf)
Cl. E, Affirmed at A3 (sf); previously on Apr 2,
2004 Definitive Rating Assigned A3 (sf)
Cl. F, Affirmed at Baa1 (sf); previously on Apr 2,
2004 Definitive Rating Assigned Baa1 (sf)
Cl. G, Affirmed at Baa2 (sf); previously on Apr 2,
2004 Definitive Rating Assigned Baa2 (sf)
Cl. H, Affirmed at Baa3 (sf); previously on Apr 2,
2004 Definitive Rating Assigned Baa3 (sf)
Cl. J, Affirmed at Ba3 (sf); previously on Jul 21,
2010 Downgraded to Ba3 (sf)
Cl. K, Affirmed at B1 (sf); previously on Jul 21,
2010 Downgraded to B1 (sf)
Cl. L, Affirmed at B3 (sf); previously on Jul 21,
2010 Downgraded to B3 (sf)
Cl. M, Affirmed at Caa2 (sf); previously on Jul 21,
2010 Downgraded to Caa2 (sf)
Cl. N, Affirmed at Ca (sf); previously on Jul 21,
2010 Downgraded to Ca (sf)
Cl. P, Affirmed at C (sf); previously on Jul 21,
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
3.5% of the current balance. At last review,
Moody's cumulative base expected loss was 3.0%.
Moody's stressed scenario loss is 9.4% 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 forward-looking view of the likely range of performance
over the medium term. From time to time, Moody's may,
if warranted, change these expectations. Performance that
falls outside the given range may indicate that the collateral's credit
quality is stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from
the expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an assessment
of a range of factors including, but not exclusively, the
performance metrics.
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: "Moody's
Approach to Rating Fusion Transactions", published on April
19, 2005.
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 credit estimate 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 credit estimate 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 22
compared to 22 at Moody's prior 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 July 21, 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 April 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 37% to $657.4
million from $1.04 billion at securitization. The
Certificates are collateralized by 103 mortgage loans ranging in size
from less than 1% to 13% of the pool, with the top
ten loans representing 39% of the pool. Twelve loans,
representing 16% of the pool, have defeased and are collateralized
by U.S. Government securities.
Twenty-six loans, representing 17% 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.
One loan has been liquidated from the pool, resulting in a realized
loss of $4.6 million (80% loss severity).
Currently four loans, representing 4% of the pool,
are in special servicing. The largest specially serviced loan is
the 610 Broadway Loan ($11.4 million -- 1.7%
of the pool), which is secured by a 152,454 square foot office
complex built in 1909 and renovated in 2002 and located in the Jewelry
District of downtown Los Angeles, California. The loan was
transferred to special servicing in January 2010 due to monetary default
and the borrower subsequently filed for bankruptcy in May 2010.
The borrower filed its bankruptcy plan in November 2010 and the special
servicer is currently reviewing the plan. The plan includes a modification
to the loan agreement. Terms of the modification include an extension
of the maturity date, interest only payments for a portion of the
extension, and the ability to pay off the loan any time prior to
the new maturity date.
The remaining three specially serviced properties are secured by a mix
of property types. Moody's estimates an aggregate $5.1
million loss for the specially serviced loans (61% expected loss
on average).
Moody's has assumed a high default probability for four poorly performing
loans representing 2% of the pool and has estimated an aggregate
$3.7 million loss (24% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 98%
of the pool. Excluding specially serviced loans with estimated
losses and troubled loans, Moody's weighted average LTV is
82%, the same as at Moody's prior review. Moody's
net cash flow reflects a weighted average haircut of 11% to the
most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.4%.
Excluding specially serviced loans with estimated losses and troubled
loans, Moody's actual and stressed DSCRs are 1.40X
and 1.31X, respectively, compared to 1.37X and
1.28X 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 conduit loans represent 27% of the pool. The
largest conduit loan is the Hometown America Portfolios IV & V Loan
($87.8 million -- 13.4% of the
pool), which is secured by 14 manufactured home communities totaling
3,742 units and located in eight states. The portfolio was
95% leased as of September 2010 compared to 89% at the prior
review. The loan has amortized 2% since last review and
9% since securitization. Moody's LTV and stressed DSCR are
67% and 1.45X, respectively, compared to 74%
and 1.32X at last review.
The second largest conduit loan is the One Fordham Plaza Loan ($45.7
million -- 7.0% of the pool), which
is secured by a 414,002 square foot office building located in Bronx,
New York. The property was 85% leased as of September 2010
compared to 92% at last review. The largest tenant is Montefiore
Hospital, which leases approximately 125,000 square feet of
the net rentable area (NRA) under various leases expiring in 2012 and
2013. Included is a proprietary lease (109,000 square feet),
where upon expiration of the initial term in 2012, Montefiore can
extend through September 2036 at $1.00 per annum plus expense
reimbursements. Other tenants include the New York City Housing
Authority (18% of the NRA; lease expiration March 2030) and
the New York State Division of Human Rights (13% of the NRA;
currently on a month-to-month lease -- working with
borrower on a long term lease). Property performance has declined
due to both a decrease in rental income as well as increased expenses.
The loan has amortized 4% since last review and 29% since
securitization. Moody's LTV and stressed DSCR are 90% and
1.20X, respectively, compared to 83% and 1.31X
at last review.
The third largest conduit loan is the White Oak Crossing Shopping Center
Loan ($40.4 million -- 6.1%
of the pool), which is secured by a 517,000 square foot shopping
center located approximately seven miles southeast of Raleigh, North
Carolina. The center is anchored by BJ's Wholesale Club (22%
of the NRA; lease expiration August 2023), Kohl's (17%
of the NRA; lease expiration January 2024), and Dick's Sporting
Goods (9% of the NRA; lease expiration January 2019).
The center is shadow anchored by Target. The center was 95%
leased as of December 2010 compared to 94% at the last review.
The loan has benefitted from 2% of amortization since last review
and 15% since securitization. Moody's LTV and stressed DSCR
are 73% and 1.38X, respectively, compared to
82% and 1.22X at last review.
New York
Amit Rustgi
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 17 CMBS Classes of JPMCC 2004-C1
