Approximately $1.3 Billion of Structured Securities Affected
New York, February 03, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 22 classes
of JP Morgan Chase Commercial Mortgage Securities Corp. Commercial
Mortgage Pass-Through Certificates, Series 2004-C3
as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Dec 29, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Dec 29, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Dec 29, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-5, Affirmed at Aaa (sf); previously on
Dec 29, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Dec 29, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Dec 29, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
Dec 29, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at Aa3 (sf); previously on
Mar 18, 2010 Downgraded to Aa3 (sf)
Cl. B, Affirmed at Baa1 (sf); previously on Mar 18,
2010 Downgraded to Baa1 (sf)
Cl. C, Affirmed at Baa2 (sf); previously on Mar 18,
2010 Downgraded to Baa2 (sf)
Cl. D, Affirmed at Ba1 (sf); previously on Mar 18,
2010 Downgraded to Ba1 (sf)
Cl. E, Affirmed at Ba3 (sf); previously on Mar 18,
2010 Downgraded to Ba3 (sf)
Cl. F, Affirmed at B3 (sf); previously on Mar 18,
2010 Downgraded to B3 (sf)
Cl. G, Affirmed at Caa2 (sf); previously on Mar 18,
2010 Downgraded to Caa2 (sf)
Cl. H, Affirmed at Caa3 (sf); previously on Mar 18,
2010 Downgraded to Caa3 (sf)
Cl. J, Affirmed at Ca (sf); previously on Mar 18,
2010 Downgraded to Ca (sf)
Cl. K, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (sf)
Cl. Q, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (sf)
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
7.1% of the current balance. At last review,
Moody's cumulative base expected loss was 7.9%.
Moody's stressed scenario loss is 16.6% 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 stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2011;
we expect overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal deficits
and persistent unemployment levels.
The principal methodology used in rating JMPCC 2004-C3 is "CMBS:
Moody's Approach to Rating Conduit Transactions", published
on September 15, 2000. The methodology is available on Moody's
website at www.moodys.com. Other methodologies and
factors that may have been considered in the process of rating this issuer
can also be found on Moody's website.
In addition to methodologies and research available on moodys.com,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
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 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 March 17th, 2010.
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 January 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 12% to $1.3
billion from $1.5 billion at securitization. The
Certificates are collateralized by 131 mortgage loans ranging in size
from less than 1% to 5% of the pool, with the top
ten loans representing 25% of the pool. Ten loans,
representing 13% of the pool, have defeased and are collateralized
with U.S. Government securities.
Thirty-seven loans, representing 28% 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.
Three loans have been liquidated from the pool, resulting in an
aggregate $8.2 million loss (30% loss severity overall).
At last review, the pool had experienced an aggregate $4.3
million realized loss. Sixteen loans, representing 11%
of the pool, are currently in special servicing. Moody's
has estimated an aggregate $58.7 million loss (41.6%
expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for ten poorly performing
loans representing 4% of the pool and has estimated a $10.7
million aggregate loss (20% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 74%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 100% compared to 99%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 11.6% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.37X and 1.03X, respectively,
compared to 1.41X and 1.03X 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.
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 53
compared to 31 at Moody's prior review.
The top three performing conduit loans represent 13% of the pool
balance. The largest loan is the 345 Park Avenue South Loan ($71.8
million -- 5.4%), which is secured by a 272,000
square foot Class A office building located in Midtown Manhattan,
New York. The property was 97% leased as of September 2010
which is in line with last review. Performance has improved due
to increased rental revenues. Moody's LTV and stressed DSCR
are 103% and 0.92X, respectively, compared to
126% and 0.80X at last review.
The second largest loan is the Crossroads Shopping Center Loan ($61.3
million -- 4.6%), which is secured by a 311,000
square foot retail center located in White Plains, New York.
The property was 94% leased as of September 2010, similar
to last review. The largest tenant is A&P Supermarket.
A&P declared bankruptcy in December 2010 and has announced that there
will be store closings. Moody's valuation reflects a stressed
cash flow due to our concerns about the continued occupancy of A&P.
Moody's LTV and stressed DSCR are 121% and 0.71X,
respectively, compared to 114% and 0.75X at last review.
The third largest loan is the Broadway Marketplace Loan ($41 million
- 3.1%), which is secured by a 387,000
square foot retail center located in Denver, Colorado. The
property was 98% leased as of September 2010, similar to
last review Moody's LTV and stressed DSCR are 102% and 0.91X,
respectively, compared to 103% and 0.89X at last review.
New York
Brad Kamedulski
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 22 CMBS Classes of JPMCC 2004-C3
