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Announcement:

Moody's Affirms 22 CMBS Classes of JPMCC 2004-C3

03 Feb 2011

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
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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