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Rating Action:

Moody's Affirms Five and Downgrades Two Classes of JPMCC 2003-C1

20 Nov 2014

Approximately $72 Million of Structured Securities Affected

New York, November 20, 2014 -- Moody's Investors Service has affirmed the ratings on five classes and downgraded the ratings on two classes in J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2003-C1 as follows:

Cl. D, Affirmed Aa3 (sf); previously on Jan 10, 2014 Affirmed Aa3 (sf)

Cl. E, Affirmed Baa1 (sf); previously on Jan 10, 2014 Affirmed Baa1 (sf)

Cl. F, Affirmed B1 (sf); previously on Jan 10, 2014 Affirmed B1 (sf)

Cl. G, Downgraded to Caa3 (sf); previously on Jan 10, 2014 Affirmed Caa2 (sf)

Cl. H, Affirmed C (sf); previously on Jan 10, 2014 Affirmed C (sf)

Cl. J, Affirmed C (sf); previously on Jan 10, 2014 Affirmed C (sf)

Cl. X-1, Downgraded to Caa3 (sf); previously on Jan 10, 2014 Downgraded to Caa2 (sf)

RATINGS RATIONALE

The ratings on P&I classes D, E and F were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on P&I classes H and J were affirmed because the ratings are consistent with Moody's expected loss.

The rating on P&I class G was downgraded due to an increase in anticipated losses from specially serviced loans.

The rating on the IO Class, Class X-1, was downgraded due to a decline in the credit performance (or the weighted average rating factor or WARF) of its referenced classes due to the paydown of more highly rated classes.

Moody's rating action reflects a base expected loss of 40.9% of the current balance compared to 30.0% at Moody's last review. Moody's base expected loss plus realized losses is now 8.6% of the original pooled balance, compared to 8.3% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

On October 9, 2014, Moody's issued a "Request for Comment" asking for market feedback on proposed changes to the methodology it uses to rate conduit and fusion CMBS transactions. If Moody's adopts the new methodology as proposed, the changes could affect the ratings of JPMCC 2003-C1. Please see "Request for Comment: Proposed Enhancements to Our Approach to Rating US and Canadian Conduit/Fusion CMBS", which is available at www.moodys.com, for more information about the implications of the proposed changes to the methodology on Moody's ratings.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses 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 Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan-level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on 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, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 5 compared to 6 at Moody's last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

Moody's analysis also incorporated a loss and recovery approach in rating the P&I classes in this deal since 64% of the pool is in special servicing and performing conduit loans only represent 31% of the pool. In this approach, Moody's determines a probability of default for each specially serviced loan that it expects will generate a loss and estimates a loss given default based on a review of information from the special servicer, available market data and Moody's internal data. The loss given default for each loan also takes into consideration repayment of servicer advances to date, estimated future advances and closing costs. Translating the probability of default and loss given default into an expected loss estimate, Moody's then applies the aggregate loss from specially serviced loans to the most junior classes and the recovery as a pay down of principal to the most senior classes.

DEAL PERFORMANCE

As of the November 12, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 93% to $72 million from $1.07 billion at securitization. The certificates are collateralized by 11 mortgage loans ranging in size from 1% to 31% of the pool. Two loans, constituting 5% of the pool, have defeased and are secured by US government securities.

One loan, constituting 19% of the pool, is on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

Eleven loans have been liquidated at a loss from the pool, resulting in an aggregate realized loss of $62 million (for an average loss severity of 70%). Five loans, constituting 64% of the pool, are currently in special servicing. The largest specially serviced loan is the Prince Georges Metro Center IV Loan ($22 million -- 30.9% of the pool), which is secured by a 178,000 square foot (SF) office property in Hyattsville, Maryland. The loan failed to repay at its March 2013 maturity and became REO in July 2014. The property was built-to-suit for the US Department of Health and Human Services (HHS) in 2002. HHS fully leased the property under a 10 year lease. HHS renewed the lease until December 2014. HHS recently signed a new 15-year lease at the property, but the new lease is only for 104,000 SF. The special servicer is currently marketing the property for sale.

The remaining four specially serviced loans are secured by a office and retail properties. Moody's estimates an aggregate $28 million loss for the specially serviced loans (61% expected loss on average).

Moody's received full year 2013 and partial year 2014 operating results for 100% of the pool. Moody's weighted average conduit LTV is 66% compared to 70% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 13% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.3%.

Moody's actual and stressed conduit DSCRs are 1.06X and 1.53X, respectively, compared to 1.12X and 1.57X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. Moody's stressed DSCR is greater than Moody's actual DSCR for this transaction because the transaction's average debt constant is greater than Moody's stressed 9.25% rate.

The top three performing conduit loans represent 28% of the pool balance. All top three conduit loans are fully amortizing loans with a January 2023 loan maturity. Each of the top three loans has amortized between 42% and 44% since securitization. The largest loan is the Mark IV Las Vegas Loan ($14 million -- 19.4% of the pool), which is secured by three adjoining industrial properties totaling 451,000 SF. The collateral is located in Las Vegas, Nevada. The loan has been on the watchlist for low DSCR since January 2013. The borrower reports a recent increase in leasing activity. The collateral is 84% leased as of September 2014. Moody's LTV and stressed DSCR are 71% and 1.44X, respectively, compared to 80% and 1.29X at the last review.

The second largest loan is the Ocoee Crossing Shopping Center ($3 million -- 4.5% of the pool). The loan is secured by a 63,000 SF grocery-anchored retail center located in Cleveland, Tennessee. The property is 97% leased as of January 2014 with average in-place rents of $11 per square foot. Moody's LTV and stressed DSCR are 56% and, 1.85X, respectively, compared to 61% and 1.68X at the last review

The third largest loan is the Walgreens-Lyndon Lane Loan ($3 million -- 4.0% of the pool). The loan is secured by a 15,000 SF retail property. Walgreens leases the entire property via a long term triple net lease expiring in October 2061. Moody's LTV and stressed DSCR are 59% and 1.73X, respectively, compared to 64% and 1.60X at last review.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Simon
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

Annelise Osborne
VP - Sr Credit Officer/Manager
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 Five and Downgrades Two Classes of JPMCC 2003-C1
No Related Data.
© 2022 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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