Approximately $953 Million of Structured Securities Affected
New York, September 02, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of seven
classes, confirmed one class and downgraded ten classes of J.P.
Morgan Commercial Mortgage Finance Corp. Series 2003-CIBC7.
Moody's rating action is as follows:
US$390M Cl. A-4 Certificate, Affirmed at Aaa
(sf); previously on Jan 14, 2004 Definitive Rating Assigned
Aaa (sf)
US$85.621M Cl. A-3 Certificate, Affirmed
at Aaa (sf); previously on Jan 14, 2004 Definitive Rating Assigned
Aaa (sf)
US$390.043M Cl. A-1A Certificate, Affirmed
at Aaa (sf); previously on Jan 14, 2004 Definitive Rating Assigned
Aaa (sf)
Cl. X-1 Certificate, Affirmed at Aaa (sf); previously
on Jan 14, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-2 Certificate, Affirmed at Aaa (sf); previously
on Jan 14, 2004 Definitive Rating Assigned Aaa (sf)
US$34.689M Cl. B Certificate, Affirmed at Aaa
(sf); previously on Jul 23, 2007 Upgraded to Aaa (sf)
US$13.875M Cl. C Certificate, Affirmed at Aaa
(sf); previously on Jul 23, 2007 Upgraded to Aaa (sf)
US$27.751M Cl. D Certificate, Confirmed at
Aa3 (sf); previously on Aug 26, 2010 Aa3 (sf) Placed Under
Review for Possible Downgrade
US$15.610M Cl. E Certificate, Downgraded to
A3 (sf); previously on Aug 26, 2010 A2 (sf) Placed Under Review
for Possible Downgrade
US$17.345M Cl. F Certificate, Downgraded to
Ba1 (sf); previously on Aug 26, 2010 Baa1 (sf) Placed Under
Review for Possible Downgrade
US$10.407M Cl. G Certificate, Downgraded to
Ba3 (sf); previously on Aug 26, 2010 Baa3 (sf) Placed Under
Review for Possible Downgrade
US$19.078M Cl. H Certificate, Downgraded to
Caa3 (sf); previously on Aug 26, 2010 Ba3 (sf) Placed Under
Review for Possible Downgrade
US$5.204M Cl. J Certificate, Downgraded to
Ca (sf); previously on Aug 26, 2010 B2 (sf) Placed Under Review
for Possible Downgrade
US$5.203M Cl. K Certificate, Downgraded to
C (sf); previously on Aug 26, 2010 B3 (sf) Placed Under Review
for Possible Downgrade
US$8.672M Cl. L Certificate, Downgraded to
C (sf); previously on Aug 26, 2010 Caa1 (sf) Placed Under Review
for Possible Downgrade
US$8.673M Cl. M Certificate, Downgraded to
C (sf); previously on Aug 26, 2010 Caa2 (sf) Placed Under Review
for Possible Downgrade
US$3.469M Cl. N Certificate, Downgraded to
C (sf); previously on Aug 26, 2010 Caa3 (sf) Placed Under Review
for Possible Downgrade
US$2.853M Cl. P Certificate, Downgraded to
C (sf); previously on Aug 26, 2010 Caa3 (sf) Placed Under Review
for Possible Downgrade
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans and concerns about refinance risk associated with loans maturing
in an adverse environment. Forty-three loans, representing
18% of the pool, mature within the next 36 months.
Thirteen of these loans, representing 6% of the pool,
have a Moody's stressed debt service coverage ratio (DSCR) less
than 1.00X. The confirmation and affirmations 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
confirmed and affirmed classes are sufficient to maintain the existing
ratings.
On August 26, 2010 Moody's placed 11 classes of this transaction
on review for possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
4.6% of the current balance. At last review,
Moody's cumulative base expected loss was 2.9%.
Moody's stressed scenario loss is 7.4% 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 the performance of the pool declines materially, 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 2010
and 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 J.P. Morgan Commercial
Finance Corp., Series 2003-CIBC7 was "CMBS:
Moody's Approach to Rating Fusion Transactions" rating methodology published
in April 2005. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found on Moody's
website.
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 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 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
underlying ratings 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 underlying ratings 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 June 25, 2009. 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 received and took into account one or
more third party due diligence reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had a neutral
impact on the rating.
DEAL PERFORMANCE
As of the August 17, 2010 distribution date, the transaction's
aggregate certificate balance has decreased 35% to $953.4
million from $1.5 billion at securitization. The
Certificates are collateralized by 162 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten loans representing 33% of the pool. Twenty-three
loans, representing 21% of the pool, have defeased
and are collateralized with U.S. Government securities.
Defeasance at last review represented 17% of the pool.
Twenty-nine loans, representing 23% 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.
Six loans have been liquidated from the pool, resulting in an aggregate
realized loss of $21.3 million (47% loss severity).
Eight loans, representing 6% of the pool, are currently
in special servicing. The largest specially serviced loan is the
Versailles and Dana Point Apartment Loan ($22.2 million
-- 2.4% of the pool), which is secured by a total
of 652 units in two crossed apartment complexes located in Dallas Texas.
The loan was transferred to special servicing in June 2010 due to delinquency.
The properties were 46% leased as of December 2009.
The second largest specially serviced loan is the University Gardens Student
Housing Loan ($11.9 million -- 1.2% of
the pool), which is secured by an 80-unit, 320-bed
student housing facility located near the Florida A&M and Florida
State campuses in Tallahassee, Florida. The property was
72% leased as of May 2010. The loan transferred into special
servicing in February 2007 and is now real estate owned (REO).
The remaining six specially serviced loans are secured by a mix of property
types. Moody's has estimated an aggregate $26.8
million loss (45% expected loss on average) for the specially serviced
loans.
Moody's has assumed a high default probability for 12 poorly performing
loans representing 4% of the pool and has estimated a $6.9
million (19% expected loss based on a 55% probability default)
from these troubled loans. Moody's rating action recognizes
potential uncertainty around the timing and magnitude of loss from these
troubled loans.
Moody's was provided with full year 2009 operating results for 77%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 76% compared to 73%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 10.9% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 10.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.88X and 1.55X, respectively,
compared to 1.47X and 1.38X 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 40
compared to 33 at Moody's prior review.
The largest loan with an underlying rating is the One Post Office Square
Loan ($56.1 million -- 5.9% of the pool),
which represents a participation interest in a $112.2 million
first mortgage loan. The loan is secured by a 766,000 square
foot Class A office building located in Boston, Massachusetts.
The property was 100% leased as of December 2009, an increase
from 87% at last review. The largest tenants include Putnam
Investments (32% of the net rentable area (NRA); lease expiration
March 2019), Sullivan & Worcester (18% of the NRA;
lease expiration December 2021) and Jones Lang LaSalle -- (7%
of the NRA; December 2016). Moody's underlying rating
is Aa1 compared to A1 at last review. Moody's stressed DSCR
is 2.22X compared to 1.66X at last review.
The second loan with an underlying rating is the Brown Noltemeyer Portfolio
Loan ($29.5 million -- 3.1% of the pool),
which consists of five cross collateralized and cross defaulted loans
secured by eight multi-family properties totalling 2,087
units located in Louisville, Kentucky. The loan is structured
with a 17-year amortization schedule and has amortized by approximately
8% since last review. Moody's current underlying rating
is Aa2, the same as last review. Moody's stressed DSCR
is 2.01X compared to 1.73X at last review.
The top three performing conduit loans represent 15% of the pool
balance. The largest loan is the Hometown America Portfolio III
Loan ($58.3 million -- 6.1% of the pool),
which is secured by five manufactured housing communities with 1,953
pads located in four states. The property was 84% leased
as of December 2009 compared to 86% at last review. Although
financial performance had declined since securitization, year-end
2009 operating results indicate that financial performance has improved
and now approximates securitization levels. The loan has amortized
2% since last review. Moody's LTV and stressed DSCR
are 92% and 1.09X, respectively, compared to
97% and 1.03X at last review.
The second largest conduit loan is the Potomac Run Loan ($42.6
million -- 4.5% of the pool), which is secured
by a 362,000 square foot community shopping center located in Sterling,
Virginia. The center was 98% occupied as of December 2009
compared to 95% at last review. The largest tenants include
Toys R Us, Michaels and Office Depot which collectively occupy 30%
of the premises. Property performance has fluctuated since securitization
due to the loss of Circuit City. However, HHGregg recently
signed a long-term lease to occupy the former Circuit City space
and opened that store February 2010. The loan has amortized 2%
since last review. Moody's LTV and stressed DSCR are 110%
and 0.91X, respectively, compared to 102% and
0.98X at last review.
The third largest conduit loan is the Colony Cove Loan ($38.9
million -- 4.1% of the pool), which is secured
by a 2,210-pad mobile home park located approximately 40
miles south of Tampa in Ellenton, Florida. The property was
93% leased as of December 2009, the same as last review.
The loan was structured with a 20-year amortization schedule and
has amortized approximately 5% since last review. Moody's
LTV and stressed DSCR are 51% and 2.02X, respectively,
compared to 61% and 1.68X at last review.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's investors
Service information, and confidential and proprietary Moody's
Analytics' information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
In addition, 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 Investors Service adopts all necessary measures so that the information
it uses in assigning a credit rating is of sufficient quality and from
reliable sources; however, Moody's Investors Service does not
and cannot in every instance independently verify, audit or validate
information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Gregory Reed
Vice President - Senior 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
USA
Moody's Affirms Seven, Confirms One and Downgrades Ten CMBS Classes of JPMCC 2003-CIBC7
