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Rating Action:

Moody's Affirms Six and Downgrades Four Classes of JPMCC 2005-LDP4

Global Credit Research - 17 Jan 2014

Approximately $1.40 Billion of Structured Securities Affected

New York, January 17, 2014 -- Moody's Investors Service has affirmed the ratings on six classes and downgraded the ratings on four classes in J.P. Morgan Chase Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2005-LDP4 as follows:

Cl. A-1A, Affirmed Aaa (sf); previously on May 2, 2013 Affirmed Aaa (sf)

Cl. A-4, Affirmed Aaa (sf); previously on May 2, 2013 Affirmed Aaa (sf)

Cl. A-SB, Affirmed Aaa (sf); previously on May 2, 2013 Affirmed Aaa (sf)

Cl. A-M, Affirmed Aa2 (sf); previously on May 2, 2013 Affirmed Aa2 (sf)

Cl. A-J, Affirmed Ba2 (sf); previously on May 2, 2013 Downgraded to Ba2 (sf)

Cl. B, Affirmed B3 (sf); previously on May 2, 2013 Downgraded to B3 (sf)

Cl. C, Downgraded to Caa3 (sf); previously on May 2, 2013 Downgraded to Caa1 (sf)

Cl. D, Downgraded to C (sf); previously on May 2, 2013 Affirmed Caa2 (sf)

Cl. E, Downgraded to C (sf); previously on May 2, 2013 Affirmed Ca (sf)

Cl. X-1, Downgraded to B1 (sf); previously on May 2, 2013 Affirmed Ba3 (sf)

RATINGS RATIONALE

The ratings on the P&I classes A1-A through A-M 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 classes A-J and B, the below investment grade P&I classes were affirmed because the ratings are consistent with Moody's expected loss.

The ratings on the P&I classes C through E were downgraded due to realized and anticipated losses from specially serviced and troubled loans.

The rating on the IO Class (Class X-1) was downgraded due to a decline in the weighted average rating factor (WARF) of its referenced classes.

Moody's rating action reflects a base expected loss of 6.0% of the current balance, compared to 12.1% at Moody's last review. Moody's base expected loss plus realized losses is now 10.7% of the original pooled balance, compared to 9.6% 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://v3.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 principal methodology used in this rating was "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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 credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the credit assessment level) for loans with similar 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 45, compared to 42 at Moody's last review.

DEAL PERFORMANCE

As of the December 15, 2013 distribution date, the transaction's aggregate certificate balance has decreased by 47% to $1.40 billion from $2.7 billion at securitization. The certificates are collateralized by 145 mortgage loans ranging in size from less than 1% to 6% of the pool, with the top ten loans, excluding defeasance constituting 33% of the pool. One loan, constituting 5% of the pool, has an investment-grade credit assessment. Eight loans, constituting 13% of the pool, have defeased and are secured by US government securities.

Thirty-four loans, constituting 24% of the pool, are 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.

Seventeen loans have been liquidated from the pool, resulting in an aggregate realized loss of $201.1 million (for an average loss severity of 61%). Six loans, constituting 5% of the pool, are currently in special servicing. The largest specially serviced loan is the Sterling Pointe Shopping Center Loan ( $36.9 million -- 2.6% of the pool), which is secured by a 129,000 square foot (SF) retail property located in Lincoln, California. The loan transferred to specially servicing in January 2010 due to imminent default. The loan became real estate owned (REO) in June 2012. The loan was sold at the end of December 2013 with net proceeds of $31.9 million.

The remaining five specially serviced loans are secured by a mix of property types. Moody's estimates an aggregate $26.8 million loss for the specially serviced loans (38% expected loss on average).

Moody's has assumed a high default probability for 15 poorly performing loans, constituting 13% of the pool, and has estimated an aggregate loss of $34.1 million (a 19% expected loss based on a 45% probability default) from these troubled loans.

Moody's received full year 2012 operating results for 98% of the pool, and full or partial year 2013 operating results for 70%. Moody's weighted average conduit LTV is 91%, compared to 94% at Moody's last review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 11% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.1%.

Moody's actual and stressed conduit DSCRs are 1.45X and 1.14X, respectively, compared to 1.42X and 1.11X 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.

The loan with a credit assessment is the Plastipak Portfolio Loan ($72.5 million -- 5.2% of the pool), which is secured by 14 industrial/warehouse buildings located in eight states. The portfolio totals 4.5 million SF and is 100% leased to Plastipak Holdings Inc. under a lease which extends 10 years beyond the loan's maturity date. The loan is structured with a 20-year amortization schedule and has amortized 28% since securitization. Performance remains stable. Moody's current credit assessment and stressed DSCR are A3 and 1.99X, respectively, compared to A3 and 1.91X at last review.

The top three non-defeased conduit loans represent 12.7% of the pool. The largest loan is the One World Trade Center Loan ($85.7 million -- 6.1% of the pool), which is secured by a 565,000 SF office building located in Long Beach, California. The loan is on the watchlist due to low DSCR caused by lower revenues from occupancy loss. The largest tenant is the US General Services Administration (18% of the net rentable area (NRA); lease expirations between 2014 and 2028). As of December 2013, the property was 65% leased compared to 70% at last review. Due to poor loan performance, Moody's views this loan as a troubled loan.

The second largest loan is Highland Landmark Building ($50.0 million -- 3.6% of the pool), which is secured by a 276,500 SF office building located in a western suburb of Chicago in Downers Grove, Illinois. As of September 2013, the property was 70% leased compared to 43% at last review. The largest tenant is Advocate Healthcare (38% of the NRA; lease expiration May 2027). Moody's LTV and stressed DSCR are 128% and 0.76X.

The third largest loan is 901 West Landstreet Road Portfolio Loan ($43.4 million -- 3.1% of the pool), which is secured by two industrial properties located in Kearny, New Jersey and the other located in Orlando, Florida. As of December 2013, both properties were 100% leased. Moody's LTV and stressed DSCR are 93% and 1.04X, respectively, compared to 90% and 1.08X 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.

Lacey M Morgan
Associate 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

Keith Banhazl
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 Six and Downgrades Four Classes of JPMCC 2005-LDP4
No Related Data.

 

© 2014 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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