Approximately $5.22 Billion of Structured Securities Affected
New York, February 16, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of 10 classes
and affirmed 25 classes of J.P. Morgan Commercial Mortgage
Trust, Commercial Mortgage Pass-Through Certificates,
Series 2007-LDP10 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-1S, Affirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2S, Affirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2SFL, Affirmed at Aaa (sf); previously
on Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2SFX, Affirmed at Aaa (sf); previously
on Aug 3, 2010 Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-3S, Affirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Apr 10,
2007 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at A1 (sf); previously on Feb
25, 2010 Downgraded to A1 (sf)
Cl. A-MS, Affirmed at A1 (sf); previously on
Feb 25, 2010 Downgraded to A1 (sf)
Cl. A-J, Affirmed at Ba2 (sf); previously on
Feb 25, 2010 Downgraded to Ba2 (sf)
Cl. A-JFL, Affirmed at Ba2 (sf); previously on
Feb 25, 2010 Downgraded to Ba2 (sf)
Cl. A-JS, Affirmed at Ba2 (sf); previously on
Feb 25, 2010 Downgraded to Ba2 (sf)
Cl. B, Downgraded to B3 (sf); previously on Feb 25,
2010 Downgraded to B1 (sf)
Cl. B-S, Downgraded to B3 (sf); previously on
Feb 25, 2010 Downgraded to B1 (sf)
Cl. C, Downgraded to Caa2 (sf); previously on Feb 25,
2010 Downgraded to B3 (sf)
Cl. C-S, Downgraded to Caa2 (sf); previously
on Feb 25, 2010 Downgraded to B3 (sf)
Cl. D, Downgraded to Caa3 (sf); previously on Feb 25,
2010 Downgraded to Caa2 (sf)
Cl. D-S, Downgraded to Caa3 (sf); previously
on Feb 25, 2010 Downgraded to Caa2 (sf)
Cl. E, Downgraded to Ca (sf); previously on Feb 25,
2010 Downgraded to Caa3 (sf)
Cl. E-S, Downgraded to Ca (sf); previously on
Feb 25, 2010 Downgraded to Caa3 (sf)
Cl. F, Downgraded to C (sf); previously on Feb 25,
2010 Downgraded to Ca (sf)
Cl. F-S, Downgraded to C (sf); previously on
Feb 25, 2010 Downgraded to Ca (sf)
Cl. G, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. G-S, Affirmed at C (sf); previously on Feb
25, 2010 Downgraded to C (sf)
Cl. H, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. H-S, Affirmed at C (sf); previously on Feb
25, 2010 Downgraded to C (sf)
Cl. J, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Feb 25,
2010 Downgraded to C (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses resulting from anticipated
losses from specially serviced and troubled loans and refinancing risk
associated with loans approaching maturity in an adverse environment.
Thirty-three loans, representing 17% of the pool,
mature within the next 24 months. Twenty-four of these loans,
representing 13% of the pool, have a Moody's stressed debt
service coverage ratio (DSCR) less than 1.0X.
The affirmations are due to key rating parameters, including Moody's
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
9.9% of the current balance. At last review,
Moody's cumulative base expected loss was 8.2%.
Moody's stressed scenario loss is 27.3% 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 this rating was: "CMBS:
Moody's Approach to Rating Fusion Transactions " published on April
19, 2005.
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 credit estimate 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 credit estimate level, is incorporated
for loans with similar credit estimates in the same transaction.
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 57
compared to 58 at Moody's prior review.
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 February 25, 2010.
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 did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
DEAL PERFORMANCE
As of the January 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 2% to $5.26
billion from $5.34 billion at securitization. The
Certificates are collateralized by 217 mortgage loans ranging in size
from less than 1% to 5% of the pool, with the top
ten loans representing 32% of the pool. The pool includes
one loan with an investment-grade credit estimate, representing
2% of the pool.
Sixty-four loans, representing 30% 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.
Five loans have been liquidated from the pool, resulting in an aggregate
$25.7 million realized loss (50% loss severity on
average). Thirty-two loans, representing 13%
of the pool, are currently in special servicing. The largest
specially serviced loan is the Solana Loan ($140.0 million
- 2.7% of the pool), which is a pari passu
interest in a $360.0 million loan. The loan is secured
by a 1.9 million square foot mixed use complex consisting of office,
retail and a 198-room full service hotel located in Westlake,
Texas. The loan was transferred to special servicing in March 2009
for imminent default but has remained current. The loan had been
modified but the borrower was not able to fund required leasing costs.
A new loan modification is being discussed. The property's performance
has been impacted by declines in both the office and hotel components.
As of September 2010 NOI DSCR was 1.04X. The most recent
appraisal (May 2010) valued the property at $227.3 million.
The other specially serviced loans are secured by a mix of properties
types. The master servicer has recognized appraisal reductions
totaling $139.2 million for twenty of the specially serviced
loans. Moody's has estimated an aggregate $273.7
million loss (36% expected loss on average) for the specially serviced
loans.
Moody's has assumed a high default probability for 21 poorly performing
loans representing 13% of the pool and has estimated an aggregate
$96.5 million loss (15% expected loss based on a
36% probability default) from these troubled loans.
Based on the most recent remittance statement, Classes E-S
through NR have experienced cumulative interest shortfalls totaling $20.4
million. Moody's anticipates that the pool will continue to experience
interest shortfalls because of the high exposure to specially serviced
loans. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate entitlement
reductions (ASERs) and extraordinary trust expenses.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 88% and 68% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 125% compared to 124% at Moody's prior
review. Moody's net cash flow reflects a weighted average
haircut of 11% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.3X and 0.84X, respectively,
compared to 1.39X and 0.9X 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.
The loan with a credit estimate is the Center West Loan ($90.0
million - 1.7% of the pool), which is secured
by a 345,000 square foot office property located in Los Angeles,
California. The property was 71% leased as of September
2010 compared to 73% at last review. Performance has been
stable. Moody's current credit estimate and stressed DSCR are Baa3
and 1.28X, respectively, the same as at last review.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the Coconut Point Loan ($230.0
million - 4.4% of the pool), which is secured
by a 835,000 square foot retail center located near Fort Meyers
in Estero, Florida. The property was 96% leased as
of September 2010 compared to 99% at last review. Performance
has been stable. Moody's LTV and stressed DSCR are 135%
and 0.72X, respectively, essentially the same as at
last review.
The second largest loan is the 599 Lexington Loan ($225.0
million - 4.3% of the pool), which is secured
by a 1.0 million square foot office building located in Midtown
Manhattan in New York City. The loan represents a 30% pari-passu
interest in a $750 million loan. The property was 96%
leased as of June 2010 compared to 95% at last review. The
largest tenant is Shearman & Sterling LLP, which leases 46%
of the NRA through 2022. Performance has improved since last review
due to higher revenues. Moody's LTV and stressed DSCR are 129%
and 0.71X, respectively, compared to 136% and
0.68X at last review.
The third largest loan is the Skyline Loan ($203.4 million
- 3.9% of the pool), which is secured by eight
office properties located in Falls Church, Virginia. The
loan represents a 30% pari-passu interest in a $678
million loan. The properties were 94% leased as of June
2010 compared to 95% at last review and 97% at securitization.
Performance has improved since last review due to higher revenues.
The loan sponsor is Vornado Realty Trust. Moody's LTV and stressed
DSCR are 124% and 0.79X, respectively, compared
to 132% and 0.76X 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 purpose of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify 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
Dariusz Surmacz
Asst Vice President - 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 Downgrades 10 and Affirms 25 CMBS Classes of JPMC 2007-LDP10
