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Rating Action:

Moody's Downgrades 11 and Affirms 14 CMBS Classes of JPMCC 2008-C2

Global Credit Research - 12 Aug 2010

Approximately $1.1 Billion of Structured Securities Affected

New York, August 12, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of 11 classes and affirmed 14 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2008-C2. The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from loans in special servicing and interest shortfalls. 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 (Herf), remaining within acceptable ranges.

On July 29, 2010 Moody's placed 11 classes of this transaction on review for possible downgrade. This action concludes our review of this transaction. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions.

As of the July 12, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 3% to $1.1 billion from $1.2 billion at securitization. The Certificates are collateralized by 78 mortgage loans ranging in size from less than 1% to 11% of the pool, with the top ten loans representing 54% of the pool. No loans have defeased. Two loans, representing 3% of the pool, have investment grade underlying ratings.

Twenty-four loans, representing 25% 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; formerly Commercial Mortgage Securities Association) 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.

One loan has been liquidated from the pool resulting in a $11.0 million realized loss (45% loss severity). Five loans, representing 21% of the pool, are currently in special servicing. The largest specially serviced loan is The Promenade Shops at Dos Lagos Loan ($125.2 million - 11.1%), which is secured by a 350,000 square foot entertainment lifestyle center located in Corona, California. The center was 95% leased at securitization, but has experienced significant tenant issues due to the downturn in the economy. The loan was transferred to special servicing in November 2008 due to imminent default and is now real estate owned (REO). The property was appraised at $169.7 million at securitization. A January 2010 appraisal valued the property at $28.5 million, leading the master servicer to recognize a $108.1 million appraisal reduction in May 2010.

The second largest specially serviced loan is the Westin Portfolio Loan ($104.0 million - 9.2%), which represents a pari passu interest in a $209.0 million first mortgage loan. The loan is secured by a 487-unit full service hotel located in Tucson, Arizona and a 412-unit full service hotel located in Hilton Head, South Carolina. The loan was transferred to special servicing in October 2008 due to imminent default and is now 90+ days delinquent. The properties were appraised at $303.8 million at securitization. A September 2009 appraisal valued the properties at $142.0 million. The master servicer recognized a $43.7 million appraisal reduction in August 2009.

The remaining specially serviced loans are secured by a retail center, self storage facility and an office property. Moody's has estimated an aggregate $157.3 million loss (66% expected loss on average) on the specially serviced loans. The losses for the two largest loans in special servicing are based on a discount to the most recent appraisals.

Moody's has assumed a high default probability for seven poorly performing loans, representing 4% of the pool, and has estimated an aggregate $12.5 million loss (25% expected loss based on a 50% probability default) from these troubled loans. Moody's rating action recognizes potential uncertainty around the timing and magnitude of loss from these troubled loans.

Based on the most recent remittance statement, Classes A-J through NR have experienced cumulative interest shortfalls totaling $9.9 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 year-end or partial year 2009 operating statements for 91% of the conduit pool. Moody's weighted average LTV for the conduit pool is 117% compared to 139 % at last review.

Moody's conduit actual and stressed DSCRs are 1.12X and 0.93X, respectively, compared to 1.04X and 0.86X 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 the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf score of 20 compared to 23 at last review.

The two loans with underlying ratings comprise 3% of the pool. The largest loan with an underlying rating is the Two Democracy Plaza Loan ($31.0 million - 2.7%), which is secured by a 273,000 square foot office building located in Bethesda, Maryland. The largest tenant is the National Institute of Health (a U.S. government-related tenant; Moody's senior unsecured rating Aaa - stable outlook), which leases 83% of the net rentable area (NRA) through October 2010 and September 2012. The property was 99% leased as of January 2010, compared to 98% last review. Moody's current underlying rating and stressed DSCR are A2 and 1.79X, respectively, the same as at last review.

The second largest loan with an underlying rating is the Lofts at New Roc Loan ($4.9 million - 0.4%), which is secured by a 98-unit cooperative multifamily property located in New Rochelle, New York. Moody's current underlying rating and stressed DSCR are Aaa and 2.56X, respectively, compared to Aaa and 2.53X at last review.

The top three performing conduit loans represent 17.3% of the pool. The largest loan is the Block at Orange Loan ($110.0 million - 9.7%), which represents a pari passu interest in a $220.0 million first mortgage loan. The loan is secured by 700,000 square foot retail entertainment center located in Orange, California. The property is anchored by an AMC Entertainment movie theater, Dave & Buster's, and Vans Skate Park. The property was 86% leased as of December 2009 compared to 83% at last review. Despite the increased occupancy, property performance has declined due to a decrease in rental income. Moody's LTV and stressed DSCR are 137% and 0.69X, respectively, compared to 135% and 0.68X at last review.

The second largest performing conduit loan is the Tupper Building Loan ($43.9 million - 3.9%), which is secured by a 97,000 square foot medical office property located in Boston, Massachusetts. The property is 100% leased to New England Medical Center Hospitals through September 2017. The loan is interest-only for its entire five year term and matures in October 2012. Although property performance has been stable since securitization, Moody's analysis reflects a stressed cash flow due to current market softness and our concerns about single tenant exposure. Moody's LTV and stressed DSCR are 136% and 0.80X, respectively, compared to 122% and 0.88X at last review.

The third largest conduit loan is the Station Casinos Headquarters Loan ($42.3 million -3.7%), which is secured by a 138,000 square foot office building located in Las Vegas, Nevada. The building is 100% leased to Station Casinos under a 20-year lease through October 2027 and serves at its corporate headquarters. The property is located adjacent to the Red Rocks Casino, which is owned and operated by Stations Casinos. Station Casinos Inc. filed for Chapter 11 bankruptcy protection on July 28, 2009. The current owners recently won formal approval from a federal bankruptcy judge to keep ownership of most of the company subject to confirmation of the reorganization plan court in late August. Per the servicer, the tenant is requesting rent concession. Moody's analysis reflects a stressed cash flow based on our expectation that the rental levels for the property will be reduced. Moody's LTV and stressed DSCR are 152% and 0.82X, respectively, compared to 146% and 0.85X at last review.

Moody's rating action is as follows:

US$2.090469M Cl. A-1 Certificate, Affirmed at Aaa (sf); previously on May 29, 2008 Definitive Rating Assigned Aaa (sf)

US$68.126000M Cl. A-2 Certificate, Affirmed at Aaa (sf); previously on May 29, 2008 Definitive Rating Assigned Aaa (sf)

US$105.514000M Cl. A-3 Certificate, Affirmed at Aaa (sf); previously on May 29, 2008 Definitive Rating Assigned Aaa (sf)

US$54.460000M Cl. A-SB Certificate, Affirmed at Aaa (sf); previously on May 29, 2008 Definitive Rating Assigned Aaa (sf)

US$354.554000M Cl. A-4 Certificate, Downgraded to A1 (sf); previously on Jul 29, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

US$145.000000M Cl. A-4FL Certificate, Downgraded to A1 (sf); previously on Jul 29, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

US$64.352885M Cl. A-1A Certificate, Downgraded to A1 (sf); previously on Jul 29, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

US$116.589000M Cl. A-M Certificate, Downgraded to B1 (sf); previously on Jul 29, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade

US$61.209000M Cl. A-J Certificate, Downgraded to Caa3 (sf); previously on Jul 29, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade

US$14.574000M Cl. B Certificate, Downgraded to C (sf); previously on Jul 29, 2010 B1 (sf) Placed Under Review for Possible Downgrade

US$14.574000M Cl. C Certificate, Downgraded to C (sf); previously on Jul 29, 2010 B3 (sf) Placed Under Review for Possible Downgrade

US$10.201000M Cl. D Certificate, Downgraded to C (sf); previously on Jul 29, 2010 Ca (sf) Placed Under Review for Possible Downgrade

US$10.202000M Cl. E Certificate, Downgraded to C (sf); previously on Jul 29, 2010 Ca (sf) Placed Under Review for Possible Downgrade

US$13.116000M Cl. F Certificate, Downgraded to C (sf); previously on Jul 29, 2010 Ca (sf) Placed Under Review for Possible Downgrade

US$11.659000M Cl. G Certificate, Downgraded to C (sf); previously on Jul 29, 2010 Ca (sf) Placed Under Review for Possible Downgrade

US$16.031000M Cl. H Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

US$14.574000M Cl. J Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

US$14.573000M Cl. K Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

US$8.745000M Cl. L Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

US$4.372000M Cl. M Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

US$5.829000M Cl. N Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

US$4.372000M Cl. P Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

US$2.915000M Cl. Q Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

US$4.372000M Cl. T Certificate, Affirmed at C (sf); previously on Jul 31, 2009 Downgraded to C (sf)

Cl. X Certificate, Affirmed at Aaa (sf); previously on May 29, 2008 Definitive Rating Assigned Aaa (sf)

Moody's monitors transactions on both a monthly basis through two sets of quantitative tools: MOST® (Moody's Surveillance Trends) and CMM on Trepp, and a periodic basis through a full review. Moody's prior review is summarized in a press release dated July 31, 2009.

The principal methodology used in rating and monitoring this transaction is "CMBS: Moody's Approach to Rating Fusion Transactions" dated April 19, 2005, and is available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. 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.

New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael M. Gerdes
Senior Vice President
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 Downgrades 11 and Affirms 14 CMBS Classes of JPMCC 2008-C2
No Related Data.
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