Approximately $1.58 Billion of Structured Securities Affected
New York, December 10, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of 12 classes
and affirmed ten classes of J.P. Morgan Chase Commercial
Mortgage Securities Corp., Commercial Mortgage Pass-Through
Certificates, Series 2004-CIBC10 as follows:
Cl. A-3, Affirmed at Aaa (sf); previously on
Dec 7, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Dec 7, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-5, Affirmed at Aaa (sf); previously on
Dec 7, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-6, Affirmed at Aaa (sf); previously on
Dec 7, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Dec 7, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Downgraded to Aa1 (sf); previously on
Oct 7, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to A2 (sf); previously on Oct 7,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa1 (sf); previously on Oct 7,
2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Baa2 (sf); previously on Oct 7,
2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Baa3 (sf); previously on Oct 7,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to Ba3 (sf); previously on Oct 7,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to Caa3 (sf); previously on Oct 7,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Ca (sf); previously on Oct 7,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to C (sf); previously on Oct 7,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to C (sf); previously on Oct 7,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to C (sf); previously on Oct 7,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Oct 7,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Cl. N, Affirmed at C (sf); previously on Nov 19,
2009 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Nov 19,
2009 Downgraded to C (sf)
Cl. Q, Affirmed at C (sf); previously on Nov 19,
2009 Downgraded to C (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Dec 7, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
Dec 7, 2004 Definitive Rating Assigned Aaa (sf)
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. 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 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 the existing rating.
On October 7, 2010, Moody's placed 12 classes on review
for possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
8.1% of the current balance. At last review,
Moody's cumulative base expected loss was 3.9%.
Moody's stressed scenario loss is 15.9% 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 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 this ratings was "CMBS: Moody's
Approach to Rating Conduit Transactions" published in September 2000.
In addition to methodologies and research, 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 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 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 underlying rating level,
is incorporated for loans with similar credit estimates 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 November 17, 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 ratings.
DEAL PERFORMANCE
As of the November 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 18% to $1.60
billion from $1.96 billion at securitization. The
Certificates are collateralized by 190 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten loans representing 23% of the pool. Twenty five loans,
representing 18% of the pool, have defeased and are collateralized
with U.S. Government securities, compared to 19%
at last review.
Thirty-three loans, representing 13% 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
realized loss of $296,565 (1% loss severity on average).
Thirteen loans, representing 13% of the pool, are currently
in special servicing. The largest specially serviced loan is the
Continental Plaza Loan ($88.0 million - 5.5%
of the pool). The loan is secured by three office buildings and
a single story retail center totaling 640,000 square feet (SF) and
is located in Hackensack, New Jersey. The property was transferred
to special servicing in April 2009 due to payment default. The
master servicer recognized a $25.5 million appraisal reduction
for the loan in June 2010.
The remaining 12 specially serviced loans are represented by a mix of
property types. The master servicer has recognized an aggregate
$32.5 million appraisal reduction for 10 of the remaining
specially serviced loans. Moody's has estimated an aggregate
$91.4 million loss (42% expected loss on average)
for all of the specially serviced loans.
Moody's has assumed a high default probability for 11 poorly performing
loans representing 4% of the pool and has estimated an aggregate
$14.1 million loss (20% 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.
Moody's was provided with full year 2009 operating results for 88%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 93%, essentially the
same as at Moody's prior review. Moody's net cash flow
reflects a weighted average haircut of 11.2% to the most
recently available net operating income. Moody's value reflects
a weighted average capitalization rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.31X and 1.14X, respectively,
compared to 1.35X and 1.14X 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 61
compared to 68 at Moody's prior review.
The top three performing conduit loans represent 7% of the pool
balance. The largest loan is The Walden Pond at East Moriches Loan
($35.8 million -- 2.2% of the pool),
which is secured by a 324 unit multifamily property located in East Moriches,
New York. The property was 96% leased as of December 2009
compared to 93% at last review. Moody's LTV and stressed
DSCR are 110% and 0.83X, respectively, compared
to 103% and 0.89X at last review.
The second largest loan is the Sherman Tower Center Loan ($35.6
million -- 2.2% of the pool), which is secured
by a 285,000 SF anchored retailing shopping center located in Sherman,
Texas. The center is part of a larger 678,000 SF retail center.
The center is anchored by Target, Home Depot and Wal-Mart.
The property was 100% leased as of June 2010, the same as
at last review. Moody's LTV and stressed DSCR are 104% and
0.94X, respectively, compared to 99% and 0.98X
at last review.
The third largest loan is the Fountain Square Loan ($34.3
million -- 2.1% of the pool), which is secured
by three office buildings, totaling 242,100 SF, located
in Boca Raton, Florida. The properties were 82% leased
as of June 2010, the same as at last review. Moody's LTV
and stressed DSCR is 113% and 0.86X, respectively,
compared to 110% and 0.88X 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.
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
Lacey Morgan
Associate Analyst
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
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Downgrades 12 and Affirms Ten CMBS Classes of JPMCC 2004-CIBC10
