Approximately $2.02 Billion of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of 15 classes
and affirmed seven classes of J.P. Morgan Chase Commercial
Mortgage Corp., Commercial Mortgage Pass-Through Certificates,
Series 2006-CIBC15 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Jul 12, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Jul 12, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed at Aaa (sf); previously on
Jul 12, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Jul 12, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Jul 12, 2006 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Jul 12, 2006 Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
Jul 12, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Downgraded to A1 (sf); previously on
Nov 4, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-J, Downgraded to B1 (sf); previously on
Nov 4, 2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Caa1 (sf); previously on Nov 4,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Caa2 (sf); previously on Nov 4,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Ca (sf); previously on Nov 4,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to C (sf); previously on Nov 4,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to C (sf); previously on Nov 4,
2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to C (sf); previously on Nov 4,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to C (sf); previously on Nov 4,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to C (sf); previously on Nov 4,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to C (sf); previously on Nov 4,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to C (sf); previously on Nov 4,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Nov 4,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. N, Downgraded to C (sf); previously on Nov 4,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Cl. P, Downgraded to C (sf); previously on Nov 4,
2010 Ca (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 interest shortfalls.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, the Herfindahl Index (Herf) and Moody's stressed
DSCR, 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.
On November 4, 2010, Moody's placed 15 classes on review for
possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of 12.1%
of the current balance. At last review, Moody's cumulative
base expected loss was 7.5%. Moody's stressed scenario
loss is 23.1% 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 rating was "CMBS: Moody's
Approach to Rating Fusion Transactions" published in April 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 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 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 February 12, 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 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 November 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 4% to $2.03
billion from $2.12 billion at securitization. The
Certificates are collateralized by 121 mortgage loans ranging in size
from less than 1% to 14% of the pool, with the top
ten loans representing 43% of the pool. The pool contains
one loan, representing less than 1% of the pool, with
an investment grade credit estimate. At securitization, the
Southington Plaza Loan also had an investment grade credit estimate.
However, due to a decline in property performance and increased
leverage, this loan is now analyzed as part of the conduit pool.
Thirty-three loans, representing 17% 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. Moody's
has assumed a high default probability for 17 of the watchlisted loans
and has estimated a $39.3 million loss (20% expected
loss based on a 50% default probability) from these troubled loans.
One loan has been liquidated from the pool, resulting in a realized
loss of $14.4 million (98% loss severity).
The pool had not realized any losses at last review. Fifteen loans,
representing 19% of the pool, are currently in special servicing.
The largest specially serviced loan is the Midwest Retail Portfolio Loan
($80.4 million -- 4.0% of the pool),
which is secured by 13 cross-collateralized and cross-defaulted
retail properties. Twelve of the centers are located in Nebraska
and one in South Dakota. The properties range from 34,000
to 180,000 square feet and total 1.5 million square feet.
The loan was transferred to special servicing in August 2009 due to a
shortage of cash flow to cover operating expenses. The special
servicer is negotiating a loan modification with the borrower.
The second largest loan in special servicing is the FPG Portfolio I Loan
($79.2 million -- 3.9% of the pool),
which is secured by 12 industrial properties located in nine states.
The loan was transferred to special servicing July 2009 due to delinquency.
Portfolio performance has declined due to a decrease in rental revenue.
The third largest specially serviced loan is the Lightstone Portfolio
Loan ($66.9 million -- 3.3% of the pool),
which is secured by three retail properties located in Georgia,
Pennsylvania and Tennessee. The loan was transferred to special
servicing October 2008 due to delinquency. The master servicer
has recognized a $42.9 million appraisal reduction for this
loan.
The remaining specially serviced loans are secured by a mix of property
types and each represents less than 2% of the pool. The
master servicer has recognized an aggregate $73.4 million
appraisal reduction for seven of the remaining specially serviced loans.
Moody's estimates an aggregate loss of approximately $162.4
million (43% expected loss on average) for the specially serviced
loans.
Based on the most recent remittance statement, Classes G through
P have experienced cumulative interest shortfalls totaling $7 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 operating results for 81%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 104% compared to 103% at
securitization. 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 9.1%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.28X and 0.98X, respectively,
compared to 1.27X and 0.98X at securitization. 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 23
compared to 28 at Moody's prior review.
The loan with a credit estimate is the Waterford Square Loan ($13
million -- 0.6% of the pool), which is secured
by a 283,840 square foot retail center located in Waterford,
Connecticut. The center was 91% leased as of June 2010 compared
to 99% at securitization. Property performance has been
stable since securitization. Moody's credit estimate and stressed
DSCR are Baa3 and 1.22X, respectively, compared to
Baa3 and 1.30X at securitization.
The top three performing conduit loans represent 24% of the pool
balance. The largest loan is the Warner Building Loan ($292.7
million -- 14.4% of the pool), which is secured
by a 666,000 square foot Class A office building located in Washington,
D.C. The property was 99% leased as of June 2010,
essentially the same as at securitization. Property performance
has been impacted by increased expenses. Moody's LTV and stressed
DSCR are 122% and 0.75X, respectively, compared
to 110% and 0.88X at securitization.
The second largest loan is the Greenway Portfolio Loan ($112 million
-- 5.5% of the pool), which is secured by eight
office buildings located in Middleton, Wisconsin. The buildings
range from 26,000 to 260,000 square feet and total 913,000
square feet. The portfolio was 90% leased as of June 2010,
compared to 94% at securitization. Portfolio performance
has been stable since securitization. Moody's LTV and stressed
DSCR are 118% and 0.85X, respectively, compared
to 120% and 0.88X at securitization.
The third largest loan is the Factory Building Loan ($75.9
million -- 3.7% of the pool), which is secured
by a 1.0 million square foot industrial property located in Long
Island City, New York. The property was 86% leased
as of September 2010 compared to 74% at securitization.
Property performance is in-line with securitization. Moody's
LTV and stressed DSCR are 106% and 0.86X, respectively,
compared to 105% and 0.93X at securitization.
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
Christie Edwards
Associate 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 15 and Affirms Seven CMBS Classes of JPMCC 2006-CIBC15
