Approximately $590.7 Million of Structured Securities Affected
New York, September 02, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of five classes
and affirmed nine classes of J.P. Morgan Chase Commercial
Mortgage Securities Corp., Series 2002-C1.
Moody's rating action is as follows:
US$174M Cl. A-2 Certificate, Affirmed at Aaa
(sf); previously on Aug 14, 2002 Definitive Rating Assigned
US$410.948M Cl. A-3 Certificate, Affirmed
at Aaa (sf); previously on Aug 14, 2002 Definitive Rating Assigned
Cl. X-1 Certificate, Affirmed at Aaa (sf); previously
on Aug 14, 2002 Definitive Rating Assigned Aaa (sf)
US$30.624M Cl. B Certificate, Affirmed at Aaa
(sf); previously on Mar 3, 2006 Upgraded to Aaa (sf)
US$34.708M Cl. C Certificate, Affirmed at Aa1
(sf); previously on Jul 9, 2007 Upgraded to Aa1 (sf)
US$10.208M Cl. D Certificate, Affirmed at Aa2
(sf); previously on Sep 6, 2007 Upgraded to Aa2 (sf)
US$24.5M Cl. E Certificate, Affirmed at A2
(sf); previously on Sep 6, 2007 Upgraded to A2 (sf)
US$12.25M Cl. F Certificate, Affirmed at Baa1
(sf); previously on Sep 6, 2007 Upgraded to Baa1 (sf)
US$16.333M Cl. G Certificate, Affirmed at Ba1
(sf); previously on Aug 14, 2002 Definitive Rating Assigned
US$12.249M Cl. H Certificate, Downgraded to
B1 (sf); previously on Aug 14, 2002 Definitive Rating Assigned
US$6.125M Cl. J Certificate, Downgraded to
Caa1 (sf); previously on Aug 14, 2002 Definitive Rating Assigned
US$4.084M Cl. K Certificate, Downgraded to
Caa3 (sf); previously on Aug 14, 2002 Definitive Rating Assigned
US$8.166M Cl. L Certificate, Downgraded to
Ca (sf); previously on Aug 14, 2002 Definitive Rating Assigned
US$4.083M Cl. M Certificate, Downgraded to
C (sf); previously on Aug 14, 2002 Definitive Rating Assigned
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced loans and
refinance risk associated with loans approaching maturity in an adverse
environment. Eighty-two loans, representing 74%
of the pool, mature within the next 24 months. Fourteen of
these loans, representing 13% of the pool, have a Moody's
stressed debt service coverage (DSCR) less than 1.00X. The
affirmations are due to key parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed 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 ratings.
Moody's rating action reflects a cumulative base expected loss of
4.8% of the current balance. At last review,
Moody's cumulative base expected loss was 2.1%.
Moody's stressed scenario loss is 8.1% 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
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 pool 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 rating J.P. Morgan Chase,
Series 2002-C1 is "CMBS: Moody's Approach to Conduit Transactions"
rating methodology published in September 2000. Other methodologies
and factors that may have been considered in the process of rating this
issuer can also be found on Moody's website.
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 (sf) 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 (sf) 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 (sf) and B2 (sf), 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.
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 September 6, 2007.
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.
As of the August 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 26% to $600.2
million from $816.6 million at securitization. The
Certificates are collateralized by 104 mortgage loans ranging in size
from less than 1% to 7% of the pool, with the top
ten non-defeased loans representing 33% of the pool.
Thirteen loans, representing 19% of the pool, have
defeased and are collateralized with U.S. Government securities.
Defeasance at last review represented 15% of the pool.
Thirty-three 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) 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
Seven loans have been liquidated from the pool, resulting in an
aggregate realized loss of $8.9 million (35% loss
severity). Three loans, representing 2.5% of
the pool, are currently in special servicing. The largest
specially serviced loan is the Baymeadows Loan ($8.3 million
-- 1.4% of the pool), which is secured by a 264-unit
multifamily property located in Ridgeland, Mississippi. The
loan was transferred to special servicing last month for imminent default.
As of March 2010 property was 75% leased.
The remaining two specially serviced loans are secured by two office properties
located in Denver, Colorado. The loans are 90+ days
delinquent. Moody's has estimated an aggregate $5.5
million loss (36% expected loss on average) for the specially serviced
Moody's has assumed a high default probability for 11 poorly performing
loans that mature within the next 24 months. These loans represent
10% of the pool. Moody's has estimated a $16.2
million loss (26% expected loss based on a 60% 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 and partial year
2010 operating results for 97% and 76% of the pool,
respectively. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 75% compared to 83%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 12.4% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.44X and 1.48X, respectively,
compared to 1.37X and 1.34X 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 39
compared to 48 at Moody's prior review.
The top three conduit loans represent 14% of the pool. The
largest loan is the Aramark Tower Loan ($42.7 million --
7.1%), which is secured by a 32-story,
634,000 square foot, Class A office building located in Center
City Philadelphia, Pennsylvania. The property serves as the
world headquarters for Aramark Services, Inc. which leases
57% of the net rentable are (NRA) through September 2018.
The second largest tenant is the Philadelphia Authority for Industrial
Development (28% of the NRA; lease expiration August 2016).
As of December 2009 the property was 94% leased compared to 99%
at last review. Performance has been stable. Moody's LTV
and stressed DSCR are 57% and 1.91X, respectively,
compared to 60% and 1.88X at last review.
The second largest loan is the 4th & Battery Office Loan ($22.9
million - 3.8%), which is secured by a 201,000
square foot office building located in downtown Seattle, Washington.
As of August 2010 property was 97% leased compared to 95%
at last review. The largest tenants are PopCap Games Inc.
(32% of the NRA, lease expiration December 2010 and July
2018) and Trubion Pharmaceuticals Inc. (25% of the NRA,
lease expiration April 2013). Performance has been stable.
Moody's LTV and stressed DSCR are 84% and 1.29X, respectively,
compared to 84% and 1.28X at last review.
The third largest loan is the 300 West Vine Loan ($21.6
million - 3.3%), which is secured by a 23-story,
Class A, 388,000 square foot office building located in Lexington,
Kentucky. As of March 2010 the property was 93% leased compared
to 96% at last review. The largest tenant is Central Bank
& Trust Co. (32% of the NRA, lease expiration
October 2022). Performance has improved due to higher revenues.
Moody's LTV and stressed DSCR are 86% and 1.26X, respectively,
compared to 96% and 1.13X at last review.
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
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
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.
Moody's Investors Service adopts all necessary measures so that the information
it uses in assigning a credit rating is of sufficient quality and from
reliable sources; however, Moody's Investors Service does not
and cannot in every instance independently verify, audit 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.
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Downgrades Five and Affirms Nine CMBS Classes of JPMCC 2002-C1
250 Greenwich Street
New York, NY 10007