Approximately $2.0 Billion of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) downgraded the rating of one class
and affirmed seven classes of J.P. Morgan Chase Commercial
Mortgage Securities Trust 2007-LDP12 Commercial Mortgage Pass-Through
Certificates, Series 2007-LDP12 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Sep 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Sep 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Sep 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed at Aaa (sf); previously on
Sep 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Sep 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Sep 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Sep 10,
2007 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Downgraded to Aa3 (sf); previously on
Dec 9, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
RATINGS RATIONALE
The downgrade is 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 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 December 9, 2010 Moody's placed one class on review for
possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
9.3% of the current balance. At last review,
Moody's cumulative base expected loss was 1.7%.
Moody's stressed scenario loss is 28.3% 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 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 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 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 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 36
compared to 49 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 10, 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 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 1% to $2.48
billion from $2.50 billion at securitization. The
Certificates are collateralized by 165 mortgage loans ranging in size
from less than 1% to 7% of the pool, with the top
ten loans representing 34% of the pool. The pool contains
one loan, representing 1% of the pool, with an investment
grade credit estimate.
Forty-five loans, representing 33% 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
deal performance.
One loan has been liquidated from the pool, resulting in a realized
loss of $6.4 million (95% loss severity overall).
The pool had not experienced any realized losses at Moody's last review.
Thirteen loans, representing 7% of the pool, are currently
in special servicing. Moody's has estimated an aggregate
$84.5 million loss (49% expected loss on average)
for the specially serviced loans.
Moody's has assumed a high default probability for 24 poorly performing
loans representing 16% of the pool and has estimated a $79.8
million aggregate loss (20% expected loss based on a 40%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 100%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 121% compared to 112%
at securitization. Moody's net cash flow reflects a weighted
average haircut of 9% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.31X and 0.92X, respectively,
compared to 1.27X and 0.81X 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.
The loan with a credit estimate is the AT&T-Cleveland,
OH Loan ($29.2 million -- 1.2%),
which is secured by a 459,000 square feet office property located
in Cleveland, Ohio. The property is 100% leased to
AT&T on a NNN lease expiring in September 2019. The loan matures
in August 2012. Moody's current credit estimate and stressed DSCR
are Baa2 and 1.84X, respectively, compared to Baa2
and 1.92X at securitization.
The top three performing conduit loans represent 16% of the pool
balance. The largest loan is the Plaza El Segundo Loan ($162.0
million -- 6.5%), which is secured by a 382,000
square feet power/lifestyle community center located in El Segundo,
California. Anchor tenants include Whole Foods, Borders and
Cost Plus World Market. The property was 87% leased as of
July 2010 compared to 97% at securitization. The loan is
on the watchlist due to decline in DSCR. Moody's LTV and
stressed DSCR are 135% and 0.73X, respectively,
compared to 113% and 0.89X at last securitization.
The second largest loan is the Sawgrass Mills Loan ($150.0
million -- 6.0% of the pool), which is secured
by a 2.0 million square foot regional mall located in Sunrise,
Florida. This loan represents a pari-passu interest in an
$820.0 million first mortgage loan. Performance has
been stable. The loan is interest only throughout the term.
Moody's LTV and stressed DSCR are 114% and 0.81X,
respectively, compared to 115% and 0.74X at securitization.
The third largest loan is the 111 Massachusetts Avenue Loan ($90.0
million -- 3.6%), which is secured by a 255,000
square feet office property located in Washington, DC. The
property was 98% leased as of July 2010 to the GSA on leases expiring
in 2015 and 2016. Moody's LTV and stressed DSCR are 115%
and 0.85X, respectively, compared to 119% and
0.84X 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 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
Polina Margolina
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 One and Affirms Seven CMBS Classes of JPMCC 2007-LDP12
