Approximately $1.6 Billion of Structured Securities Affected
New York, February 16, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of two classes
and affirmed 16 classes of J.P. Morgan Chase Commercial
Mortgage Securities Corp Commercial Mortgage Pass-Through Certificates,
Series 2005-LDP3 as follows:
Cl. A-3, Affirmed at Aaa (sf); previously on
Sep 6, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-4A, Affirmed at Aaa (sf); previously on
Sep 6, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-4B, Affirmed at Aaa (sf); previously on
Sep 6, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed at Aaa (sf); previously on
Sep 6, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Sep 6, 2005 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Sep 6, 2005 Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
Sep 6, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at A2 (sf); previously on Mar
18, 2010 Downgraded to A2 (sf)
Cl. B, Affirmed at Baa1 (sf); previously on Mar 18,
2010 Downgraded to Baa1 (sf)
Cl. C, Affirmed at Baa2 (sf); previously on Mar 18,
2010 Downgraded to Baa2 (sf)
Cl. D, Affirmed at Baa3 (sf); previously on Mar 18,
2010 Downgraded to Baa3 (sf)
Cl. E, Affirmed at B1 (sf); previously on Mar 18,
2010 Downgraded to B1 (sf)
Cl. F, Affirmed at Caa1 (sf); previously on Mar 18,
2010 Downgraded to Caa1 (sf)
Cl. G, Downgraded to Ca (sf); previously on Mar 18,
2010 Downgraded to Caa3 (sf)
Cl. H, Downgraded to C (sf); previously on Mar 18,
2010 Downgraded to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Mar 18,
2010 Downgraded to C (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
their current ratings.
Moody's rating action reflects a cumulative base expected loss of
5.1% of the current balance. At last review,
Moody's cumulative base expected loss was 4.5%.
Moody's stressed scenario loss is 15.1% 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 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 JPMCC 2005-LDP3 was "CMBS:
Moody's Approach to Rating Conduit Transactions", published
on September 15, 2000.
The methodology is available on Moody's website at www.moodys.com.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
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 March 17, 2010. 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 January 31, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 19% to $1.6
billion from $2 billion at securitization. The Certificates
are collateralized by 208 mortgage loans ranging in size from less than
1% to 10% of the pool, with the top ten loans representing
39% of the pool. Two loans, representing 1%
of the pool, have defeased and are collateralized with U.S.
Government securities.
Fifty-nine loans, representing 19% 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.
Nine loans have been liquidated from the pool, resulting in an aggregate
realized loss of $41.3 million (48% loss severity
overall). The pool had experienced an aggregate $30.5
million loss at last review. Nineteen loans, representing
6% of the pool, are currently in special servicing.
Moody's has estimated an aggregate $44.4 million loss
(43% expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for 13 poorly performing
loans representing 5% of the pool and has estimated a $10.5
million aggregate loss (12% expected loss based on a 50%
probability default) 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 101% compared to 105%
at Moody's prior review. 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 9.2%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.42X and 1.01X, respectively,
compared to 1.42X and 0.99X 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 38
compared to 44 at Moody's prior review.
The top three performing conduit loans represent 21% of the pool
balance. The largest loan is the Shoppes at Buckland Hills Loan
($159.6 million -- 10%), which is secured
by the borrower's interest in a 985,000 square foot regional mall
located in Manchester, Connecticut, just east of Hartford.
The property was 90% leased as of March 2010, essentially
the same at last review. Moody's LTV and stressed DSCR are
100% and 0.89X, respectively, compared to 99%
and .09X from last review.
The second largest loan is the Universal Hotel Portfolio Loan ($100
million - 6%), which is secured by three full service
hotels located within the Universal Theme Park in Orlando, Florida.
This loan is interest only for its entire term and matures in July 2015.
The portfolio's performance has imporved since last review. Moody's
LTV and stressed DSCR are 99% and 1.17X, respectively,
compared to 111% and 1.05X at last review.
The third largest loan is the Four Seasons Boston Loan ($79.3
million - 5%), which is secured by a 273 room luxury
hotel in Boston, Massachusetts. At last review Moody's analysis
reflected a stressed cash flow due to our concerns about the hotel sector.
Property preformance has been stable since last review and Moody's current
NCF is higher than at last review. Based on STAR reports,
luxury hotels in Boston are expected to improve over the near term,
with RevPar anticipated to be up 10-13% in the coming year.
Moody's LTV and stressed DSCR are 117% and 0.92X,
respectively, compared to 147% and 0.74X 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 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
Brad Kamedulski
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 Two and Affirms 16 CMBS Classes of JPMCC 2005-LDP3
