Approximately $80.5 Million of Structured Securities Affected
New York, March 30, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of two classes
and affirmed six classes of J.P. Morgan Commercial Mortgage
Finance Corp., Commercial Mortgage Pass-Through Certificates,
Series 2000-C10, as follows:
Cl. X, Affirmed at Aaa (sf); previously on Nov 8,
2000 Definitive Rating Assigned Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Dec 8,
2006 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Jul 17,
2008 Upgraded to Aaa (sf)
Cl. E, Affirmed at A2 (sf); previously on Jul 17,
2008 Upgraded to A2 (sf)
Cl. F, Affirmed at Baa1 (sf); previously on Jul 17,
2008 Upgraded to Baa1 (sf)
Cl. G, Downgraded to Caa3 (sf); previously on Jul 14,
2010 Downgraded to B3 (sf)
Cl. H, Downgraded to C (sf); previously on Jul 14,
2010 Downgraded to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Jul 14,
2010 Downgraded to C (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses resulting from anticipated
losses from specially serviced and troubled loans and an increase in interest
shortfalls.
The affirmations are due to key parameters, including Moody's
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
21.6% of the current balance. At last review,
Moody's cumulative base expected loss was 23.9%.
The decline in base expected loss is due to an increase of realized losses
for the pool to $36.7 million from $23.4 million
at last review. Moody's stressed scenario loss is 24.0%
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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011 The hotel and multifamily sectors are continuing to show
signs of recovery, while recovery in the office and retail sectors
will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodologies used in these ratings were: "CMBS:
Moody's Approach to Rating Conduit Transactions" published
in September 2000 and "CMBS: Moody's Approach to Rating Large Loan/Single
Borrower Transactions" published in July 2000.
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 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 credit estimate 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 8 compared
to 12 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs
the large loan/single borrower methodology. This methodology uses
the excel-based Large Loan Model v 8.0 and then reconciles
and weights the results from the two models in formulating a rating recommendation.
The large loan model derives credit enhancement levels based on an aggregation
of adjusted loan level proceeds derived from Moody's loan level
LTV ratios. Major adjustments to determining proceeds include leverage,
loan structure, property type, and sponsorship. These
aggregated proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and correlations.
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 July 14, 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 March 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 89% to $80.5
million from $740.1 million at securitization. The
Certificates are collateralized by 20 mortgage loans ranging in size from
less than 1% to 23% of the pool, with the top ten
loans representing 84% of the pool. The pool does not contain
any defeased loans or loans with investment-grade credit estimates.
Three loans, representing 5% 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.
Twenty-three loans have been liquidated from the pool, resulting
in a realized loss of $36.7 million (38% loss severity).
Nine loans, representing 66% of the pool, are currently
in special servicing. The largest loan in special servicing is
the Liberty Fair Mall Loan ($18.3 million -- 22.7%
of the pool), which is secured by a 435,402 square foot (SF)
mall located in Martinsville, Virginia. The loan was transferred
to the special servicer in December 2009 after the borrower indicated
it would not continue to cover the loan's debt service. Terms
for a deed-in-lieu of foreclosure could not be agreed upon
and the servicer is currently pursuing a foreclosure.
The second largest loan in special servicing is the Embassy Suites --
Chicago Loan ($13.6 million -- 16.8%
of the pool), which is secured by a 237 room full-service
hotel located in Deerfield, Illinois. The loan transferred
to the special servicer in October 2009 due to imminent monetary default
and became REO in December 2010 via a deed-lieu of foreclosure.
The remaining seven specially serviced loans are secured by a mix of property
types. The master servicer has recognized an aggregate $9.1
million appraisal reduction for five of the loans in special servicing.
Moody's has estimated an aggregate $15.4 million loss
(31% expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for two poorly performing
loans representing 4% of the pool and has estimated an aggregate
$1.5 million loss (43% expected loss based on a 68%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 89%
of the loans in the pool. Excluding troubled loans, Moody's
weighted average LTV is 59% compared to 71% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 12% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
10.5%.
Excluding troubled loans, Moody's actual and stressed DSCRs
are 1.26X and 2.01X, respectively, compared
to 1.38X and 1.96X 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.
The top three performing conduit loans represent 17% of the pool
balance. The largest loan is the Pavilion East Loan ($7.4
million -- 9.2% of the pool), which is secured
by a 171,157 SF anchored retail center located in Richardson,
Texas. Major tenants include Richardson Bike Mart (19% of
the net rentable area (NRA) -- lease expiration December 31,
2017), Sprouts Grocers (17% of the NR -- lease expiration
October 11, 2011) and TJ Maxx (17% of the NRA - lease
expiration October 11, 2011). Spouts Grocers and TJ Maxx
sublease their space from Albertson's, a supermarket retailer,
who vacated the property in 2006. The property was 93% leased
in December 2010, which is in-line with historical levels.
Property performance has been stable. Moody's LTV and stressed
DSCR are 51% and 2.13X, respectively, compared
to 54% and 2.00X at last review.
The second largest loan is the Pavilion East Loan ($3.2
million -- 4.0% of the pool), which is secured
by a 84,250 SF retail center located in Dallas, Texas.
The anchor tenant is 24 Hour Fitness (38% of the NRA -- lease
expiration September 2016). The property was 90% leased
in December 2010, which is in-line with historical levels.
Property performance has been stable. Moody's LTV and stressed
DSCR are 39% and 3.01X, respectively, compared
to 43% and 2.69X at last review.
The third largest loan is the Thomas Jefferson II Apartments Loan ($3.2
million -- 4.0% of the pool), which is secured
by a 23 unit multifamily property located in Hoboken, New Jersey.
The property has been fully leased for most of the past three years.
Property performance has been stable. Moody's LTV and stressed
DSCR are 59% and 1.74X.
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
Andrew Florio
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 Six CMBS Classes of JPMC 2000-C10
