Approximately $772.2 Million of Structured Securities Affected
New York, February 02, 2012 -- Moody's Investors Service (Moody's) upgraded the ratings of two pooled
classes and three non-pooled or rake classes and affirmed nine
classes of J.P. Morgan Chase Commercial Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates,
Series 2003-C1 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Mar 28, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Mar 28, 2003 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Sep 2,
2010 Confirmed at Aaa (sf)
Cl. C, Upgraded to Aaa (sf); previously on Sep 2,
2010 Downgraded to Aa1 (sf)
Cl. D, Upgraded to Aa3 (sf); previously on Sep 2,
2010 Downgraded to A1 (sf)
Cl. E, Affirmed at Baa1 (sf); previously on Sep 2,
2010 Downgraded to Baa1 (sf)
Cl. F, Affirmed at B1 (sf); previously on May 4,
2011 Downgraded to B1 (sf)
Cl. G, Affirmed at Caa1 (sf); previously on Sep 2,
2010 Downgraded to Caa1 (sf)
Cl. H, Affirmed at Ca (sf); previously on Sep 2,
2010 Downgraded to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Sep 2,
2010 Downgraded to C (sf)
Cl. CM-1, Upgraded to A1 (sf); previously on
May 4, 2011 Upgraded to A2 (sf)
Cl. CM-2, Upgraded to A2 (sf); previously on
May 4, 2011 Upgraded to A3 (sf)
Cl. CM-3, Upgraded to A3 (sf); previously on
May 4, 2011 Upgraded to Baa1 (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Mar 28, 2003 Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The upgrades of the pooled classes are due to overall improved pool financial
performance and increased credit support due to loan payoffs and amortization.The
upgrades for the three non-pooled, or rake classes,
which are associated with the Concord Mills Mall Loan, are due to
improved loan performance since last review as a result of an increase
in property cash flow and loan amortization.
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
2.7% of the current balance. At last review,
Moody's cumulative base expected loss was 4.4%.
Moody's provides a current list of base 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.
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. From
time to time, Moody's may, if warranted, change these
expectations. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker than
Moody's had anticipated when the related securities ratings were issued.
Even so, a deviation from the expected range will not necessarily
result in a rating action nor does performance within expectations preclude
such actions. The decision to take (or not take) a rating action
is dependent on an assessment of a range of factors including, but
not exclusively, the performance metrics.
Primary sources of assumption uncertainty are the current sluggish macroeconomic
environment and performance in the commercial real estate property markets.
While commercial real estate property markets are gaining momentum,
a consistent upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are continuing
to show signs of recovery through the first half of 2011, while
recovery in the non-core office and retail sectors are tied to
pace of recovery of the broader economy. Core office markets are
showing signs of recovery through lending and leasing activity.
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 as the most likely scenario through
2012, amidst ongoing individual, corporate and governmental
deleveraging, persistent unemployment, and government budget
considerations, however the downside risks to the outlook have risen
since last quarter.
The principal methodology used in this rating was "Moody's Approach
to Rating Fusion U.S. CMBS Transactions" published
in April 2005. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody's noted that on November 22, 2011, it released
a Request for Comment, in which the rating agency has requested
market feedback on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on JPMCC 2003-C1 X1 may be negatively affected.
Please refer to Moody's request for Comment, titled "Proposal
Changing the Global Rating Methodology for Structured Finance Interest-Only
Securities," for further details regarding the implications
of the proposed methodology change on Moody's rating. Please
see the Credit Policy page on www.moodys.com for a copy
of this methodology and the Request for Comment.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 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.
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 23
compared to 27 at Moody's prior full 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 May 4, 2011.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last rating action and the ratings history.
DEAL PERFORMANCE
As of the January 12, 2012 distribution date, the aggregate
certificate balance of the pooled classes has decreased by 28%
to $772 million from $1.07 billion at securitization.
The Certificates are collateralized by 85 mortgage loans ranging in size
from less than 1% to 18% of the pool, with the top
ten non-defeased or non-specially serviced loans representing
45% of the pool. The pool includes two loans, representing
22% of the pool, with a credit estimate. Twenty-seven
loans, representing 26% of the pool, have defeased
and are secured by U.S. Government securities.
Ten loans, representing 8% 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.
Eight loans have been liquidated from the pool, resulting in a realized
loss of $63.0 million (70% loss severity overall).
Approximately 52% of this deal's aggregate realized loss is attributed
to the liquidation of the Crossroads Mall Loan. This loan was the
deal's second largest loan at securitization and resulted in a $33
million loss when it was disposed of in June 2010.
Currently two loans, representing 2% of the pool, are
in special servicing. Moody's has estimated an aggregate $8.4
million loss (54% expected loss, on average) for the specially
serviced loans. The largest specially serviced loan is the 200-220
West Germantown Pike Loan ($14.3 million --
1.8% of the pool), which is secured by two office
buildings totaling 115,000 square feet (SF) located in Plymouth
Meeting, PA. Loan performance deteriorated after a tenant
occupying 40% of the net rentable area (NRA) vacated upon its October
2010 lease expiration. The loan is currently real estate owned
(REO). Moody's has estimated an aggregate $8.4 million
loss (54% expected loss based on a 98% probability of default)
for the specially serviced loans.
Loans representing approximately 95% of the pool mature within
the next 15 months. Moody's expects most of these loans will be
able to refinance at or prior to loan maturity. However,
Moody's has assumed a high default probability for five poorly performing
loans representing 4.5% of the pool and has estimated an
aggregate $5.5 million loss (16% expected loss based
on a 32% probability default) from these troubled loans.
Moody's was provided with full year 2010 and full or partial year 2011
operating results for 94% and 94% of the pool, respectively.
Excluding specially serviced, troubled and defeased loans,
Moody's weighted average conduit LTV is 76%, the same as
at last review. Moody's net cash flow reflects a weighted average
haircut of 13% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of 9.5%.
Excluding specially serviced, troubled and defeased loans,
Moody's actual and stressed conduit DSCR are 1.51X and 1.47X,
respectively, compared to 1.56X and 1.48X 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 largest loan with a credit estimate is the Concord Mills Loan ($139.1
million -- 18.0% of the pool), which
is secured by a 1.26 million SF regional mall located in Concord,
NC. In addition to the pooled debt, there is a $18.3
million non-pooled, or rake component, which supports
Classes CM1, CM2 and CM3. The mall is a top shopping,
entertainment and tourist destination in North Carolina with over 17 million
visitors annually. In-line occupancy has improved from 89%
at last review to 91% as of September 2011, with total mall
occupancy also increasing from 94% to 95% since last review.
In-line sales have increased over the last three years from $343
in 2009 to $378 in 2010 and $388 in 2011. Simon Property
Group is the sponsor for the loan. Moody's credit estimate and
stressed DSCR are Aa3 and 1.98X, respectively, as compared
to A1 and 1.83X at last review.
The second loan with a credit estimate is the Bishops Gate Loan ($32.5
million -- 4.2% of the pool), which
is secured by two office buildings totaling 484 thousand SF located in
Mt. Laurel, NJ. The collateral is 100% leased
to PHH Mortgage, a subsidiary of PHH Corporation (Moody's senior
unsecured rating Ba2; negative outlook), through December 2022.
The loan has an anticipated repayment date (ARD) of January 2013 and has
amortized 15% since securitization. Moody's credit estimate
and stressed DSCR are A3 and 2.00X, respectively, compared
to A3 and 2.04X at last review.
The three largest conduit loans represent 11.5% of the outstanding
pool balance. The largest loan is the Crossways/Newington Portfolio
($38.6 million -- 5.0% of the
pool), which consists of two cross-collateralized loans secured
by two industrial/office flex buildings totaling 844,000 SF.
Both properties are located in Virginia. As of September 2011,
the two properties were 86% leased, compared to 87%
at last review. The loan has amortized 12% since securitization.
Moody's LTV and stressed DSCR are 64% and 1.66X, respectively,
compared to 62% and 1.66X at last review.
The second largest loan is the Somerset Shoppes Loan ($26.2
million -- 3.4% of the pool), which
is secured by a 189,000 SF community shopping center located in
Boca Raton, FL. Major tenants include T.J.
Maxx, Michaels and Loehmann's. The center was 93%
leased as of January 2012, the same as at last review. Property
performance has been stable since securitization with improvement in 2010
over 2009. At last review, Moody's value reflected the risk
tied to high tenant turnover during 2011 and 2012. However,
many of these tenants have renewed their leases. Moody's LTV and
stressed DSCR are 92% and 1.15X, respectively,
compared to 105% and 1.01X at last review.
The third largest loan is the Prince Georges Metro Center IV Loan ($23.8
million -- 3.1% of the pool), which
is secured by a 178,000 SF class A office building located in near
Washington, DC in Hyattsville, MD. The property was
constructed in 2002 as a build-to-suit for the US Department
of Health and Human Services (HHS) which occupies 100% of the building
under a 10-year lease expiring in December 2012. The loan
has amortized 12% since securitization and matures in March 2013.
Moody's believes this loan will be difficult to refinance if HHS does
not renew or a replacement tenant is not found prior to loan maturity.
Moody's analysis utilized a lit/dark analysis to account for this single
tenant exposure. Moody's LTV and stressed DSCR are 103%
and 0.99X, respectively, compared to 108% and
1.01X at last review.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. Further information on the EU endorsement status and on the
Moody's office that has issued a particular Credit Rating is available
on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the 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 did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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 the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Andree Subervi
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Michael M. Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Upgrades Five and Affirms Nine CMBS Classes of JPMCC 2003-C1
