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Rating Action:

Moody's Upgrades Four, Affirms Nine, and Downgrades One Class of JPMCC 2004-C2

Global Credit Research - 01 May 2014

Approximately $106 Million of Structured Securities Affected

New York, May 01, 2014 -- Moody's Investors Service (Moody's) has upgraded the ratings of four classes, affirmed nine classes, and downgraded one class in J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2004-C2 as follows:

Cl. B, Upgraded to Aaa (sf); previously on Jun 20, 2013 Affirmed Aa2 (sf)

Cl. C, Upgraded to Aa1 (sf); previously on Jun 20, 2013 Affirmed Aa3 (sf)

Cl. D, Upgraded to A1 (sf); previously on Jun 20, 2013 Affirmed A3 (sf)

Cl. E, Upgraded to A2 (sf); previously on Jun 20, 2013 Affirmed Baa1 (sf)

Cl. F, Affirmed Ba1 (sf); previously on Jun 20, 2013 Affirmed Ba1 (sf)

Cl. G, Affirmed Ba3 (sf); previously on Jun 20, 2013 Affirmed Ba3 (sf)

Cl. H, Affirmed B3 (sf); previously on Jun 20, 2013 Affirmed B3 (sf)

Cl. J, Affirmed Caa2 (sf); previously on Jun 20, 2013 Affirmed Caa2 (sf)

Cl. K, Affirmed Caa3 (sf); previously on Jun 20, 2013 Affirmed Caa3 (sf)

Cl. L, Affirmed Ca (sf); previously on Jun 20, 2013 Affirmed Ca (sf)

Cl. M, Affirmed C (sf); previously on Jun 20, 2013 Affirmed C (sf)

Cl. N, Affirmed C (sf); previously on Jun 20, 2013 Affirmed C (sf)

Cl. P, Affirmed C (sf); previously on Jun 20, 2013 Affirmed C (sf)

Cl. X, Downgraded to B3 (sf); previously on Jun 20, 2013 Affirmed Ba3 (sf)

RATINGS RATIONALE

The ratings on the P&I classes were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 86% since Moody's last review. Tranche D was upgraded despite current interest shortfalls because Moody's anticipates that the temporary interest shortfall caused by the payoff of a $41.5 million loan will be cured by the end of the next month. Tranche E was upgraded similarly, with Moody's anticipating temporary interest shortfalls to be cured within the next two months.

The ratings on the nine below investment grade P&I classes were affirmed because the ratings are consistent with Moody's expected loss.

The rating on the IO Class (Class X) was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes.

Moody's rating action reflects a base expected loss of 8.8% of the current balance compared to 4.0% at Moody's prior review. Moody's base expected loss plus realized losses is now 2.0% of the original pooled balance compared to 4.1% at the prior review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan paydowns or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses 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 Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan-level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on 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, Moody's merges the credit enhancement for loans with investment-grade credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the credit assessment level) for loans with similar credit assessments in the same transaction.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 10, compared to 15 at Moody's last review.

When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan 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. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations.

DEAL PERFORMANCE

As of the April 15, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 90% to $108 million from $1.1 billion at securitization. The Certificates are collateralized by 26 mortgage loans ranging in size from less than 1% to 17% of the pool, with the top ten loans (excluding defeasance) representing 73% of the pool. Three loans, representing 7% of the pool, have defeased and are secured by US Government securities.

Seven loans, representing 15% of the pool, are on the master servicer's watchlist. After the distribution date, two of the watchlisted loans went into special servicing. As a result, five loans (representing 10% 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.

Ten loans have been liquidated from the pool, resulting in an aggregate realized loss of $12.1 million (31% loss severity on average). Five loans, representing 19% of the pool, are in special servicing. After the distribution date, another three loans went into special servicing, resulting in eight loans (representing 35% of the pool) being in special servicing. The largest specially serviced loan is the Slidell Center Loan ($12 million -- 11% of the pool), which is secured by 139,000 squared feet (SF) of a 331,000 SF community retail center in Slidell, Louisiana. The property was 79% leased as of December 2013 compared to 82% as of December 2012. Moody's does not currently anticipate a loss on this loan.

The remaining seven specially serviced loans are secured by a mix of property types. Moody's estimates an aggregate $7.9 million loss for the specially serviced loans (51% expected loss on average).

Moody's has assumed a high default probability for one poorly-performing loans representing 2.7% of the pool and has estimated an minimal loss for this loan.

Moody's received full-year 2012 operating results for 95% of the pool and full or partial year 2013 operating results for 100%. Moody's weighted average conduit LTV is 72% compared to 86% at Moody's last review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.2%.

Moody's actual and stressed conduit DSCRs are 1.49X and 1.43X, respectively, compared to 1.41X and 1.25X at the 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 36% of the pool balance. The largest loan is the Eastlake Village Marketplace Loan ($19 million -- 17% of the pool), which is secured by a 77,000 SF retail center in Chula Vista, California, approximately fifteen miles southeast of the San Diego CBD. Major tenants include Office Depot, Prudential California Realty, and BevMo. Occupancy was 100% as of December 2013, the same as at last review. Moody's LTV and stressed DSCR are 58% and 1.72X, respectively, compared to 60% and 1.68X at the last review.

The second largest loan is the Employers Reinsurance Corporation II Loan ($17 million -- 16% of the pool). The loan is secured by a three-story Class B office building with a total net rentable area of 155,925 SF in Kansas City, Missouri. The property is fully leased by Swiss Re American Holding Corporation. Moody's LTV and stressed DSCR are 75% and 1.30X, respectively, compared to 76% and 1.28X at the last review.

The third largest loan is the Alta Decatur Shopping Center Loan ($4 million -- 4% of the pool). The loan is secured a shopping center in Las Vegas, Nevada. The property was 100% leased as of October 2013, with Las Cal Corporation, Walgreen Company, and McDonald's as its top tenants. Moody's LTV and stressed DSCR are 79% and 1.23X, respectively.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

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.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Stephanie Sun
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

Keith Banhazl
VP - Sr Credit Officer/Manager
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 Four, Affirms Nine, and Downgrades One Class of JPMCC 2004-C2
No Related Data.
© 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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