Approximately $30.4 Million of Structured Securities Affected
New York, February 24, 2017 -- Moody's Investors Service has upgraded the rating on one class,
downgraded the ratings on two classes and affirmed the ratings on three
classes in J.P. Morgan Chase Commercial Mortgage Securities
Corp., Commercial Pass-Through Certificates,
Series 2003-ML1 as follows:
Cl. J, Affirmed Aaa (sf); previously on May 26,
2016 Upgraded to Aaa (sf)
Cl. K, Upgraded to A1 (sf); previously on May 26,
2016 Upgraded to A3 (sf)
Cl. L, Affirmed B1 (sf); previously on May 26,
2016 Affirmed B1 (sf)
Cl. M, Downgraded to Ca (sf); previously on May 26,
2016 Downgraded to Caa1 (sf)
Cl. N, Affirmed C (sf); previously on May 26,
2016 Downgraded to C (sf)
Cl. X-1, Downgraded to Caa2 (sf); previously
on May 26, 2016 Affirmed Caa1 (sf)
RATINGS RATIONALE
The rating on Class K was upgraded based primarily on an increase in credit
support resulting from loan paydowns and amortization. The deal
has paid down 19% since Moody's last review.
The ratings on Classes J and L were affirmed because the transaction's
key metrics, including Moody's loan-to-value (LTV)
ratio, Moody's stressed debt service coverage ratio (DSCR) and the
transaction's Herfindahl Index (Herf), are within acceptable ranges.
The rating on Class N was affirmed because the rating is consistent with
Moody's expected loss.
The rating on Class M was downgraded due to realized and anticipated losses
from specially serviced loans that were higher than Moody's had previously
expected.
The rating on the IO Class (Cl. X-1) 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 26.4%
of the current balance, compared to 15.6% at Moody's
last review. Moody's base expected loss plus realized losses is
now 2.6% of the original pooled balance, compared
to 2.2% at the last review. Moody's provides
a current list of base expected losses for conduit and fusion CMBS transactions
on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:
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 can indicate that the collateral's
credit quality is stronger or weaker than Moody's had previously expected.
Factors that could lead to an upgrade of the ratings include a significant
amount of loan paydowns or amortization, an increase in the pool's
share of defeasance or an improvement in pool performance.
Factors that could lead to a downgrade of the ratings include a decline
in the performance of the pool, loan concentration, an increase
in realized and expected losses from specially serviced and troubled loans
or interest shortfalls.
METHODOLOGY UNDERLYING THE RATING ACTION
The principal methodology used in these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in October 2015. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Additionally, the methodology used in rating Cl. X-1
was "Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in October 2015. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
DESCRIPTION OF MODELS USED
Moody's analysis used the excel-based Large Loan Model.
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 and property type. 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 February 13, 2017 distribution date, the transaction's
aggregate certificate balance has decreased by 97% to $30.4
million from $929.8 million at securitization. The
certificates are collateralized by 11 mortgage loans ranging in size from
less than 1% to 32.8% of the pool. Five loans,
constituting 28% of the pool, have defeased and are secured
by US government securities.
One loan, constituting 7.8% of the pool, is
on the master servicer's watchlist. The watchlist includes
loans that meet certain portfolio review guidelines established as part
of the CRE Finance Council (CREFC) monthly reporting package. As
part of Moody's ongoing monitoring of a transaction, the agency
reviews the watchlist to assess which loans have material issues that
could affect performance.
Fifteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $16.4 million (for an average
loss severity of 27%). One loan, constituting 32.8%
of the pool, is currently in special servicing. The specially
serviced loan is the High Ridge Center loan ($10.0 million),
which is secured by a 261,000 square foot (SF) community shopping
center located behind the Regency Mall located in Racine, Wisconsin.
The loan transferred to special servicing in December 2012 and the trust
took title in February 2015. As of October 2016, the property
was 76% leased to two tenants. The two tenants are Home
Depot (lease expiration in April 2018) and Kmart (lease expiration in
January 2018).
Moody's received full year 2015 operating results for 100% of the
pool, and full or partial year 2016 operating results for 84%
of the pool. Moody's weighted average conduit LTV is 50%,
compared to 53% at Moody's last review. Moody's conduit
component excludes loans with structured credit assessments, defeased
and CTL loans, and specially serviced and troubled loans.
Moody's net cash flow (NCF) reflects a weighted average haircut of 16%
to the most recently available net operating income (NOI). Moody's
value reflects a weighted average capitalization rate of 9.5%.
Moody's actual and stressed conduit DSCRs are 1.40X and 2.11X,
respectively, compared to 1.37X and 2.17X at the last
review. Moody's actual DSCR is based on Moody's NCF
and the loan's actual debt service. Moody's stressed
DSCR is based on Moody's NCF and a 9.25% stress rate
the agency applied to the loan balance.
The top three conduit loans represent 35% of the pool balance.
The largest loan is the McLearen Shopping Center Loan ($6.3
million -- 20.8% of the pool), which is secured
by a 74,800 SF grocery anchored retail center located in Herndon,
Virginia, less than five miles from the Dulles International Airport.
The anchor, Food Lion, lease expires in September 2017.
As of September 2016, the property was 98% leased,
compared to 100% in December 2015. A portion of the original
loan was previously defeased. Moody's LTV and stressed DSCR are
57% and 1.87X, respectively, compared to 59%
and 1.78X at the last review.
The second largest loan is the Eastgate Village Apartments Loan ($2.4
million -- 7.8% of the pool), which
is secured by a 182-unit multifamily property located in Greenville,
North Carolina, less than 2.5 miles from East Carolina University.
The loan is on the watchlist due to a low debt-service-coverage-ratio.
The property serves students and its occupancy can fluctuate throughout
the year. As of September 2016, the property was 97%
leased compared to 75% in December 2015. The loan is fully
amortizing and has amortized 56% since securitization. Moody's
LTV and stressed DSCR are 40% and 2.40X, respectively,
compared to 46% and 2.08X at the last review.
The third largest loan is the Walgreens -- Hikes Point Loan
($1.9 million -- 6.4% of the pool),
which is secured by a single-tenant retail property located in
Louisville, Kentucky. Walgreen's lease expires in 2060;
however, the tenant has a termination option every five years starting
in 2020. The loan is fully amortizing and has amortized 56%
since securitization. Due to the single-tenant exposure,
Moody's value included a lit/dark analysis. Moody's LTV and stressed
DSCR are 53% and 1.93X, respectively, compared
to 54% and 1.89X at the last review.
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.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Rhett Terrell
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
Matthew Halpern
Asst Vice President - Analyst
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
