Approximately $828 Million of Structured Securities Affected
New York, May 04, 2011 -- Moody's Investors Service (Moody's) upgraded the ratings of
three non-pooled or rake classes, affirmed eleven classes
and downgraded one class 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. X-1, 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, Affirmed at Aa1 (sf); previously on Sep 2,
2010 Downgraded to Aa1 (sf)
Cl. D, Affirmed at A1 (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, Downgraded to B1 (sf); previously on Sep 2,
2010 Downgraded to Ba1 (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. K, Affirmed at C (sf); previously on Sep 2,
2010 Downgraded to C (sf)
Cl. CM-1, Upgraded to A2 (sf); previously on
Jul 31, 2008 Upgraded to A3 (sf)
Cl. CM-2, Upgraded to A3 (sf); previously on
Jul 31, 2008 Upgraded to Baa1 (sf)
Cl. CM-3, Upgraded to Baa1 (sf); previously on
Jul 31, 2008 Upgraded to Baa2 (sf)
RATINGS RATIONALE
The upgrades are for three non-pooled, or rake classes,
associated with the Concord Mills Mall Loan. The mall's performance
has improved since last review due to an increase in property cash flow
and loan amortization. The upgrades are due to Concord Mills'
improved performance.
The downgrade is due to interest shortfalls, which have more than
doubled to $2.8 million since Moody's last review
in September 2010.
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 4.4%
of the current balance. The pool has experienced an additional
$6.5 million of realized losses since last review.
Moody's cumulative base expected loss plus the additional realized
losses since last review represents 5.3% of the current
balance. Moody's base expected loss at last review was 5.4%.
Moody's stressed scenario loss is 6.6% 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 methodology used in this rating was " Moody's Approach to
Rating Fusion U.S. CMBS Transactions", published in
April 2005.
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 27
compared to 30 at Moody's prior 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 September 2, 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 April 12, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by approximately 24%
to $828 million from $1.09 billion at securitization.
The Certificates are collateralized by 89 mortgage loans ranging in size
from less than 1% to 17% of the pool, with the top
ten loans representing 45% of the pool. The pool includes
two loans, representing 21.5% of the pool, with
a credit estimate. Twenty-five loans, representing
24% of the pool, have defeased and are secured by U.S.
Government securities.
Fourteen loans, representing 11% 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's (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.
Four loans have been liquidated from the pool resulting in $44
million of realized losses (80% average severity). As of
Q4 2010, this deal has underperformed the 2003 vintage CMBS deals
that Moody's rates. 2003 vintage CMBS deals have experienced
a 0.7% cumulative realized loss on average according to
Moody's US CMBS Loss Severities, Q4 2010 Update. The
aggregate $44 million realized loss represents approximately 4%
of the original deal balance. Approximately 77% 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.
Four loans, representing 5% of the pool, are in special
servicing. The largest specially serviced loan is the 200-220
West Germantown Pike Loan ($14 million -- 1.8%
of the pool), which is secured by two office buildings totaling
115,000 square feet (SF) located in Plymouth Meeting, Pennsylvania.
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). The servicer has
recognized a $7.6 million appraisal reduction for this loan.
The remaining three specially serviced loans are secured by a mix of retail
and office properties. The servicer has recognized a $23
million aggregate appraisal reduction for three of the four specially
serviced loans. Moody's has estimated a $23 million
loss (61% expected loss based on a 96% probability of default)
for all of the specially serviced loans.
Loans representing approximately 71% of the pool mature within
the next 24 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 6% of the pool and has estimated an aggregate
$7 million loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Based on the most recent remittance statement, Classes F through
NR have experienced cumulative interest shortfalls totaling $2.8
million. Interest shortfalls totaled $1.3 million
and were contained to Classes H through NR at last review. Moody's
anticipates that the pool will continue to experience interest shortfalls
due to the exposure to specially serviced and troubled loans. Interest
shortfalls are caused by special servicing fees, including workout
and liquidation fees, appraisal subordinate entitlement reductions
(ASERs) and extraordinary trust expenses. Interest shortfalls recently
increased compared to last review because the servicer has begun to recoup
previous advances on a specially serviced loan that it deemed non-recoverable.
Moody's was provided with full year 2009 and full or partial year 2010
operating results for 96% and 95% of the pool, respectively.
Excluding specially serviced, troubled and defeased loans and loans
with credit estimates, Moody's weighted average LTV is 76%
compared to 83% at Moody's 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 and loans
with credit estimates, Moody's actual and stressed DSCR are 1.56X
and 1.48X, respectively, compared to 1.46X and
1.38X 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 ($141
million -- 17.4% of the pool), which is secured
by a 1.25 million SF regional mall located in Concord, North
Carolina. In addition to the pooled debt, there is a $18.5
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 87%
at last review to 89% as of February 2011, while total mall
occupancy has remained stable at 94%. 2010 in-line
sales increased 10% from 2009 to $377 PSF. Simon
Property Group is the sponsor for the loan. Moody's credit
estimate and stressed DSCR are A1 and 1.83X, respectively,
as compared to A2 and 1.75X at last review.
The second loan with a credit estimate is the Bishops Gate Loan ($33
million -- 4.1% of the pool), which is secured
by two office buildings totaling 484,000 SF located in Mt.
Laurel, New Jersey. The collateral is 100% leased
to PHH Mortgage, a subsidiary of PHH Corporation (Moody's senior
unsecured rating Ba2; stable outlook), through December 2022.
The loan has an anticipated repayment date (ARD) of January 2013 and has
amortized 13% since securitization. Moody's credit estimate
and stressed DSCR are A3 and 2.04X, respectively, compared
to A3 and 2.05X at last review.
The three largest conduit loans represent 11% of the outstanding
pool balance. The largest loan is the Crossways/Newington Portfolio
($39 million - 4.8% of the pool), which
consists of two cross-collateralized loans secured by two industrial/office
flex buildings totaling 812,000 SF. Both properties are located
in Virginia. As of December 2010, the two properties were
87% leased, compared to 83% at last review.
The loan has amortized 11% since securitization. Moody's
LTV and stressed DSCR are 62% and 1.66X, respectively,
compared to 79% and 1.29X at last review.
The second largest loan is the Somerset Shoppes Loan ($27 million
- 3.3% of the pool), which is secured by a
187,000 SF community shopping center located in Boca Raton,
Florida. Major tenants include T.J. Maxx, Michaels
and Loehmann's. The center was 93% leased as of April 2011,
the same as at last review. The loan matures in October 2012 and
almost 40% of the leases expire in 2011-12. Moody's
value reflects the property's significant upcoming lease rollover.
Moody's LTV and stressed DSCR are 105% and 1.01X,
respectively, compared to 106% and .99X at last review.
The third largest loan is the Prince Georges Metro Center IV Loan ($24
million -- 3.0% of the pool), which is secured
by a 178,450 SF class A office building located in near Washington,
DC in Hyattsville, Maryland. The property was constructed
in 2002 as a build-to-suit office 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 11% 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 108%
and 1.01X, respectively, compared to 115% and
.99X 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 purposes 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
Peter Simon
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 Upgrades Three, Affirms Eleven and Downgrades One CMBS Class of JPMCC 2003-C1
