Approximately $157.6 Million of Structured Securities Affected
New York, March 20, 2014 -- Moody's Investors Service (Moody's) upgraded the ratings of two classes,
affirmed eight classes and downgraded one class of J.P.
Morgan Commercial Mortgage Finance Corp. Series 2003-CIBC7
as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Apr
11, 2013 Affirmed Aaa (sf)
Cl. B, Affirmed Aaa (sf); previously on Apr 11,
2013 Affirmed Aaa (sf)
Cl. C, Affirmed Aaa (sf); previously on Apr 11,
2013 Affirmed Aaa (sf)
Cl. D, Upgraded to Aa2 (sf); previously on Apr 11,
2013 Affirmed Aa3 (sf)
Cl. E, Upgraded to A2 (sf); previously on Apr 11,
2013 Affirmed A3 (sf)
Cl. F, Affirmed Ba1 (sf); previously on Apr 11,
2013 Affirmed Ba1 (sf)
Cl. G, Affirmed B1 (sf); previously on Apr 11,
2013 Downgraded to B1 (sf)
Cl. H, Affirmed Caa3 (sf); previously on Apr 11,
2013 Affirmed Caa3 (sf)
Cl. J, Affirmed C (sf); previously on Apr 11,
2013 Downgraded to C (sf)
Cl. K, Affirmed C (sf); previously on Apr 11,
2013 Affirmed C (sf)
Cl. X-1, Downgraded to B3 (sf); previously on
Apr 11, 2013 Affirmed Ba3 (sf)
RATINGS RATIONALE
The ratings on Classes D and E were upgraded based primarily on an increase
in credit support resulting from loan paydowns and amortization.
The deal has paid down 78% since Moody's last review.
The ratings on the classes A-1A, B, and C 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 ratings on the classes F through K were
affirmed because the ratings are consistent with Moody's expected
loss.
The rating of the IO Class, Class X-1, was downgraded
due to the decline in credit performance of its reference classes as a
result of principal paydowns of higher quality reference classes.
Moody's rating action reflects a base expected loss of 8.2%
of the current balance compared to 3.5% at Moody's last
review. Moody's base expected loss plus realized losses is now
4.4% of the original pooled balance compared to 5.0%
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://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 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 methodologies used in this rating were "Moody's Approach to Rating
Fusion U.S. CMBS Transactions" published in April 2005 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 16
compared to 36 at Moody's last 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 8.6 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.
DEAL PERFORMANCE
As of the March 12, 2014 payment date, the transaction's aggregate
certificate balance has decreased by approximately 89% to $157.6
million from $1.3 billion at securitization. The
Certificates are collateralized by 46 mortgage loans ranging in size from
less than 1% to 13% of the pool. The pool includes
one loan with an investment-grade credit assessment, representing
13% of the pool. Six loans, constituting 11%
of the pool, have defeased and are secured by U.S.
Government securities.
Seven loans, representing 27% of the pool, are on the
master servicer's watchlist. The watchlist includes loans that
meet certain portfolio review guidelines 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 impact performance.
Twenty-one loans have been liquidated from the pool, resulting
in an aggregate realized loss of $48.3 million (for an average
loss severity of 46%). Five loans, constituting 9%
of the pool, are currently in special servicing. The largest
specially serviced loan is the Foster Avenue Industrial Park loan ($4.4
million, 2.8% of the pool), which is secured
by 116,780 square foot industrial property located in Bensenville,
Illinois. The loan is in the foreclosure process. The servicer
has recognized a $1.4 million appraisal reduction for this
loan. The remaining four specially serviced loans are secured by
a mix of property type and three of them are already real estate owned
(REO). Moody's has estimated an aggregate $7.3 million
loss for the specially serviced loans.
Moody's received full year 2012 operating results for 97% of the
pool and partial year 2013 operating results for 34% of the pool.
Moody's weighted average conduit LTV is 68% compared to 70%
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 13% to the most recently available
net operating income (NOI). Moody's value reflects a weighted average
capitalization rate of 9.3%.
Moody's actual and stressed conduit DSCRs are 1.29X and 1.93X,
respectively, compared to 1.58X and 1.71X 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% stress rate the agency applied
to the loan balance.
The loan with a credit assessment is the Brown Noltemeyer Apartments Portfolio
($21.1 million -- 13.4% of the
pool), which is a portfolio of five cross-collateralized
loans secured by eight multifamily properties located in Louisville,
Kentucky. The properties are primarily of 1980s vintage.
The portfolio's performance is stable. The loans are fully
amortizing and have amortized 49% since securitization.
Moody's current credit assessment and stressed DSCR are Aa1 and 2.77X,
respectively, compared to Aa1 and 2.42X at last review.
The top three conduit loans represent 22% of the pool balance.
The largest loan is the Versailles and Dana Point Apartments Portfolio
Loan ($20.0 million -- 12.7% of the pool),
which is secured by two Class B multifamily properties, with a total
652 units, located in Dallas, Texas. As of September
2013 the properties were 93% leased compared to 92% in December
2012. Performance has slightly improved since last review.
The loan had passed its anticipated repayment date (ARD) in 2008 and was
transferred to special servicer in 2010, then returned to the master
servicer in March, 2011. The loan is current but still on
the servicer's watchlist. The actual DSCR is 1.12X
as of September 2013. Moody's LTV and stressed DSCR are 129%
and 0.75X, respectively, compared to 145% and
0.67X at last review.
The second largest conduit loan is the Crestpointe Corporate Center II
Loan ($8.3 million -- 5.3% of the pool),
which is secured by a 122,389 SF office property located in Columbia,
Maryland. The property was 82% leased as of September 2013
compared to 73% at the end of year 2012. The loan is on
the servicer's watchlist. Although, performance has declined
since last review due to lower revenues and higher expenses, it
is expected to improve due to recently signed new lease. The loan
is fully amortizing and has amortized 36% since securitization.
Moody's LTV and stressed DSCR are 67% and 1.54X, respectively,
compared to 50% and 2.05X at last review.
The third largest conduit loan is the Crawfordsville Square Loan ($6.6
million -- 4.2% of the pool), which is secured
by a 192,659 SF retail property located in Crawfordsville,
Indiana. The property was 89% leased as of December 2013
compared to 88% at the end of 2012. Performance has declined
since last review due to higher expenses. Moody's LTV and stressed
DSCR are 75% and 1.34X, respectively, compared
to 56% and 1.78X at 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.
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.
Dariusz Surmacz
Asst Vice President - 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 Two, Affirms Eight Classes and Downgrades One CMBS Class of JPMCC 2003-CIBC7
