Fitch Ratings has downgraded 13 and affirmed
nine classes of J.P. Morgan Chase Commercial Mortgage Securities Trust,
series 2008-C2. A detailed list of rating actions follows at the end of
this release.
KEY RATING DRIVERS
The downgrades reflect the expected losses after the sale of the largest asset in the pool, The Shops at Dos Lagos (12.4% of the pool).
The Shops at Dos Lagos, a $124 million real estate owned (REO) retail property, was sold July 23, 2013 for $30 million. Including advances, appraisal subordinate entitlement reductions (ASERs), fees and other unpaid amounts of approximately $41 million, the loan loss severity will be approximately 109% on the current loan balance.
Realized losses to the trust will reflect the full principal balance of $124 million. Losses are expected to be incurred as of the Aug. 12, 2013 distribution date. Classes C through Q, currently rated 'Csf' or 'Dsf' by Fitch, will be affected. These classes rated 'Csf' are downgraded to 'Dsf'.
The additional amount of $11.4 million will cause permanent shortfalls to the transaction. These amounts were part of the total $27 million ASER (advances not made due to an appraisal reduction). Therefore, the sales proceeds of $30 million will be used to pay fees, expenses, advances and $16 million of the total $27 million in ASER amounts. The remaining $11.4 million in ASER amounts will not be repaid, while the most senior bondholders with an interest shortfall will recover $16 million in interest. No additional interest is expected to be taken from the trust due to the disposition of the Dos Lagos asset.
The property is a 345,847 square foot (sf) lifestyle/entertainment retail center built in 2006/2007; therefore, the property was not fully stabilized, with no operating history. The loan transferred to special servicing in October 2008 for monetary default after the borrower indicated the property was significantly affected by the downturn in the economy. The special servicer foreclosed on the property and, along with a third party management team, worked to stabilize occupancy. The last reported occupancy was 72.5%.
The property represented phase one of a two-phase, 534 acre development that was significantly pressured by economic conditions in 2009. The development included a residential subsection, a golf course, hotel, office building, a senior housing development and a 135 acre wildlife preserve. The retail center was 95% occupied at issuance; however, occupancy steadily declined to a low of 68% in early 2012. The borrower cited slower-than-anticipated growth in the residential neighborhood for the decline in performance, as tenant sales, rental rates and ultimately occupancy declined.
RATING SENSITIVITIES
The super senior classes' Rating Outlooks are revised to Negative due to the erosion in credit enhancement and continued risk of both principal and interest losses as the pool becomes more concentrated. After the sale of The Shops at Dos Lagos, eight loans (18.4%), including three REOs (1.8%) remain in the pool. Downgrades are possible if expected losses increase or if these classes are affected by repeated interest shortfalls.
Fitch downgrades the following classes and revises Recovery Estimates as indicated:
--$116.5 million class AM to 'CCsf' from 'CCCsf'; RE 50% from 100%;
--$14.6 million class C to 'Dsf' from 'Csf'; RE 0%;
--$10.2 million class D to 'Dsf' from 'Csf'; RE 0%;
--$10.2 million class E to 'Dsf' from 'Csf'; RE 0%;
--$13.1 million class F to 'Dsf' from 'Csf'; RE 0%;
--$11.7 million class G to 'Dsf' from 'Csf'; RE 0%;
--$16 million class H to 'Dsf' from 'Csf'; RE 0%;
--$14.6 million class J to 'Dsf' from 'Csf'; RE 0%;
--$14.6 million class K to 'Dsf' from 'Csf'; RE 0%.
--$8.7 million class L to 'Dsf' from 'Csf'; RE 0%;
--$4.4 million class M to 'Dsf' from 'Csf'; RE 0%;
--$5.8 million class N to 'Dsf' from 'Csf'; RE 0%;
--$4.4 million class P to 'Dsf' from 'Csf'; RE 0%;
The following classes are affirmed and Rating Outlooks and Recovery Estimates revised as indicated:
--$71.2 million class A-3 at 'Asf'; Outlook Negative from Stable;
--$45.6 million class A-SB at 'Asf'; Outlook Negative from Stable;
--$354.6 million class A-4 at 'Asf'; Outlook Negative from Stable;
--$145 million class A-4FL at 'Asf'; Outlook Negative from Stable;
--$60.4 million class A-1A at 'Asf'; Outlook Negative from Stable;
--$61.2 million class AJ at 'Csf'; RE 0% from 40%;
--$14.6 million class B at 'Csf'; RE 0%;
--$2.9 million class Q at 'Dsf'; RE 0%;
--$1.7 million class T at 'Dsf'; RE 0%.
Classes A-1 and A-2 have paid in full. Class X was previously withdrawn.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696969
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=799070
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
KEY RATING DRIVERS
The downgrades reflect the expected losses after the sale of the largest asset in the pool, The Shops at Dos Lagos (12.4% of the pool).
The Shops at Dos Lagos, a $124 million real estate owned (REO) retail property, was sold July 23, 2013 for $30 million. Including advances, appraisal subordinate entitlement reductions (ASERs), fees and other unpaid amounts of approximately $41 million, the loan loss severity will be approximately 109% on the current loan balance.
Realized losses to the trust will reflect the full principal balance of $124 million. Losses are expected to be incurred as of the Aug. 12, 2013 distribution date. Classes C through Q, currently rated 'Csf' or 'Dsf' by Fitch, will be affected. These classes rated 'Csf' are downgraded to 'Dsf'.
The additional amount of $11.4 million will cause permanent shortfalls to the transaction. These amounts were part of the total $27 million ASER (advances not made due to an appraisal reduction). Therefore, the sales proceeds of $30 million will be used to pay fees, expenses, advances and $16 million of the total $27 million in ASER amounts. The remaining $11.4 million in ASER amounts will not be repaid, while the most senior bondholders with an interest shortfall will recover $16 million in interest. No additional interest is expected to be taken from the trust due to the disposition of the Dos Lagos asset.
The property is a 345,847 square foot (sf) lifestyle/entertainment retail center built in 2006/2007; therefore, the property was not fully stabilized, with no operating history. The loan transferred to special servicing in October 2008 for monetary default after the borrower indicated the property was significantly affected by the downturn in the economy. The special servicer foreclosed on the property and, along with a third party management team, worked to stabilize occupancy. The last reported occupancy was 72.5%.
The property represented phase one of a two-phase, 534 acre development that was significantly pressured by economic conditions in 2009. The development included a residential subsection, a golf course, hotel, office building, a senior housing development and a 135 acre wildlife preserve. The retail center was 95% occupied at issuance; however, occupancy steadily declined to a low of 68% in early 2012. The borrower cited slower-than-anticipated growth in the residential neighborhood for the decline in performance, as tenant sales, rental rates and ultimately occupancy declined.
RATING SENSITIVITIES
The super senior classes' Rating Outlooks are revised to Negative due to the erosion in credit enhancement and continued risk of both principal and interest losses as the pool becomes more concentrated. After the sale of The Shops at Dos Lagos, eight loans (18.4%), including three REOs (1.8%) remain in the pool. Downgrades are possible if expected losses increase or if these classes are affected by repeated interest shortfalls.
Fitch downgrades the following classes and revises Recovery Estimates as indicated:
--$116.5 million class AM to 'CCsf' from 'CCCsf'; RE 50% from 100%;
--$14.6 million class C to 'Dsf' from 'Csf'; RE 0%;
--$10.2 million class D to 'Dsf' from 'Csf'; RE 0%;
--$10.2 million class E to 'Dsf' from 'Csf'; RE 0%;
--$13.1 million class F to 'Dsf' from 'Csf'; RE 0%;
--$11.7 million class G to 'Dsf' from 'Csf'; RE 0%;
--$16 million class H to 'Dsf' from 'Csf'; RE 0%;
--$14.6 million class J to 'Dsf' from 'Csf'; RE 0%;
--$14.6 million class K to 'Dsf' from 'Csf'; RE 0%.
--$8.7 million class L to 'Dsf' from 'Csf'; RE 0%;
--$4.4 million class M to 'Dsf' from 'Csf'; RE 0%;
--$5.8 million class N to 'Dsf' from 'Csf'; RE 0%;
--$4.4 million class P to 'Dsf' from 'Csf'; RE 0%;
The following classes are affirmed and Rating Outlooks and Recovery Estimates revised as indicated:
--$71.2 million class A-3 at 'Asf'; Outlook Negative from Stable;
--$45.6 million class A-SB at 'Asf'; Outlook Negative from Stable;
--$354.6 million class A-4 at 'Asf'; Outlook Negative from Stable;
--$145 million class A-4FL at 'Asf'; Outlook Negative from Stable;
--$60.4 million class A-1A at 'Asf'; Outlook Negative from Stable;
--$61.2 million class AJ at 'Csf'; RE 0% from 40%;
--$14.6 million class B at 'Csf'; RE 0%;
--$2.9 million class Q at 'Dsf'; RE 0%;
--$1.7 million class T at 'Dsf'; RE 0%.
Classes A-1 and A-2 have paid in full. Class X was previously withdrawn.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696969
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=799070
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
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