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
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PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
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CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
WEBSITE.
