Mar. 17, 2010 (Business Wire) -- Fitch Ratings downgrades, assigns Rating Outlooks and Loss Severity (LS) Ratings to JP Morgan Commercial Mortgage, series 2004-C1. A full list of ratings follows the end of the press release.
Affirmations are due to the pool's stable performance and minimal future expected losses following Fitch's prospective review of potential stresses to the transaction. The downgrades are the result of projected losses on the two specially serviced assets (1.58%). Rating Outlooks reflect the likely direction of any changes to the ratings over the next one to two years.
There are 105 of the original 117 loans remaining in the transaction, 19 of which have defeased (13.3% of the current transaction balance).
The largest specially serviced asset (1.39%) is an office building located in San Diego, CA. The loan transferred to special servicing Oct. 11, 2009 due to monetary default. The borrower has been unresponsive and the special servicer is still collecting due diligence. Occupancy at the property declined to 58.7% as of February 2009, down from 94% at issuance.
The second largest specially serviced asset (0.19%) is a multifamily property located in Arlington, TX. The loan transferred to the special servicing Jan. 9, 2009 due to material impairment default. The borrower negotiated to extend the date to perform required repairs at the property until the end of March 2010. Borrower also won a $2.3 million judgment from the original seller which has been appealed. The special servicer is working with the borrowers' counsel to defend against the appeal so proceeds can be used to pay down the loan. The borrower has continued to remit monthly payments, which are currently being held since the loan has been accelerated.
Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal year end net operating income and applying an adjusted market cap rate between 7.5% and 10% to determine value.
Similar to Fitch's prospective analysis of recent vintage commercial mortgage backed securities (CMBS), each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to pay off at maturity. Of the non-defeased or non-specially serviced loans, none incurred a loss when compared to Fitch's stressed value.
Fitch has downgraded and assigned LS ratings as follows:
--$207.3 million class M to 'B/LS5' from 'B+'; Outlook Negative;
--$303.2 million class N to 'B-/LS5' from 'B'; Outlook Negative;
--$172.4 million class P to 'B-/LS5' from 'B-'; Outlook Negative.
In addition Fitch has affirmed, assigned Rating Outlooks and LS ratings as follows:
--$207.3 million class A-2 at 'AAA/LS1'; Outlook Stable;
--$303.2 million class A-3 at 'AAA/LS1'; Outlook Stable;
--$172.4 million class A-1A at 'AAA/LS1'; Outlook Stable;
--Interest-Only class X-1 at 'AAA'; Outlook Stable;
--Interest-Only class X-2 at 'AAA'; Outlook Stable.
--$27.4 million class B at 'AAA/LS4'; Outlook Stable;
--$11.7 million class C at 'AAA/LS5'; Outlook Stable;
--$22.1 million class D at 'AA-/LS5'; Outlook Stable;
--$13 million class E at 'A/LS5'; Outlook Stable;
--$11.7 million class F to 'A-/LS5'; Outlook Stable;
--$9.1 million class G at 'BBB+/LS5'; Outlook Stable;
--$10.4 million class H at 'BBB-/LS5'; Outlook Stable;
--$6.5 million class J at 'BB+/LS5'; Outlook Negative;
--$5.2 million class K to 'BB/LS5'; Outlook Negative;
--$10.4 million class L at 'BB-/LS5'; Outlook Negative.
Fitch does not rate the $11.1 million class NR.
Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the July 7, 2009 report, 'Surveillance Methodology for Recent Vintage U.S. CMBS,' which is available at www.fitchratings.com under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at www.fitchratings.com
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