Fitch Downgrades 2 Distressed Classes of J.P. Morgan 2007-CIBC20
Fitch Ratings has downgraded two and affirmed 16 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp (JPMCC) commercial mortgage pass through certificates series 2007-CIBC20. A full list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The affirmations of the majority of classes are due to overall stable performance since Fitch's last rating action. Fitch modeled losses of 8.4% of the remaining pool; expected losses on the original pool balance total 12.8%, including $181.7 million (7.1% of the original pool balance) in realized losses to date. Fitch has designated 39 loans (42.7%) as Fitch Loans of Concern, which includes three specially serviced assets (4.8%). The downgrades to classes F and G are due to higher certainty of losses from the specially serviced loans.
As of the December 2015 distribution date, the pool's aggregate principal balance has been reduced by 32.2% to $1.72 billion from $2.54 billion at issuance. Per the servicer reporting, one loan (0.3% of the pool) is defeased. Interest shortfalls are currently affecting classes F through NR.
The largest contributor to expected losses is the North Hills Mall loan (8.2% of the pool), which is secured by a 577,383 square foot (sf) regional lifestyle center located in Raleigh, NC within the Research Triangle. The property is anchored by J.C. Penney, Regal Entertainment, REI, and Fitness Connection with lease expirations in March 2018, May 2020, November 2020, and December 2019, respectively. The anchor tenant Target is not part of the collateral. In addition to the retail component, there is a 101,423 sf office component, which is part of the collateral, and a 200-room Renaissance Hotel which is not part of the collateral. JC Penney is not listed on the recently published store closure list and reported trailing 12-month September 2015 sales of $83 per sf. The mall is 98.4% occupied as of September 2015. There is approximately 7% lease rollover in 2016 and 8% in 2017. Per Reis, as of third quarter 2015 (3Q15), the Raleigh-Durham retail market had a vacancy rate of 7.8%.
The next largest contributor to expected losses is the specially-serviced Clark Tower loan (3.5%), which is secured by a Class B, 671,577 sf office property located in Memphis, TN. The largest tenants are Concorde Career Colleges, Inc. (10%), expiration August 2021; CB Richard Ellis/Trammell Crow (8%), expiration March 2016, Thompson Dunavant (4%), expiration March 2019, and Wade Hartfield Enterprises (3%), expiration September 2020. No update was provided on a CB Richard Ellis/Trammell Crow lease renewal. The loan has been in special servicing since September 2013 when occupancy declined to 66% mainly due to the tenant, FDIC, vacating its space in 2012. The loan was modified in July 2015: the modification terms include balance split into an A note $43.5 million and B-Note $16.9 million (Hope Note), a borrower contribution of $5.7 million in new equity, interest rate reduction, and two one-year maturity extension options. As of December 2015, the property remains 67% occupied with average rent $17 per sf. There is approximately 16% upcoming rollover in 2016. Per Reis, as of 3Q15, the East Memphis/Germantown retail submarket vacancy is 11.9% with average asking rent $16.63 per sf. The special servicer continues to monitor the master servicer's boarding of the new/modified loan terms and cash management waterfall and the loan is expected to return to the master servicer in late January 2016.
The third largest contributor to expected losses is The Milburn Hotel loan (1.5%), which is secured by a hotel property consisting of 121 units located on the upper west side in New York City on West 76th street. The most recent STR report available from the master servicer is as of June 2014, when the property was 78% occupied with ADR and RevPAR of $256 and $201 respectively. The loan is on the master servicer's watchlist due to declines in room revenue and high operating expenses. A more recent STR report was requested but was not available. While the Fitch value based on current reported cash flow and a stressed cap rate indicates losses are possible, given the location and asset quality, losses are unlikely to be incurred.
Rating Outlooks on classes A-4 through A-J remain Stable due to increasing credit enhancement and continued paydown. Although the credit enhancement is increasing for the A-M classes, the transaction has a large concentration of retail properties, higher loan to value (LTVs) on the larger top 15 loans, and large concentration of 2017 loan maturities. Distressed classes may be subject to further downgrades should losses exceed Fitch's expectations or additional assets transfer to special servicing.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch downgraded the following ratings:
--$22.3 million class F to 'Csf' from 'CCsf'; RE 0%;
--$25.4 million class G to 'Csf' from 'CCsf'; RE 0%.
Fitch also affirmed the following classes and revised REs as indicated:
--$876.3 million class A-4 at 'AAAsf'; Outlook Stable;
--$19.4 million class A-SB at 'AAAsf'; Outlook Stable;
--$246.7 million class A-1A at 'AAAsf'; Outlook Stable;
--$219.3 million class A-M at 'Asf'; Outlook Stable;
--$35 million class A-MFX at 'Asf'; Outlook Stable;
--$152.6 million class A-J at 'Bsf'; Outlook Stable;
--$31.8 million class B at 'CCCsf'; RE 85%;
--$25.4 million class C at 'CCCsf'; RE 0%.
--$28.6 million class D at 'CCsf'; RE 0%;
--$22.3 million class E at 'CCsf'; RE 0%;
--$18.6 million class H at 'Dsf'; RE 0%;
--$0 class J at 'Dsf'; RE 0%;
--$0 class K at 'Dsf'; RE 0%;
--$0 class L at 'Dsf'; RE 0%;
--$0 class M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%.
The class A-1, A-2 and A-3 certificates have paid in full. Fitch does not rate the class P, Q, T and NR certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.
Additional information is available at www.fitchratings.com.
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
Dodd-Frank Rating Information Disclosure Form
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