Fitch Ratings has upgraded two and affirmed 12 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., series 2004-PNC1 commercial mortgage pass-through certificates (JPMCC 2004-PNC1). A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades reflect the improved credit enhancement and the ability of the classes to withstand losses in a stressed scenario. Fitch modeled losses of 17.7% of the remaining pool; expected losses on the original pool balance total 6.6%, including $49.6 million (4.5% of the original pool balance) in realized losses to date. There are 20 loans remaining in the pool; Fitch has designated nine loans (69.5%) as Fitch Loans of Concern, which includes four specially serviced assets (24%). One loan (11.8%) is currently defeased.
As of the July 2014 distribution date, the pool’s aggregate principal balance has been reduced by 88.5% to $111.2 million from $1.1 billion at issuance. Interest shortfalls are currently affecting classes H through NR.
The largest contributor to Fitch’s modeled losses is an 180,000 square foot (sf) suburban office property (13.1%) located in Farmington Hills, MI. The property is solely occupied by Jervis B Webb Co whose lease expired in September 2017. The loan transferred to the special servicer in October 2013 due to imminent payment default after the borrower was unable to obtain sufficient financing prior to the April 2014 maturity date.
The second largest contributor to expected losses and the third largest in the pool is a 146,279 square foot anchored retail center (8.9%) located in Springdale, OH. The property is 100% occupied by three tenants, the largest of which has notified the borrower that they will not be renewing their lease. Average rents at the property remain below market as the borrower has previously given rent concessions in order to maintain occupancy.
The third largest contributor to expected losses is a 47,367 square foot (sf) medical center (4.6%) located in Corona, CA. The property is not producing sufficient income to meet its debt service obligations and occupancy was 28% as of October 2013. Per a November inspection, the third floor is damaged due to vandalism while occupied units remain in good condition.
In order to consider upgrades as the pool is very concentrated, Fitch ran additional stresses on the specially serviced loans and two of the four largest loans in the pool.
The largest loan in the pool is secured by a 320,198 sf suburban office building located in Overland Park, KS. The property is 100% occupied by Swiss Re America Holding Co who has a lease that expires in December 2018; which is before the loan’s anticipated repayment date in 2019. Fitch took an additional stress on the loan to match vacancy with that of the submarket.
Additionally, Fitch applied a further stress to the previously mentioned second largest contributor to Fitch model loss. The stress on the loan, which is the fourth largest in the pool, reflects the possibility for significant deterioration in the performance of the loan.
The ratings on the class A-1A through E notes are expected to be stable as the credit enhancement remains high. The class F and G notes may be subject to further downgrades as losses are realized.
Fitch upgrades the following classes:
–$28.8 million class B to ‘AAAsf’ from ‘AAsf’; Outlook Stable;
–$17.8 million class D to ‘BBBsf’ from ‘BBsf’; Outlook Stable.
Fitch affirms the following classes:
–$16.5 million class A-1A at ‘AAAsf’; Outlook Stable;
–$13.7 million class C at ‘Asf’; Outlook Stable;
–$11 million class E at ‘Bsf’; Outlook Stable;
–$16.5 million class F at ‘CCCsf’; RE 100%;
–$11 million class G at ‘CCsf’; RE 25%;
–$10.8 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%;
–$0 class P at ‘Dsf’; RE 0%.
The class A-1, A-2, A-3, and A-4 notes have paid in full. Fitch does not rate the class NR notes. Fitch has previously withdrawn the rating on the interest-only class X certificates.
Applicable Criteria and Related Research:
–‘Global Structured Finance Rating Criteria’ (May 20, 2014);
–‘U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria’ (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria