NEW YORK–(BUSINESS WIRE)–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). Fitch has also
revised the Rating Outlook for class D to Positive from Stable. A
detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades reflect an increase in credit enhancement due to three loan
payoffs since Fitch’s previous rating action, as well as continued
amortization and paydown. Fitch has applied additional stresses in its
base case scenario to reflect the increasing risk of adverse selection
as the pool becomes more concentrated. Despite high credit enhancement,
ratings for classes D and E are capped at ‘Asf’ and ‘BBBsf’,
respectively, due to concentration risk, quality of the remaining
collateral, the percentage of Fitch Loans of Concern (FLOCs, 29.6%) and
significant single-tenant exposure (three loans, 48.1%). These concerns
increase the pool’s exposure to single event risk, which can cause a
significant loss or interest shortfall in the future.
Currently, there are only 13 loans remaining in the transaction,
compared to 101 at issuance. Fitch modeled losses of 28.3% of the
remaining pool; expected losses on the original pool balance total 6.5%,
including $49.6 million (4.5% of the original pool balance) in realized
losses to date. Fitch has designated four loans as FLOCs, including one
specially serviced asset (12.2%).
As of the May 2016 distribution date, the pool’s aggregate principal
balance has been reduced by 92.8% to $78.7 million from $1.1 billion at
issuance. One loan (4.7%) is defeased. Interest shortfalls totaling
$2.85 million are currently affecting classes H, L, M, N, P and NR.
The largest contributor to expected losses is a 146,279 square foot (sf)
retail center (12.9%) located in Springdale, OH. The property is
currently 57% occupied by two tenants. The former largest tenant, Dick’s
Sporting Goods, which occupied 43% of the property, vacated upon lease
expiration in October 2015. The two remaining tenants have extended
their leases until March 2019 and January 2021, respectively, but are
paying reduced rents due to co-tenancy clauses with the former Dick’s
space. Historically, the borrower has been offering rent concessions in
order to maintain occupancy, which has impacted property revenues. The
loan has passed its anticipated repayment date (ARD) of May 2014. The
final loan maturity date is May 1, 2034. The servicer-reported first
quarter (1Q) 2016 debt service coverage ratio (DSCR) was 0.37x, compared
to 0.94x at year-end (YE) 2015 and 1.52x at issuance.
The second largest contributor to Fitch’s modeled losses is an 180,000
sf suburban office property (12.2%) located in Farmington Hills, MI, a
suburb of Detroit. The property is 100% occupied by the single tenant
Jervis B. Webb Company, whose lease will expire in September 2017. The
tenant is expected to vacate upon lease expiration. The loan transferred
to the special servicer in October 2013 due to imminent payment default
after the borrower was unable to secure refinancing proceeds prior to
the April 2014 maturity date. The property was foreclosed on and became
real estate owned (REO) in August 2015. The special servicer is working
to identify replacement tenants.
The Positive Outlook on class D indicates that future upgrades are
possible if the tenant of the largest loan in the pool exercises its
renewal option in December 2018. Swiss Re Management (US) Corp. occupies
100% of the ERC Overland Park property, a 320,198 sf office property
located in Overland Park, KS (43.1% of the pool). Upgrades are also
possible if this loan pays off on its Anticipated Repayment Date (ARD)
of May 2019, as the pool’s binary risk profile would decrease.
Fitch expects the ratings on the classes C, E and F to remain stable,
and does not anticipate any near-term rating actions at this time.
Further upgrades to classes E and F may be limited due to the
concentrated nature of the pool. In addition, the distressed classes
(rated below ‘B’) may be subject to further rating actions as losses are
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to
this rating action.
Fitch has upgraded the following classes:
–$11 million class E to ‘BBBsf’ from ‘Bsf’; Outlook Stable;
–$16.5 million class F to ‘B’ from ‘CCCsf/RE100%’; Outlook Stable.
Fitch has affirmed the following classes:
–$11.7 million class C at ‘AAAsf’; Outlook Stable;
–$17.8 million class D at ‘Asf’; Outlook to Positive from Stable;
–$11 million class G at ‘CCsf’; RE 90%;
–$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, A-4, A-1A and B 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.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
Criteria for Rating Caps and Limitations in Global Structured Finance
Transactions (pub. 28 May 2014)
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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Primary Surveillance Analyst
33 Whitehall Street
New York, NY 10004
Mary MacNeill, +1-212-908-0785
Sandro Scenga, New York, +1 212-908-0278