Fitch Affirms JPMCC 2005-LDP4
KEY RATING DRIVERS
The affirmations reflect continued performance in-line with Fitch's expectations at the last rating action. Fitch modeled losses of 7.2% of the remaining pool; expected losses on the original pool balance total 11.7%, including \$221 million (8.3% of the original pool balance) in realized losses to date. Fitch has designated 33 loans (27.7%) as Fitch Loans of Concern, which includes five specially serviced assets (2.5%).
As of the January 2015 distribution date, the pool's aggregate principal balance has been reduced by 52.2% to \$1.28 billion from \$2.68 billion at issuance. Per the servicer reporting, 15 loans (18.7% of the pool) are defeased. Interest shortfalls are currently affecting classes D through NR.
The largest contributor to expected losses is the One World Trade Center loan (6.6% of the pool), the largest loan in the pool. The loan is secured by a 573,300 square foot (sf), 27-story class 'A' office building located in Long Beach, CA. The property has experienced cash flow issues due to occupancy declines. The September 2014 rent roll reported occupancy at 59%, a further decline from 64.8% in December 2013, and 70% in both 2012 and 2011. According to REIS, the property is performing below the Long Beach submarket which reports occupancy for class 'A' office at 87.2%, and asking rents at \$34.29 psf (compared to \$21 psf in-place). The buildings largest tenant is the United States of America (USA), which occupies approximately 77,000 square feet (13% of the net rentable area [NRA]) with leases expiring in 2023 and 2024. The property has lease rollover risk for approximately 18% of the building NRA over the next 12 months. Due to the low occupancy and slow leasing, the net operating income (NOI) debt service coverage ratio (DSCR) has remained low reported at 0.49x for year to date (YTD) September 2014, 0.75x at year end (YE) December 2013, and 0.87x at YE December 2012. The loan has remained current since issuance and is scheduled to mature in August 2015.
The next largest contributor to expected losses is the Highland Landmark Building loan (3.9%), which is secured by a 276,461 sf office property located in Downers Grove, IL. The borrower has been successful in leasing up the property to 78% as of the September 2014 rent roll, after experiencing significant tenant vacancies from RR Donnelly (previously 56% NRA) in October 2012 and Havi Global (previously 32% NRA) in May 2013. The majority of the property was released to Advocate Health Care for approximately 141,000 sf (48% NRA) starting in April 2013 and expiring in 2023, and Univar Inc. for approximately 38,000 sf (12.9% NRA) starting in June 2013 and expiring in 2024. Both leases have significant rent abatements through 2015. The property has reported negative NOI since 2012 due to the tenant vacancies, releasing, and rental abatements in place. The loan has remained current since issuance and is scheduled to mature in August 2015.
The third largest contributor to expected losses is secured by a 133,471 sf suburban office property in Phoenix, AZ (1%). The property has experienced cash flow issues since 2011 due to occupancy declines and lower rental income. Occupancy has recently improved to 76% as of September 2014 after remaining relatively flat at 69% since 2011. Leases for approximately 29% of the property NRA are scheduled to expire in the next 12 months. Due to the low occupancy and slow leasing, the NOI DSCR has remained low reporting at 0.55x for YTD September 2014 and and 0.18x for YE 2013, compared to 1.47x at issuance. The loan has remained current since issuance, and is scheduled to mature in October 2015.
RATING SENSITIVITIES
The Ratings Outlooks on classes A-1A, A-4, and A-M are Stable due to sufficient credit enhancement and continued paydown. The Negative Outlook on class A-J reflects performance concerns on several loans in the top 15 including high property vacancies with slow leasing momentum, lease rollover risks, secondary market locations, single tenant exposure, and property performance below underwritten expectations. In addition, the Negative Outlook reflects maturity concentration concerns with 92% of the pool scheduled to mature by YE 2015. Further rating actions on the classes are possible should realized losses be greater than Fitch's expectations.
Fitch affirms the following classes:
--\$194.7 million class A-1A at 'AAAsf'; Outlook Stable;
--\$503.5 million class A-4 at 'AAAsf'; Outlook Stable;
--\$267.7 million class A-M at 'AAAsf'; Outlook Stable;
--\$204.1 million class A-J at 'BBsf'; Outlook Negative;
--\$50.2 million class B at 'CCsf'; RE 65%.
--\$23.4 million class C at 'Csf'; RE 0%;
--\$36.6 million class D at 'Dsf'; RE 0%;
--\$0 class E at 'Dsf'; RE 0%;
--\$0 class F at 'Dsf'; RE 0%;
--\$0 class G at 'Dsf'; RE 0%;
--\$0 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-2FL, A-3A1, A-3A2 and A-SB certificates have paid in full. Fitch does not rate the class NR certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 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
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