Fitch Affirms JPMCC 2011-C4

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed six classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., commercial mortgage pass-through certificates, series 2011-C4 (JPMCC 2011-C4). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The affirmations reflect increased credit enhancement since Fitch's last rating action, although there are concerns with performance on loans in the top 15 located in Houston, TX and Tulsa, OK, as these regions have been impacted by the effect of low oil prices. Fitch modeled losses of 2.9% of the remaining pool; expected losses on the original pool balance total 2.3%. The pool has experienced no realized losses to date and there have been no specially serviced loans since issuance. Fitch has designated three loans (26.5% of current pool) as Fitch Loans of Concern.

As of the February 2016 distribution date, the pool's aggregate principal balance has been reduced by 20.7% to $1.15 billion from $1.45 billion at issuance. Per the servicer's reporting, one loan (0.4%) is defeased. Interest shortfalls, though minimal, are currently affecting the class NR certificates. After the February 2016 remittance, the servicer indicated two loans, Two City Plaza (3.2%) and Hilton Garden Inn Orlando (0.9%), both paid off in full at their March 1, 2016 maturity date and will be reflected in the upcoming March 2016 distribution date.

The largest contributor to Fitch-modeled losses is the Two Allen Center loan (14.4% of pool). The loan is secured by a 36-story, 995,623 square foot (sf) office building located in downtown Houston, TX. The property is located in the four-office tower Allen Center development with two attached parking garages. The sponsor is TRZ Holdings LLC, an affiliate of Brookfield Properties Corp.

As of the December 2015 rent roll, the property was 97.5% leased. The largest tenant, Devon Energy Production Company (rated 'BBB+'; Outlook Stable as of Dec. 7, 2015), which leased approximately 66% of the net rentable area (NRA) at issuance, vacated their space entirely between 2012 and 2013. The tenant had already began consolidating and subleasing its space in 2011 due to the sale of many of its international and deepwater exploration businesses, as their focus was shifted to their domestic shore exploration. The property management company took back five floors of the former Devon Energy space and have signed a direct lease of these five floors to Eni US Operating Co. (14% of NRA; expiry January 2020). Devon Energy still currently leases 52% of the NRA, where they continue to pay rent as their lease expires in January 2020. Of the remaining space leased, 40.8% of the NRA has been subleased to Chevron USA (expiry December 2017) and another 5.7% has been subleased to other smaller energy tenants (expiry January 2020).

Average in-place base rent, according to the December 2015 rent roll, was approximately $60 per square foot (psf), compared to submarket asking rents of $38.13 psf for the Houston CBD submarket, according to REIS and as of fourth quarter 2015 (4Q15). The REIS-reported submarket vacancy was 9.8%. The loan is structured with an anticipated repayment date (ARD) of May 1, 2018. Should the loan not be repaid by the ARD, the current interest rate of 6.23% will increase by the greater of 3% or the swap yield plus 3.3% (not to exceed 5% over the original interest rate). Additionally, all excess cash flow will be used to pay down the loan principal. Year-end (YE) 2014 net operating income debt service coverage ratio was 1.95x, compared to 2.04x in 2013.

The eleventh and twelfth largest loans, One Warren Place and Two Warren Place, are secured by the leasehold interest on two adjacent high-rise office buildings that are part of an overall 52-acre office park located in Tulsa, OK. A high percentage of the NRA at these two properties is leased to tenants in the energy sector, some with near-term maturities, and the overall base rents are above market rates. Average in-place base rent for both One Warren Place and Two Warren Place was approximately $21 psf, compared to $15.06 psf for the Tulsa market according to REIS and as of 4Q15. The REIS-reported submarket vacancy was 16.8%.

One Warren Place is a 20-story, 470,025 sf property, where occupancy declined to 73.7% as of the December 2015 rent roll from 95.3% at YE 2014 primarily due to the prior largest tenant, BHP Billiton Petroleum (26% of NRA) not renewing its lease that expired in October 2015. The top three tenants at the property, comprising nearly 44 % of the NRA, are tenants in the energy sector. Near-term lease rollover is 1% in 2016 and 9% in 2017.

Two Warren Place is a 19-story, 489,903 sf property, where occupancy was 93.2% as of the December 2015 rent roll, compared to 93.5% at YE 2014 and 96.9% at YE 2013. The largest six tenants at the property, comprising nearly 62% of the NRA, are in the energy sector. Near-term lease rollover is 9% in 2016 and 3% in 2017.

RATING SENSITIVITIES

All Rating Outlooks on the classes remain Stable due to increasing credit enhancement and expected continued paydowns.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch affirms the following classes as indicated:

--$119.9 million class A-2 at 'AAAsf'; Outlook Stable;

--$408.2 million class A-3 at 'AAAsf'; Outlook Stable;

--$70 million class A-3FL at 'AAAsf'; Outlook Stable;

--$226.8 million class A-4 at 'AAAsf'; Outlook Stable;

--$57.1 million class A-SB at 'AAAsf'; Outlook Stable;

--$882 million* class X-A at 'AAAsf'; Outlook Stable.

*Notional amount and interest-only.

The class A-1 certificates have paid in full. Fitch does not rate the class B, C, D, E, F, G, H, X-B and NR certificates.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1001034

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001034

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160316006457/en/

Fitch Ratings
Primary Analyst
Melissa Che
Director
+1-212-612-7862
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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