Fitch Upgrades Three Classes of JPMCC 2004-C2

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded three and affirmed seven classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., commercial mortgage pass-through certificates, series 2004-C2. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The upgrades and affirmations are based on the stable performance of the underlying collateral pool, high credit enhancement, and continued expected amortization. As the pool is concentrated with only 14 loans remaining, Fitch used a deterministic stress scenario in its analysis.

As of the March 2016 remittance report, the transaction has paid down 93.7% to $65.1 million from $1.035 billion at issuance. Fitch modeled losses are 27.73% of the remaining pool; expected losses of the original pool are 2.84% including losses already incurred to date (1.14%). There are three Fitch loans of concern, all of which are specially serviced loans.

Of the original 134 loans, 14 remain, three of which (23.9%) are in special servicing. One loan (2.20%) is fully defeased. The remaining non-defeased loans consist of fully amortizing (18.3%), balloon maturities (55.1%), and ARD loans (25.4%). The loans' final maturity dates are in 2018 (4.3%), 2019 (51.8%), 2020 (2.5%), 2022 (2.2%), and 2024 (16.7%).

The largest contributor to losses is the real estate owned (REO) 135,004 square foot (sf) retail center, Tower Plaza Retail Center (16.6% of the pool balance and the third largest in the pool), located in Temacula, CA. The property experienced cash flow issues due to occupancy declines in 2009 when the grocery anchor vacated the property. The asset was transferred to the special servicer in February 2012 for payment default and the special servicer completed the foreclosure process in March 2014. Property underwent a significant capital improvement plan in 2015 with the property repainted and the parking lot resealed. Additionally, the property manager is in negotiations with a number of tenants to significantly raise occupancy at the subject. The special servicer is monitoring the progress of negotiations before determining the disposition strategy.

The second largest contributor to losses is the specially serviced loan collateralized by a 16,004 sf unanchored retail property located in Westminster, CO. The loan was modified in early 2014 after a maturity default occurred from environmental issues that prevented the sponsor from securing takeout financing. The modification terms extended the loan maturity to May 2015 to facilitate site remediation of a previous dry cleaning tenant. Per the servicer, the remediation process is still on-going and the sponsor is trying to secure another loan extension to complete the process.

The third largest contributor to modeled losses, Hillside MHP Portfolio, is collateralized by three communities comprising 144-pad sites located west of Buffalo, NY. The loan was transferred to the special servicer in April 2014 for imminent payment default after the sponsor was unable to secure lender commitment to refinance the loan. Two separate discounted pay-off proposals were rejected by the special servicer in 2015 and a foreclosure complaint was filed in September 2015. Legal proceedings are ongoing with the special servicer anticipating a ruling during the second quarter of 2016.

RATING SENSITIVITIES

Fitch analysis employed a deterministic scenario to reflect the pool's exposure to single event risk associated with the largest loan in the pool as well as significant concentration with only 14 loans remaining. Although credit enhancement is high, the Outlook on class H remains Stable as additional upgrades are not expected due to the concentrated nature of the pool and lack of projected near-term paydown to these classes. Upgrades to classes H and J could be possible with significant unanticipated paydown or defeasance. Downgrades to the non-investment grades are possible if additional loans transfer to special servicing and/or expected losses increase significantly.

DUE DILIGENCE USAGE

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

Fitch upgrades the following classes:

--$11.6 million class F to 'AAAsf' from 'Asf'; Outlook Stable;

--$7.8 million class G to 'AAAsf' from 'Asf'; Outlook Stable;

--$11.6 million class H to 'BBBsf' from 'BBB-sf'; Outlook Stable.

Fitch also affirms the following classes:

--$8.7 million class E at 'AAAsf'; Outlook Stable;

--$6.5 million class J at 'Bsf'; Outlook Stable;

--$5.2 million class K at 'CCCsf'; RE 100%;

--$2.6 million class L at 'CCsf'; RE 50%;

--$3.9 million class M at 'Csf'; RE 0%;

--$2.6 million class N at 'Csf'; RE 0%;

--$2.6 million class P at 'Csf'; RE0%.

The class A-1, A-2, A-3, A-1A, B, C, D, RP-1, RP-2, RP-3, RP-4, and the RP-5 certificates have paid in full. Fitch does not rate the class NR certificate. Fitch previously withdrew the rating on the interest-only class X certificate.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412

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=1002926

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1002926

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/20160420006572/en/

Fitch Ratings
Primary Analyst
Jay Bullie, CFA
Associate Director
1-312-368-2079
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
R. Brook Sutherland
Senior Director
+1-312-606-2346
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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