Fitch to Rate JPMCC 2015-SGP P-T Certificates; Presale Issued

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has issued a presale report on J.P. Morgan Chase Commercial Mortgage Securities Trust 2015-SGP.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

--$319,000,000a class A notes 'AAAsf'; Outlook Stable;

--$125,300,000a class B notes 'AA-sf'; Outlook Stable.

The following classes are not expected to be rated:

--$720,000,000ab class X-CP notes;

--$925,000,000ab class X-EXT notes;

--$116,600,000a class C;

--$121,100,000a class D;

--$88,200,000a class E;

--$154,800,000a class F.

a Privately placed pursuant to Rule 144A.

b Notional amount and interest-only.

The expected ratings are based on information provided by the issuer as of Aug. 31, 2015.

The certificates represent the beneficial ownership in the trust, the primary asset of which is one loan having an aggregate principal balance of $925 million as of the cutoff date. The trust is primarily secured primarily secured by the fee and leasehold interests in 235 wholly owned retail properties with a total of 37.1 million square feet located in 49 states and Puerto Rico.

The loan is sponsored by Seritage Growth Properties (SGP). SGP is a newly formed REIT led by Benjamin Schall who previously served as the Chief Operating Officer of Rouse Properties Inc. The senior management team at SGP benefits from strong industry connections and experience working for and with other large retail companies including Vornado Realty Trust and Wal-Mart.

KEY RATING DRIVERS

Tenant Concentration to Sears Holdings: Kmart Operations, LLC and Sears Operations, LLC, subsidiaries of SHLD, are the lessees of all or a portion of 224 of the properties under a single master lease with an initial term of 10 years at an approximate average rental rate of $4.00 per square foot (psf). Sears is currently rated 'CC' by Fitch. Fitch's analysis is based on a dark value assessment that assumes Sears and Kmart vacate their respective spaces, day one, across the portfolio, and the space is re-leased to a third-party tenant.

Desirable Locations at Top-Tier Malls: Fitch considered 23 assets representing 17.1% of the allocated trust loan to be Tier 1 assets based on locations at trophy malls with high sales psf or dense in-fill urban markets. Notable assets include Aventura Mall ($1,700 sales psf) in Aventura, FL, the free-standing Sears in Santa Monica, CA, King of Prussia Mall ($773 sales psf) in Philadelphia, PA and Town Center at Boca Raton ($920 sales psf) in Boca Raton, FL.

Above-Average Structural Features: The loan is structured with a hard lock box. Ongoing monthly reserves will be collected for taxes, insurance, ground rent, leasing costs and capital expenditures. In addition, there are multiple cash flow sweep triggers based on performance triggers, including debt yield, Sears' earnings before interest taxes depreciation amortization and rent (EBITDAR) to Sears rent and net operating income (NOI) tests.

Low Loan Basis PSF: Based on the assumed total loan funding of $1.025 billion, Fitch's 'AAA' debt is $9.54 psf and $27.65 psf.

RATING SENSITIVITIES

Fitch found that the property could withstand a 85.9% decline in value and an approximate 87% decline in Fitch's implied net cash flow prior to experiencing $1 of loss to the 'AAAsf' rated classes.

Fitch performed several stress scenarios in which the Fitch net cash flow (NCF) was stressed. Fitch determined that a 58.2% reduction in Fitch's implied NCF would cause the notes to break even at a 1.0x DSCR, based on the actual debt service.

Fitch evaluated the sensitivity of the ratings for class A and found that a 25.5% decline in Fitch's implied NCF would result in a one-category downgrade, while a 49.8% decline would result in a downgrade to below investment grade.

The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com'.

DUE DILIGENCE USAGE

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

Additional information is available at www.fitchratings.com.

JPMCC 2015-SGP (US CMBS)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870843

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009

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

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

Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

Related Research

JPMCC 2015-SGP - Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870935

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=990730

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=990730

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/20150911005908/en/

Fitch Ratings
Primary Analyst
Lauren Cerda, +1-312-606-2317
Senior Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Surveillance Analyst
Benson Thomas, +1-212-908-0645
Associate Director
or
Committee Chairperson
Daniel Chambers, +1-212-908-0782
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
[email protected]

Source: Fitch Ratings

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