Fitch Downgrades JPMCC 2004-C2; Assigns LS Ratings

NEW YORK--(BUSINESS WIRE)--Fitch Ratings downgrades and assigns Loss Severity (LS) ratings to J.P. Morgan Chase Commercial Mortgage Securities, commercial mortgage pass-through certificates, series 2004-C2 as follows:

--$24.6 million class D to 'BBB/LS4' from 'A'; Outlook Stable;

--$9.1 million class E to 'BBB-/LS5' from 'A-'; Outlook Negative;

--$11.6 million class F to 'BB/LS5' from 'BBB'; Outlook Negative;

--$7.8 million class G to 'B/LS5' from 'BBB-'; Outlook Negative;

--$11.6 million class H to 'B-/LS5' from 'BB+'; Outlook Negative;

--$6.5 million class J to 'B-/LS5' from 'BB'; Outlook Negative;

--$5.2 million class K to 'B-/LS5' from 'B+'; Outlook Negative;

--$2.6 million class L to 'B-/LS5' from 'B'; Outlook Negative.

In addition, Fitch has downgraded and revised Recovery Ratings (RRs) as indicated:

--$2.6 million class N to 'CC/RR6' from 'CCC/RR1';

--$3.9 million class P to 'C/RR6' from 'CC/RR3'.

Fitch affirms the following classes and assigns LS ratings as indicated:

--$87 million class A-2 at 'AAA/LS1'; Outlook Stable;

--$431.4 million class A-3 at 'AAA/LS1'; Outlook Stable;

--$236.9 million class A-1A at 'AAA/LS1'; Outlook Stable;

--Interest-only class X at 'AAA'; Outlook Stable;

--$24.6 million class B at 'AA/LS4'; Outlook Stable;

--$10.4 million class C at 'AA-/LS5'; Outlook Stable;

--$5.4 million class RP-1 at 'A'; Outlook Stable;

--$4.2 million class RP-2 at 'A-'; Outlook Stable;

--$4.4 million class RP-3 at 'BBB+'; Outlook Stable;

--$4.8 million class RP-4 at 'BBB'; Outlook Stable;

--$7.3 million class RP-5 at 'BBB-'; Outlook Stable.

The $5.2 million class M remains at 'CCC/RR1'.

Fitch does not rate the $12.4 million class NR. The RP certificates represent an interest in a subordinate note secured by the Republic Plaza property. Class A-1 has been paid in full.

The downgrades are due to an increase in expected losses on specially serviced assets coupled with expected losses following Fitch's prospective review of potential stresses to the transaction. A significant portion of the total expected losses are associated with loans currently in special servicing. Fitch expects losses of 3% of the remaining pooled balance, approximately $27 million, from the loans in special servicing and loans that cannot refinance at maturity based on Fitch's refinance test. The Negative Outlooks reflect the increase in Fitch Loans of Concern.

As of the April 2010 distribution date, the transaction's aggregate principal balance had decreased by 13.8% to $916.7 million from $1.06 billion at issuance. Eleven loans are fully defeased (6.7%), and the third largest loan (10.3%) in the pool is partially defeased.

Fitch has identified 29 Loans of Concern (19.8%), including five loans in special servicing (8.5%). The largest specially serviced asset (4.6%) is a 332,608 square foot (sf) office building located in Portland, OR. The loan transferred to special servicing in January 2010 due to the borrower entity, an affiliate of Rubicon U.S. REIT, filing for bankruptcy. The reported occupancy at the office property was 95% as of year-end (YE) 2009.

The second largest specially serviced asset (2.0%) is a 100,320 sf office building located south of San Diego in Chula Vista, CA. The asset transferred to special servicing in January 2010 for imminent default. The reported occupancy was approximately 60% as of September 2009.

The third largest specially serviced asset (1.3%) is a 312 unit multifamily property located in Fort Worth, TX. The real-estate owned (REO) property transferred to special servicing in January 2009.

The collateral for the Republic Plaza loan is a 1.3 million sf office building located in Denver, CO. The whole loan consists of two A-note pieces, one of which is the $107 million trust balance and the other is comprised of $28 million in non-pooled RP certificates. At issuance, there was a $35 million B-note held outside of the trust. Occupancy has stabilized, with a reported YE 2009 occupancy of 95.8%. Brookfield Properties is the loan sponsor.

Fitch stressed the cash flow of the remaining non-defeased loans by applying a 10% reduction to 2008 fiscal YE net operating income and applying an adjusted market cap rate between 7.5% and 10.5% to determine value.

Similar to Fitch's prospective analysis of recent vintage CMBS, each loan also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Loans that could refinance to a debt service coverage ratio of 1.25 times or higher were considered to payoff at maturity. Twenty-eight loans did not payoff at maturity with seven loans incurring a loss when compared to Fitch's stressed value.

Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the July 7, 2009 report, 'Surveillance Methodology for Recent Vintage U.S. CMBS,' which is available at 'www.fitchratings.com' under the following headers:

Structured Finance then CMBS then Criteria Reports

Additional information is available at 'www.fitchratings.com'.

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