NEW YORK--()--Fitch Ratings downgrades seven classes of J.P. Morgan Chase Mortgage Securities Trust, series 2007-LDP10 (JPMCC 2007-LDP10), commercial mortgage pass-through certificates, due to increased loss expectations on the specially serviced loans and further deterioration of loan performance. A detailed list of rating actions follows at the end of this release.
The downgrades are due to greater certainty of losses associated with specially serviced loans and increased loss expectations on several performing loans with performance declines. Fourteen of the top 15 loans have Fitch stressed loan to value ratios greater than 95%. Fitch modeled losses of 15.6% for the remaining pool; expected losses of the original pool are at 15.3%, including losses already incurred to date.
As of the December 2011 distribution date, the pool's aggregate principal balance has decreased 6.9% to $4.96 billion from $5.33 billion at issuance. As of December 2011, there are cumulative interest shortfalls in the amount of $30.4 million, affecting classes F through NR.
The deal consists of two loan groups, Group R and Group S. Loans are grouped according to whether they have a five- to seven-year term, or 10-year and greater term. Principal proceeds, including unscheduled proceeds from liquidations, are distributed according to their respective loan group; Group S pays down the class S certificates and Group R pays down the certificates not noted with an 'S.' Losses are allocated reverse sequentially, then pro rata to each loan group's corresponding class.
In total, there are 41 loans (17.8% of the pool) in special servicing including two of the top 15 loans (5.2%) and five assets (1.2%) that are real estate owned (REO). Realized losses as of December 2011 were $40.1 million (0.8% of the original pool balance) and have partially depleted the non-rated class NR. One loan (0.2%) was liquidated recently with a $10.6 million loss to the trust.
The largest contributor to expected loss is the largest specially serviced loan (2.8% of the pool), secured by the Solana office complex located in Westlake, TX. The pari passu loan was transferred to special servicing in March 2009 for imminent default and has since been modified to change the terms of the cash management agreement. One of the largest tenants at the property vacated their space prior to their lease expiration in 2011. A reported appraisal from April 2011 indicates a value significantly below the loan amount.
The second largest contributor to modeled loss is the StratREAL Industrial Portfolio II (3.7%). The collateral consists of a portfolio of 10 industrial properties located in Tennessee, Ohio, and California. During 2010 and 2011, the portfolio lost several major tenants due to tenant lease expiries and termination options. The loan is current and not specially serviced; however, the loan's debt service coverage ratio (DSCR) is expected to decrease as the recent increase in vacancy is reflected in the financials.
The third largest contributor to modeled loss is the Long Island Marriott and Conference Center (2.1%). The loan is current and not specially serviced; however, the most recent servicer-reported DSCR as of the year-end (YE) 2010, was 0.78 times (x). The reported trailing 12 month (TTM) occupancy, average daily rate (ADR), and revenue per available room (RevPAR) as of November 2011 were 75%, $147, and $111, respectively. The issuer originally underwrote the loan assuming a stabilized RevPAR over $130 to be achieved by January 2010.
Fitch has downgraded and assigned Recovery Estimates (REs) to the following classes as indicated:
--$359 million class A-M to 'BBBsf' from 'Asf'; Outlook Stable;
--$174.1
million class A-MS to 'BBBsf' from 'Asf'; Outlook Stable;
--$200.7
million class A-J to 'CCCsf' from 'B-sf'; RE 30%;
--$145.8 million
class A-JS to 'CCCsf' from 'B-sf'; RE 30%;
--$100 million class
A-JFL to 'CCCsf' from 'B-sf'; RE 30%;
--$40.4 million class E to
'CCsf' from 'CCCsf', RE 0%;
--$19.6 million class E-S to 'CCsf'
from 'CCCsf', RE 0%.
Fitch has affirmed the following classes as indicated:
--$242.1 million class A-2 at 'AAAsf'; Outlook Stable;
--$627.6
million class A-2S at 'AAAsf'; Outlook Stable;
--$118.4 million
class A-2SFL at 'AAAsf'; Outlook Stable;
--$18.2 million class
A-2SFX at 'AAAsf'; Outlook Stable;
--$1.7 billion class A-3 at
'AAAsf'; Outlook Stable;
--$179.9 million class A-3S at 'AAAsf';
Outlook Stable;
--$502.9 million class A-1A at 'AAAsf'; Outlook
Stable;
--$71.8 million class B at 'CCCsf; RE 0%;
--$34.8
million class B-S at 'CCCsf', RE 0%;
--$26.9 million class C at
'CCCsf', RE 0%;
--$13.1 million class C-S at 'CCCsf', RE 0%;
--$49.4
million class D at 'CCCsf', RE 0%;
--$23.9 million class D-S at
'CCCsf', RE 0%;
--$44.9 million class F at 'CCsf', RE 0%;
--$21.8
million class F-S at 'CCsf', RE 0%
--$44.9 million class G at
'Csf', RE 0%;
--$21.8 million class G-S at 'Csf', RE 0%;
--$40.4
million class H at 'Csf', RE 0%;
--$19.6 million class H-S at
'Csf', RE 0%;
--$20 million class J at 'Csf', RE 0%;
--$20
million class K at 'Csf', RE 0%;
--$13.3 million class L at 'Csf',
RE 0%;
--$6.7 million class M at 'Csf', RE 0%;
--$6.7 million
class N at 'Csf', RE 0%;
--$13.3 million class P at 'Csf', RE 0%.
Classes A-1 and A-1S have paid in full. Fitch does not rate class NR. Fitch previously withdrew the rating on the interest-only class X.
Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the Dec, 21, 2011 report, 'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Dec. 21, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=662869
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