Fitch Downgrades 3 Distressed Classes of JPM 2006-CIBC15

NEW YORK--()--Fitch Ratings has downgraded three distressed classes and affirmed 15 classes of JP Morgan Chase Commercial Mortgage Securities Corp. commercial mortgage pass-through certificates series 2006-CIBC15 (JPM 2006-CIBC15). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Fitch modeled losses of 15.4% of the remaining pool; expected losses on the original pool balance total 22.8%, including $247.8 million (11.7% of the original pool balance) in realized losses to date. Fitch has designated 44 loans (50.4%) as Fitch Loans of Concern, which includes six specially serviced assets (4.8%).

As of the February 2014 distribution date, the pool's aggregate principal balance has been reduced by 28.4% to $1.52 billion from $2.12 billion at issuance. Per the servicer reporting, seven loans (3.8% of the pool) are defeased. Interest shortfalls are currently affecting classes A-J through NR.

The largest contributor to expected losses remains the Warner Building (19.3% of the pool), which is secured by a 616,135 square foot (sf) landmark office property located in Washington, D.C., approximately three blocks from the White House. In January 2012, the property experienced a significant decline in occupancy from 99% to 49% as a result of the bankruptcy and vacancy of the largest tenant, Howrey Simon Arnold & White (51% of NRA). As of the January 2014 rent roll, the property occupancy has increased to 70%. The largest tenants are Baker Botts, LLP (26%, lease expiration 2020), Cooley LLP (18%, lease expiration 2028), General Electric Company (8%, lease expiration 2016), and Live Nation, parent of the Warner Theater, (7%, lease expiration 2023 after recent extension). The borrower continues to aggressively market the vacant space and discussions continue with several prospective tenants. The loan has a servicer reported June 2013 year-to-date (YTD) debt service coverage ratio (DSCR) of 0.30x, however, at least two tenants had significant free rent periods during the period that have now burned off. The total rental income per the January 2014 rent roll increased by approximately 40% from the January 2013 rent roll. The loan remains substantially overleveraged.

The next largest contributor to expected losses remains the Scottsdale Plaza Resort (3.8% of the pool), which is secured by a 404-key hotel located in Scottsdale, AZ. The property's performance continues to lag its competitive set in terms of occupancy, average daily rate (ADR), and revenue per available room (RevPAR). According to the December 2013 STR report, the property's trailing 12 month (TTM) occupancy, ADR, and RevPAR were 52.2%, $127.81, and $66.74, respectively, with only 77.1% RevPAR penetration. The most recent servicer reported DSCR for YTD September 2013 was 0.56x, which is in line with the prior two years' performance, but significantly below the reported issuance DSCR of 1.93x. The loan remains current as the borrower has been funding debt service shortfalls out of pocket.

The third largest contributor to expected losses is the defaulted 4001 North Pine Island Road (1.3% of the pool), which is secured by a 119 unit corporate apartment complex located in Sunrise, FL. The loan transferred into special servicing in December 2008 due to monetary default. The foreclosure action was filed in December 2010; however, zoning violations stalled the process. Per the Servicer, the issues have been resolved and foreclosure is expected to be completed by early summer.

RATING SENSITIVITY

Although credit enhancement for class A-4, A-SB and A-1A remains the same, class A-SB is a scheduled balance class, and is senior in priority to class A-1A and A-4 with respect to its scheduled principal payments, and is expected to be paid in full by September 2015, so therefore retains its 'AAAsf' and Stable Outlook. Classes A-1A and A-4 may be subject to further downgrade should the larger performing loans show increased deterioration or if interest shortfalls become likely. It should be noted that three of the top 15 loans are secured by properties currently leased to single tenants. The distressed classes A-M and A-J are subject to further downgrade as additional losses are realized.

Fitch downgrades the following classes as indicated:

--$164.2 million class A-J to 'Csf' from 'CCsf', RE 0%;

--$11.5 million class B to 'Dsf' from 'Csf', RE 0%;

--$0 class C to 'Dsf' from 'Csf', RE 0%.

Fitch affirms the following classes as indicated:

--$874.5 million class A-4 at 'AAsf', Outlook Negative;

--$39.1 million class A-SB at 'AAAsf', Outlook Stable;

--$216.5 million class A-1A at 'AAsf', Outlook Negative;

--$211.8 million class A-M at 'CCCsf', RE 75%.

--$0 class D at 'Dsf', RE 0%;

--$0 class E at 'Dsf', RE 0%;

--$0 class F at 'Dsf', RE 0%;

--$0 class G at 'Dsf', RE 0%;

--$0 class H at 'Dsf', RE 0%;

--$0 class J at 'Dsf', RE 0%;

--$0 class K at 'Dsf', RE 0%;

--$0 class L at 'Dsf', RE 0%;

--$0 class M at 'Dsf', RE 0%;

--$0 class N at 'Dsf', RE 0%;

--$0 class P at 'Dsf', RE 0%.

The class A-1 and A-3 certificates have paid in full. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:

Structured Finance >> CMBS >> Criteria Reports

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823354

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Contacts

Fitch Ratings
Primary Analyst:
Stacey McGovern, +1-212-908-0722
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst:
Stacey McGovern, +1-212-908-0722
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com