NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 21 classes of J.P. Morgan Chase Commercial Mortgage Securities Trust, series 2008-C2. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The affirmations reflect sufficient credit enhancement relative to Fitch expected losses. Fitch modeled losses of 18.9% of the remaining pool; expected losses on the original pool balance total 24.9%, including $150.3 million (12.9% of the original pool balance) in realized losses to date primarily associated with the Dos Lagos retail loan disposition. Fitch has designated 22 loans (47.7%) as Fitch Loans of Concern, which includes six specially serviced assets (21.8%).
As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by approximately 35% to $760 million from $1.16 billion at issuance. There are 64 loans remaining of the original 80. Interest shortfalls are currently affecting classes A-M through T.
The largest contributor to expected losses is the Westin Portfolio, the current pool's largest loan (15.3%). The loan is secured by two Westin resort hotels: the 487-room Westin La Paloma in Tucson, AZ, with a 27-hole Jack Nicklaus golf course and spa, and the 416-room oceanfront Westin Hilton Head, in Hilton Head, SC, which features a Westin Heavenly Spa, the first 'Heavenly Spa' opened in the U.S. Both resorts offer numerous restaurants, pools and over 100,000 sf of meeting space. The loan, which transferred to special servicing soon after securitization (due to a borrower bankruptcy), fell short of performance expectations as a result of the recession and its impact on the hotels' performance. In early 2012, a loan modification was completed which required the newly formed sponsor, Southwest Value Partners, to timely perform the property improvement plans (PIP) agreed upon in the reorganization and approved by Westin.
Recent press indicates the sponsor has completed significant renovations on both properties over the last few years, and the properties appear attractive and well kept. The sponsor continues to work on stabilizing performance and growing room revenue through Westin's strong reservation system. The franchise agreement with the Westin Hilton Head expires on 12/31/2019, and the agreement with Westin La Paloma expires on 12/31/2028.
Updated valuations for the properties have not been made available; additionally, an accurate value may be more difficult to obtain as the subject properties have not been at full operation while undergoing renovations, and certain terms per the bankruptcy plan are being contested by the lender and operator. Fitch modeled a conservative value in its analysis, but took into account the significant capital investment both properties recently received, as well as the continued strong performance of the U.S. lodging industry. Fitch will closely monitor any performance updates including updated valuations as it becomes available.
The next contributor to expected losses is a specially serviced loan (3.3%) secured by a 252,759 sf portfolio of three office-flex properties in Norcross, GA. A receiver was appointed in late 2013, and the asset became real estate owned (REO) in early 2014. The special servicer is pursuing a stabilization strategy with a focus on leasing up vacant space. The subject's market remains weak however, and competition for tenants is high among landlords.
The Rating Outlooks for classes A-4, A-4FL, A-SB, and A-1A remain Negative based on a lack of updated values for certain specially serviced loans. Additionally, dispositions from previously liquidated loans have eroded credit support to the lower classes in the trust. Downgrades are possible if expected losses increase or if these classes are affected by repeated interest shortfalls.
Fitch affirms the following Classes and Outlooks as indicated:
--$336.3 million class A-4 at 'Asf'; Outlook Negative;
--$137.5 million class A-4FL at 'Asf'; Outlook Negative;
--$34.2 million class A-SB at 'Asf'; Outlook Negative;
--$53.5 million class A-1A at 'Asf'; Outlook Negative;
--$116.6 million class A-M at 'CCsf'; RE 50%;
--$61.2 million class A-J at 'Csf'; RE 0%;
--$14.6 million class B at 'Csf'; RE 0%;
--$7 million class C at 'Dsf'; RE 0%;
--$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%;
--$0 class Q at 'Dsf'; RE 0%;
--$0 class T at 'Dsf'; RE 0%.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Global Structured Finance Rating Criteria