NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded three and affirmed 14 classes of J. P. Morgan Chase Commercial Mortgage Securities Corp (JPMCC) commercial mortgage pass-through certificates series 2006-LDP7. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
Fitch modeled losses of 12.9% of the remaining pool; expected losses on the original pool balance total 13.6%, including $138.7 million (3.5% of the original pool balance) in realized losses to date. Fitch has designated 57 loans (27%) as Fitch Loans of Concern, which includes 23 specially serviced assets (16.8%).
As of the September 2014 distribution date, the pool's aggregate principal balance has been reduced by 21.9% to $3.08 billion from $3.94 billion at issuance. Per the servicer reporting, 12 loans (5.5% of the pool) are defeased. Interest shortfalls are currently affecting classes B through NR.
The largest contributor to expected losses is the specially-serviced Westfield Centro Retail Portfolio loan (7.8% of the pool), which is secured by a portfolio of four regional malls and one anchored retail center totaling 2.4 million square feet (sf) (1.7 million sf of collateral) located in OH, CT, MO, CA, and CO. The retail centers are all managed by Madison Marquette. The loan transferred to special servicing in May 2014 for imminent default as the sponsor is unable to continue to fund property operating shortfalls. Additionally, the borrower is unable to fund any future leasing expenses required at the properties. The decline in performance is mostly attributed to Midway Mall's (Elryia, OH) underperformance. The space vacated by Dillards (157,580sf) remains vacant since August 2007. The property is currently anchored by Best Buy (41,479 sf) and JCPenney (159,334 sf) both with lease expirations in 2016. The remaining properties, Westland Town Center, Enfield Mall, and Eagle Rock continue to have occupancies in the mid 90's, and West Park is 72% occupied. Overall, the portfolio is 83% occupied as of July 2014. The trailing 12 month (TTM) June 2013, debt-service coverage ratio (DSCR) for the portfolio is 1.05x. The most recently reported DSCR as of March 31, 2014 is 0.82x. The borrower has requested a loan modification and the special servicer continues negotiations with the borrower while dual-tracking foreclosure until a resolution is achieved.
The next largest contributor to expected losses is the One and Two Prudential Plaza loan (6.6%), which is secured by two connected properties in Chicago, IL. One Prudential Plaza is a 1,202,772 sf office property and Two Prudential Plaza is a 990,749 sq ft office property. The largest tenants are McGraw Hill Financial, Inc. (13%), lease expiration November 2016; Optiver US LLC (4%), expiration April 2018; and Marketing Werks Inc. (4%), expiration June 2019. The properties have a combined occupancy of 61% as of June 2014. The decline in occupancy is a result of the tenant, Integrys Business Support, vacating 205,000 sf at lease expiration in May 2014. Additionally, according to news articles, a new 10-year lease for approximately 49,464 sf was recently signed with tenant, Cision, who is expected to take occupancy in March 2015. The loan was previously modified in June 2013. The loan was assumed, with new sponsors & guarantors, Michael Silberberg and Mark Karasick which have contributed approximately $80 million in new equity to the property. The sponsors continue with planned capital improvements which include updates to the lobby and plaza areas in addition to new and upgraded amenities throughout the building in an effort to attract tenants.
The third largest contributor to expected losses is the specially-serviced Shoreview Corporate Center loan (1.7%), which is secured by a 552,927 sf office property (1.6%) located in Shoreview, MN, approximately 12 miles north of the Minneapolis CBD. The collateral consists of five buildings built in 1973 and renovated in 2005. The loan was transferred to special servicing in October 2009 due to imminent default due to the largest tenant, (41%) vacating at lease expiration. The property became real estate owned (REO) on March 28, 2012. The largest tenant at the property is Land O Lakes (34%) whose lease expires in September 2018. The property is 54% occupied as of August 2014. Per the special servicer, various buildings are in need of roof repairs/replacement. The special servicer continues to evaluate all possible disposition alternatives.
Rating Outlooks on classes A-3 through A-1A remain Stable due to increasing credit enhancement and continued paydown. The Rating Outlook on class A-M is revised to Negative due to the concentration of real estate owned (REO) assets (%) and the potential for increased fees and expenses associated with those assets the longer they remain in special servicing.
Fitch downgrades the following classes and assigns or revises Recovery Estimates (REs) as indicated:
--$310.3 million class A-J to 'CCCsf' from 'BBsf', RE 85%;
--$78.8 million class B to 'CCsf' from 'CCCsf', RE 0%;
--$14.8 million class D to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes and revises the Rating Outlook as indicated:
--$394 million class A-M at 'AAAsf', Outlook to Negative from Stable.
Fitch affirms the following classes:
--$70.5 million class A-3B at 'AAAsf', Outlook Stable;
--$1.6 billion class A-4 at 'AAAsf', Outlook Stable;
--$36.3 million class A-SB at 'AAAsf', Outlook Stable;
--$310.4 million class A-1A at 'AAAsf', Outlook Stable;
--$44.3 million class C at 'CCsf', RE 0%;
--$39.4 million class E at 'Csf', RE 0%;
--$39.4 million class F at 'Csf', RE 0%;
--$49.2 million class G at 'Csf', RE 0%;
--$39.4 million class H at 'Csf', RE 0%;
--$33.6 million 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%.
The class A-1, A-2, A-3A and A-3FL certificates have paid in full. Fitch does not rate the class N, P, Q and NR certificates. Fitch previously withdrew the rating on the interest-only class X 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' (Aug. 4, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria