NEW YORK--(BUSINESS WIRE)--Fitch Ratings downgrades one class and affirms 12 classes of J. P. Morgan Chase Commercial Mortgage Securities Corp (JPMCC) commercial mortgage pass-through certificates series 2006-LDP7. A full list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The downgrade to class C is a result of a higher certainty of losses based on the significant concentration of specially serviced assets.
Fitch modeled losses of 50.9% of the remaining pool; expected losses on the original pool balance total 13.9%, including $267 million (6.8% of the original pool balance) in realized losses to date. Fitch has designated 19 loans (90.5%) as Fitch Loans of Concern, which includes 18 specially serviced assets (87%). The transaction is highly concentrated with only 29 loans remaining of the original 271 at issuance. Of the remaining non-specially serviced loans, one loan (1%) did not pay off at its anticipated repayment date (ARD) of Oct. 1, 2016. The remaining performing loans have maturities in 2019 (6%), 2020 (3%), and 2% between 2021 and 2026.
As of the September 2016 distribution date, the pool's aggregate principal balance has been reduced by 85.9% to $555 million from $3.94 billion at issuance. No loans are defeased. Interest shortfalls are currently affecting classes A-J through NR.
The largest contributor to expected losses is the specially-serviced Westfield Centro Portfolio asset (43.3% 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 which is collateral) located in OH, CT, MO, CA, and CO. Westfield Eagle Rock (Los Angeles, CA) is a 460,000 sf regional mall anchored by Macy's and Target is currently 97% occupied; Westfield Midway Mall (Elyria, OH) is a 748,000 sf regional mall anchored by JC Penney is currently 79% occupied; Westfield West Park Mall (Cape Girardeau., MO) is a 407,000 sf regional mall is anchored by Macy's, JC Penney and is currently 72% occupied; Westfield Enfield Square (Enfield, CT) is a 548,000 sf regional mall anchored by Sears and Target (Macy's is not part of the collateral and vacated April 2016) is currently 80% occupied; and Westfield Westland Town Center (Lakewood, CO) is a 328,000 sf power center anchored by Lowe's is currently 97% occupied. The loan was transferred to special servicing in May 2014 for imminent default. The loan matured in July 2016. The properties are all real estate owned (REO) as of Feburary 2016. Per the special servicer, there are currently no disposition plans for any of the properties and they are working to identify leasing opportunities.
The next largest contributor to expected losses is the Linden Plaza A/B note loan (5.9%), which is secured by a 277,717 sf retail center anchored by Walmart. The major tenants include Modell's and Dollar Tree with lease expirations in 2023 and 2022. Dress Barn (3%) vacated the property at lease expiration in June 2016. The loan was modified in September 2015 and terms included A/B note structure and extension of the maturity date to May 1, 2019. The property suffered declines in occupancy in 2013 when two major tenants who occupied 49,986 sf and 20,786 sf, respectively, vacated their space. The property was 69% occupied as of July 2016. The master servicer reported a new lease was signed with Integrity Staffing Solutions for 3,000 sf which commenced Oct. 1, 2016. The borrower has engaged a third-party broker to assist with leasing at the property. Per the master servicer, the local market conditions are transitioning and the demographic has changed and more retail competition has emerged. The rental rates at the property are 25% below the market rates.
The third largest contributor to expected losses is the specially-serviced Hilton - Lisle/Naperville loan (6.4%), which is secured by a full- service hotel consisting of 309 rooms located in Lisle, IL. The loan was transferred to special servicing on Feb. 12, 2016 for imminent default as the borrower was unable to refinance and pay off the loan at maturity due to insufficient property cash flow. Additionally, the Hilton franchise agreement expired at maturity. The borrower has secured a short-term extension until Dec. 31, 2016. Per the special servicer, they are proceeding with foreclosure plans while continuing discussions with the borrower. A receivership hearing is scheduled for Oct. 24, 2016. The property was 64% occupied as of May 2016 with an average daily rate (ADR) of $110 and revenue per available room (RevPAR) of $70 which represents a 2% decrease year over year compared to a 3% increase for its competitive set.
The Rating Outlook on class A-M remains Negative due to the large number of specially serviced assets and the potential for increased expected losses and/or interest shortfalls. Although class A-J is currently recouping prior interest shortfalls, Fitch remains concerned with the potential for future interest shortfalls to increase should additional loans transfer to special servicing or if current specially serviced assets are not disposed of in a timely fashion. If interest shortfalls and/or expected losses increase, a downgrade to class A-M is possible. However, if specially serviced assets are disposed of and expected losses remain stable, the Rating Outlook may be revised to Stable. Downgrades are likely to class A-J and B as additional losses are incurred; upgrades are not likely.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch downgrades the following class:
--$44.3 million class C to 'Csf' from 'CCsf'; RE 0%.
Fitch also affirms the following classes and revises REs as indicated:
--$34 million class A-M at 'AAAsf'; Outlook Negative;
--$310.3 million class A-J at 'CCCsf'; RE 75%;
--$78.8 million class B at 'CCsf'; RE 0%;
--$14.8 million class D at 'Csf'; RE 0%;
--$39.4 million class E at 'Csf'; RE 0%;
--$33.5 million 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%.
The class A-1, A-2, A-3A, A-3FL, A-3B, A-4, A-SB and A-1A 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 is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
Dodd-Frank Rating Information Disclosure Form
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