Fitch Ratings has issued a presale report on J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-JP4 commercial mortgage pass-through certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$35,667,000 class A-1 'AAAsf'; Outlook Stable;
--$129,067,000 class A-2 'AAAsf'; Outlook Stable;
--$215,000,000 class A-3 'AAAsf'; Outlook Stable;
--$266,136,000 class A-4 'AAAsf'; Outlook Stable;
--$52,478,000 class A-SB 'AAAsf'; Outlook Stable;
--$758,206,000a class X-A 'AAAsf'; Outlook Stable;
--$61,106,000a class X-B 'AA-sf'; Outlook Stable;
--$59,858,000 class A-S 'AAAsf'; Outlook Stable;
--$61,106,000 class B 'AA-sf'; Outlook Stable;
--$49,882,000 class C 'A-sf'; Outlook Stable;
--$105,999,000ab class X-C 'BBB-sf'; Outlook Stable;
--$56,117,000b class D 'BBB-sf'; Outlook Stable;
--$22,447,000b class E 'BB-sf'; Outlook Stable.
The following classes are not expected to be rated:
--$17,459,000a class F;
--$32,423,640a class NR.
a) Notional amount and interest only.
b) Privately placed pursuant to Rule 144A.
The expected ratings are based on information provided by the issuer as of Nov. 29, 2016.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 40 loans secured by 72 commercial properties having an aggregate principal balance of $997,640,641 as of the cut-off date. The loans were contributed to the trust by JP Morgan Chase Bank, National Association, Starwood Mortgage Funding VI LLC, Benefit Street Partners CRE Finance LLC, and Ladder Capital Finance LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 79.5% of the properties by balance, asset summary reviews on 100.0% of the pool, and cash flow analysis of 92.7% of the pool.
KEY RATING DRIVERS
Lower Fitch Leverage: The pool's leverage statistics are lower than those of other recent Fitch-rated, fixed-rate multiborrower transactions. The pool's Fitch debt service coverage ratio (DSCR) and Fitch loan to value (LTV) of 1.28x and 99.4%, respectively, are better than the year-to-date (YTD) 2016 average Fitch DSCR and Fitch LTV of 1.20x and 105.6%, respectively.
Investment-Grade Credit Opinion Loan: Three loans, representing 21.8% of the pool have investment-grade credit opinions. Hilton Hawaiian Village (9.4%), the largest loan in the pool, has an investment-grade credit opinion of 'BBB-sf'* on a stand-alone basis. 9 West 57th (6.3%) has an investment-grade credit opinion of 'AAAsf'* on a stand-alone basis. Moffett Gateway (6.0%) has an investment-grade credit opinion of 'BBB-sf'* on a stand-alone basis.
Highly Concentrated by Loan Size and Property Type: The largest 10 loans account for 56.3% of the pool, which is above the YTD 2016 and 2015 averages of 54.6% and 49.3%, respectively. Combined retail, office and hotel properties consist of 89.0% of the transaction, which is above the YTD 2016 combined total of 74.7%.
For this transaction, Fitch's net cash flow (NCF) was 10.0% below the most recent year's net operating income (NOI; for properties for which a full-year NOI was provided, excluding properties that were stabilizing during this period). Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans and in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to JPMCC 2016-JP4 certificates and found that the transaction displays average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'A+sf' could occur. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'A-sf' could occur. The presale report includes a detailed explanation of additional stresses and sensitivities on page 11.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by Ernst & Young LLP. The third-party due diligence described in Form 15E focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and it did not have an impact on Fitch's analysis or conclusions.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 18 Aug 2016)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Jul 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)
Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
U.S. and Canadian Multiborrower CMBS Surveillance Criteria (pub. 11 Nov 2016)
JPMCC 2016-JP4 -- Appendix
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1
Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001