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Fitch Downgrades Seven Distressed Classes of JPMCC 2007-LDP10

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded seven and affirmed 20 classes of J.P. Morgan Chase Commercial Mortgage Securities Trust, commercial mortgage pass-through certificates, series 2007-LDP10 (JPMCC 2007-LDP10). A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The downgrades reflect a greater certainty of losses. The affirmations reflect the continued expected performance of the remaining pool and better recoveries than Fitch previously expected on loans liquidated from the pool since the last rating action. Fitch modeled losses of 18.9% of the remaining pool; expected losses on the original pool balance total 18.4%, including $402.6 million (7.6% of the original pool balance) in realized losses to date. Fitch has designated 52 loans (45%) as Fitch Loans of Concern, which includes 10 specially serviced assets (9.2%).

As of the June 2014 distribution date, the pool's aggregate principal balance has been reduced by 42.4% to $3.1 billion from $5.3 billion at issuance. Two loans (1.2% of the pool) are defeased. Cumulative interest shortfalls totaling $52.7 million are currently affecting the A-J classes through class NR.

The largest contributor to modeled losses is the Solana asset (4.6% of the pool), the largest specially serviced asset in the pool. The asset is a large mixed-use development located in Westlake, TX consisting of 11 office buildings, a retail center, a health club, and a 294-key Marriott hotel. The loan was initially transferred to special servicing in March 2009 for imminent default when the borrower requested relief due to the inability to cover debt service upon a major lease expiration and poor hotel performance. The asset was included as part of a multi-asset marketing plan during fourth quarter 2013, but did not sell. Foreclosure occurred in early February 2014.

In December 2011, property occupancy declined to 65% from 84% due to a loss of a single major tenant. As of second quarter 2014, occupancy further declined to 60% due to various tenants vacating at lease expiration and an existing tenant downsizing its occupied space. Occupancy is expected to continue to decline due to the largest tenant's recent request for early renewal and downsizing. The special servicer indicated a near-term sale is likely. The most recent appraisal value from March 2014, which represented a 21% decline from the prior May 2013 appraisal value, indicates significant losses upon liquidation.

The second largest contributor to modeled losses is the Skyline Portfolio (6.6%). The collateral consists of a portfolio of eight office buildings totaling approximately 2.6 million square feet (sf) located in Falls Church, VA. The loan was returned to the master servicer in February 2014 after it was previously transferred to special servicing in March 2012 for imminent default and modified in October 2013. The $203.4 million pari-passu portion in the transaction was bifurcated into a $105 million A-note and a $98.4 million B-note. The loan maturity was extended to February 2022 with a one-year extension option if certain performance metrics are attained. The loan continues to perform under the terms of the modification.

The third largest contributor to modeled losses is the Lafayette Property Trust loan (6.6%). The loan is secured by a portfolio of eight office properties and a single-tenant Clyde's restaurant located within the Mark Center, a 350-acre master-planned community, located in Alexandria, VA. The portfolio has experienced significant declines in occupancy since issuance. As of the December 2013 rent roll, the portfolio occupancy was 78.6%, down from 81.2% at year-end 2012 and the 93.1% at issuance. Individual property occupancies range from 46.5% to 100%. Approximately 58% of the portfolio NRA rolls prior to the end of 2017 with the loan maturing in March 2017. According to REIS and as of first quarter 2014, the I-395 submarket of Suburban Virginia reported a vacancy of 25.3% and asking rents of $29.77 psf compared to in-place rents of approximately $32 psf. The debt service coverage ratio, on a net operating income basis, was 1.41x for 2013 and 1.47x for 2012.

RATING SENSITIVITY

Rating Outlooks on classes A-1A, A-3, A-M, and A-MS were revised to Stable due to expected continued paydowns. Distressed classes (those rated below 'B') may be subject to downgrades as additional losses are realized or if realized losses exceed Fitch's expectations.

Fitch has downgraded the following classes:

--$200.7 million class A-J to 'CCsf' from 'CCCsf'; RE 20%;

--$145.8 million class A-JS to 'CCsf' from 'CCCsf'; RE 20%;

--$100 million class A-JFL to 'CCsf' from 'CCCsf'; RE 20%;

--$71.8 million class B to 'Csf' from 'CCsf'; RE 0%;

--$34.8 million class B-S to 'Csf' from 'CCsf'; RE 0%;

--$26.9 million class C to 'Csf' from 'CCsf'; RE 0%;

--$13.1 million class C-S to 'Csf' from 'CCsf'; RE 0%.

In addition, Fitch has affirmed and revised Rating Outlooks on the following classes as indicated:

--$415.8 million class A-1A at 'AAAsf', Outlook to Stable from Negative;

--$1.6 billion class A-3 at 'AAAsf', Outlook to Stable from Negative;

--$359 million class A-M at 'Bsf'; Outlook to Stable from Negative;

--$6.1 million class A-MS at 'Bsf'; Outlook to Stable from Negative;

--$47.5 million class D at 'Dsf'; RE 0%;

--$23 million class D-S at 'Dsf'; RE 0%;

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

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

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

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

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

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

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

--$0 class H-S 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, A-1S, A-2, A-2S, A-2SFX, A-2SFL, and A-3S certificates have paid in full. Fitch does not rate the fully depleted class 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' (May 28, 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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

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=837704

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings, New York
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com
or
Primary Analyst
Director
Melissa Che, +1-212-612-7862
or
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Managing Director
Mary MacNeill, +1-212-908-0785