NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all rated classes of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-HSBC (JPMCC 2012-HSBC). A full list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The affirmation is based on the performance of the underlying trust asset continuing to be in line with expectations at issuance. As of the June 2016 remittance, the property's physical occupancy has stabilized as expected at issuance, with a current occupancy of 99.5% compared with 92% at issuance. The loan has 12 months left in its five-year interest-only period with a final maturity in July 2022.
HSBC Tower is a 30-story, 865,339 square foot (sf), high-rise office building located in the Grand Central submarket in midtown Manhattan. The three largest tenants are HSBC (60%), Baker & McKenzie (12%),and Man Investments Holding Inc. (6%), with lease expirations in 2020, 2028, and 2022; respectively.
The property at issuance was 92% leased, with some tenants awaiting the build-out of their units; however, all tenants are currently in place. As of the December 2015 rent roll, the property is 99.5% occupied with below market-average rent at $62 sf. There is minimal near-term rollover. Per REIS as of first quarter 2016, the Grand Central submarket Class A office vacancy is 7.5% with average asking rent of $87 sf. As of trailing 12-months March 2016, Fitch's net cash flow (NCF) has increased 9% since issuance. Fitch's NCF gives credit for the investment-grade nature of the larger tenants and reserves, as well as standard assumptions of vacancy, management fees and other expenses.
The loan at issuance was structured with a hard lockbox and both ongoing and upfront reserves. Reserves account for current and future expenses for leasing costs and capital expenditures, as well as upfront reserves to cover ongoing capital improvements and free rent. A rollover reserve of $1.25 million per annum is in place for HSBC as is a cash flow sweep that will be triggered 30 months prior to HSBC's lease expiration. The current balance of the leasing reserve and replacement reserve as of June 2015 are $1,149,107 and $91,871, respectively.
The Stable Outlooks on all classes reflect the likelihood of future affirmations. Future downgrades are possible should there be a material decline in portfolio cash flow or occupancy.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following ratings:
--$200,000,000 class A at 'AAAsf'; Outlook Stable;
--Interest-only class X-A* at 'AAAsf'; Outlook Stable;
--Interest-only class X-B** at 'BBB-sf'; Outlook Stable;
--$15,000,000 class B at 'AAsf'; Outlook Stable;
--$21,400,000 class C at 'Asf'; Outlook Stable;
--$58,600,000 class D at 'BBB-sf'; Outlook Stable;
--$5,000,000 class E at 'BBB-sf'; Outlook Stable.
*Notional balance of class A
**Notional balance of classes B, C, D and E
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
JPMCC Mortgage Securities Trust 2012-HSBC -- Appendix
Dodd-Frank Rating Information Disclosure Form