News Column

Fitch Upgrades Six Classes of JPMCC 2004-C2

June 19, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded six classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., commercial mortgage pass-through certificates, series 2004-C2. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades reflect an increase in credit enhancement from loan paydown primarily from loan payoffs, as the transaction has paid down $690.3 million since Fitch's last rating action. Despite high credit enhancement the upgrades were limited given interest shortfalls that had previously reached class D before they were subsequently recovered, as well as the high percentage of the pool in special servicing.

Fitch modeled losses of 13.1% of the remaining pool; expected losses of the original pool total 2.3%, including $12 million (1.1% of the original pool balance) in realized losses to date. Of the original 134 loans, 19 remain; Fitch has designated 12 loans (45.1%) as Fitch Loans of Concern, which includes eight specially serviced loans (42.3%). Remaining loan maturities are concentrated in 2014 and 2019 comprising of 46.7% and 34.9% of the pool balance, respectively.

As of the May 2014 distribution date, the pool's aggregate principal balance has been reduced by 90.2% to $101.2 million from $1.03 billion at issuance. Per the servicer reporting, one loan (1.9%) in the trust is currently defeased. As of the May 2014 distribution date, interest shortfalls were affecting classes H through NR.

The largest contributor to expected losses is the real estate owned 135,004 square foot retail center, Tower Plaza Retail Center (11.6% of the pool balance), located in Temacula, CA. The property experienced cash flow issues due to occupancy declines in 2009 when the grocery anchor vacated the property. The asset was transferred to the special servicer in February 2012 for payment default and the special servicer completed the foreclosure process in March 2014. The property's occupancy is currently 74% which is an improvement from the 2010 low of 57%. The special servicer is evaluating options before determining the disposition strategy.

The second largest contributor to expected losses is collateralized by a 139,534 sf retail property located in Slidell, LA. The property is shadowed anchored by Target and has experienced cash flow and occupancy issues when the local economy struggled during the last recession. Economic activity has subsequently stabilized and the property's occupancy was 80% with a debt service coverage ratio (DSCR) of 1.5x at year end 2013. The property transferred to the special servicer in March 2014 when it was apparent that the loan would not pay off at its April 2014 maturity date. The special servicer notes indicate that a full pay-off is expected.

The third largest contributor to expected losses is the specially serviced loan, Woodforest Square, a 44,399 sf retail center located in Houston, TX. The property reported year end 2013 occupancy of 68% and DSCR of 1.22x. The loan was transferred to the special servicer in 2012 after one of the loan guarantors filed for bankruptcy protection. The sponsor issues are expected to prevent the loan from refinancing by the July 2014 maturity date and the special servicer continues to evaluate workout options.

RATING SENSITIVITIES

The ratings of classes C through E have Stable Outlooks due to high credit enhancement. Classes D and E will remain at 'A' due to previously incurred interest shortfalls in accordance to the May 28, 2014 Fitch report 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions'. Classes F through J also have Stable Outlooks; despite the increasing credit enhancement, upgrades are not warranted due to the high amount of specially serviced loans and increasing overall concentrations.

Fitch upgrades the following classes:

--$3.1 million class C to 'AAAsf' from 'AAsf'; Outlook Stable;

--$9.1 million class E to 'Asf' from 'BBBsf'; Outlook Stable;

--$11.6 million class F to 'BBBsf' from 'BBB-sf'; Outlook Stable from Negative;

--$7.8 million class G to 'BBBsf' from 'BBsf'; Outlook Stable from Negative;

--$11.6 million class H to 'BBsf' from 'Bsf'; Outlook Stable from Negative;

--$6.5 million class J to 'Bsf' from 'CCCsf'; assigned Outlook Stable.

Fitch also affirms the following classes:

--$24.6 million class D at 'Asf'; Outlook Stable;

--$5.2 million class K at 'CCCsf'; RE 100%;

--$2.6 million class L at 'CCsf'; RE 75%;

--$3.9 million class M at 'Csf'; RE 0%;

--$2.6 million class N at 'Csf'; RE 0%;

--$2.6 million class P at 'Csf'; RE: 0%;

The class A-1, A-2, A-3, A-1A, B, RP-1, RP-2, RP-3, RP-4, and the RP-5 certificates have paid in full. Fitch does not rate the class NR certificate. Fitch previously withdrew the rating on the interest-only class X certificate.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013);

--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 28, 2014).

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

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=835505

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.



Fitch Ratings

Primary Analyst

Jay Bullie

Associate Director

+1-312-368-2079

Fitch Ratings, Inc.

70 W. Madison Street

Chicago, IL 60642

or

Committee Chairperson

Mary MacNeill

Managing Director

+1-212-908-0785

or

Media Relations

Sandro Scenga, +1-212-908-0278

sandro.scenga@fitchratings.com


Source: Fitch Ratings


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