Nov. 13, 2009 (Business Wire) -- Fitch Ratings takes various rating actions on all rated classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP2. A detailed list of rating actions follows at the end of this press release.
The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch forecasts potential losses of 4.9% for this transaction, should market conditions not recover. Today's rating actions are based on losses of 4.5%, including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized.
To determine potential defaults for each loan Fitch assumed cash flow would decline by 10% from year-end 2008. This is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three-year period. If the stressed cash flow would cause the loan to fall below 0.95 times (x), Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow and applied a market cap rate by property type, ranging between 7.5% and 9.5%, to derive a value. If the loan balance at default is less than the stressed cash flow the loan would realize that loss. These loss estimates were reviewed in more detail for loans representing 43.4% of the pool and, in certain cases, revised based on additional information and/or property characteristics.
Approximately 90% of the mortgages mature within the next five years as follows: 10.3% in 2010, 0.2% in 2011 and 19.9% in 2012, 3.1% in 2013, and 56.4% in 2015. Fitch identified 53 Loans of Concern (12.4%) within the pool, 11 of which (3.2%) are specially serviced. Of the specially serviced loans, two (0.5%) are current.
Losses are expected on five (8.7%) of the loans within the Top 15: three (4%) of these loans are expected to default during the term, while losses on the remaining two loans (4.7%) are expected at maturity. Loss severities associated with these loans range from 3% to 36%. The largest contributors to loss are as follows: Cross Creek Shopping Center (1.6%), Bently Green/Sandpiper - Milestone (1.6%), and Ashwood-Southfield Portfolio (1.3%).
Cross Creek Shopping Center is secured by a 363,333 square foot (sf) anchored retail center in Memphis, TN, approximately 20 miles southeast of downtown Memphis. The property is represented by a strong national tenant base, including Home Depot (rated 'BBB+' by Fitch) (28.3%), Kroger (rated 'BBB') (17.6%), Babies R Us (11.6%), and Bed, Bath & Beyond (9.6%).
