Fitch Upgrades Five Classes of JPMCC 2004-C2

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded five and affirmed 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 and affirmations are based on the stable performance of the underlying collateral pool, high credit enhancement, and continued expected amortization.

The pool has increasing loan concentrations with only 15 of the original 134 loans outstanding. One loan (2.47%) is fully defeased. The remaining non-defeased loans consist of fully amortizing (20.8%), balloon maturities (55.8%), and ARD loans (23.9%). The loans' final maturity dates are in 2018 (4.2%), 2019 (50.2%), 2020 (2.5%), 2022 (1.2%), and 2024 (17.1%).

As of the April 2015 remittance report, the transaction has paid down 93.3% to $68.9 million from $1.035 billion at issuance. Fitch modeled losses of 14.54% of the remaining pool; expected losses of the original pool are at 2.11% including losses already incurred to date (1.14%). There are four Fitch loans of concern all of which are specially serviced.

The largest contributor to losses is the real estate owned (REO) 135,004 square foot retail center, Tower Plaza Retail Center (11.6% of the pool balance and the third largest in the pool), 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 losses is the specially serviced loan collateralized by a 16,004 sf unanchored retail property located in Westminster, CO. The loan was modified in early 2014 after a maturity default occurred from environmental issues that prevented the sponsor from securing takeout financing. The modification terms extended the loan 12 months (new maturity date of May 2015) to facilitate site remediation of a previous dry cleaning tenant. Per the servicer, the process is still on-going and the sponsor is trying to secure another loan extension to complete the remediation.

The third largest contributor to modeled losses, Palmdale, is collateralized by a 202-pad manufactured housing community located in San Benito, TX. The loan was transferred to the special servicer after defaulting at the scheduled maturity date of February 2014. The loan was extended one year so the sponsor could either secure funds to refinance or sell the property by the end of the year. A potential sale of the property fell through at the beginning of 2015 and the special servicer is conducting due diligence before determining next steps.

RATING SENSITIVITIES

Although credit enhancement is high, the ratings on classes F through H are stable as additional upgrades are not expected due to the concentrated nature of the pool and lack of near term paydown to these classes. Downgrades to the non-investment grades are possible if additional loans transfer to special servicing and/or expected losses increase significantly.

Fitch upgrades the following classes:

--$3.4 million class D to 'AAAsf' from 'Asf'; Outlook Stable;

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

--$11.6 million class F to 'Asf' from 'BBBsf'; Outlook Stable;

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

--$11.6 million class H to 'BBB-sf' from 'BBsf'; Outlook Stable;

Fitch also affirms the following classes:

--$6.5 million class J at 'Bsf'; Outlook Stable;

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

--$2.6 million class L at 'CCsf'; RE 100% from 75%;

--$3.9 million class M at 'Csf'; RE 35% from 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, C, 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. 10, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria - Effective from 20 May 2014 to 4 August 2014http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteriahttp://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosure

Solicitation Statushttp://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984321

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, +1-312-368-2079
Associate Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60642
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

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