NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Rating Outlooks to J.P. Morgan Chase Commercial Mortgage Securities Trust 2016-JP2 commercial mortgage pass-through certificates:
--$31,322,000 class A-1 'AAAsf'; Outlook Stable;
--$16,213,000 class A-2 'AAAsf'; Outlook Stable;
--$250,000,000 class A-3 'AAAsf'; Outlook Stable;
--$301,524,000 class A-4 'AAAsf'; Outlook Stable;
--$58,379,000 class A-SB 'AAAsf'; Outlook Stable;
--$734,921,000b class X-A 'AAAsf'; Outlook Stable;
--$48,134,000b class X-B 'AA-sf'; Outlook Stable;
--$77,483,000 class A-S 'AAAsf'; Outlook Stable;
--$48,134,000 class B 'AA-sf'; Outlook Stable;
--$41,090,000 class C 'A-sf'; Outlook Stable;
--$86,876,000ab class X-C 'BBB-sf'; Outlook Stable;
--$45,786,000a class D 'BBB-sf'; Outlook Stable;
--$22,306,000a class E 'BB-sf'; Outlook Stable.
The following classes are not rated:
--$17,610,000a class F;
--$29,349,708a class NR.
a - Privately placed pursuant to Rule 144A.
b - Notional amount and interest-only.
The ratings are based on information provided by the issuer as of July 28, 2016.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 47 loans secured by 78 commercial properties having an aggregate principal balance of $939,196,709 as of the cut-off date. The loans were contributed to the trust by JPMorgan Chase Bank, National Association, Benefit Street Partners CRE Finance LLC, German American Capital Corporation, and Starwood Mortgage Funding VI LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 72.9% of the properties by balance and asset summary reviews and cash flow analysis of 83.5% of the pool.
KEY RATING DRIVERS
Leverage Lower than Recent Deals: The transaction has lower leverage than other recent Fitch-rated transactions. The pool's weighted average (WA) Fitch DSCR of 1.20x is better than both the YTD 2016 average of 1.17x and the 2015 average of 1.18x. The pool's WA Fitch LTV of 103.5% is better than both the YTD 2016 average of 107.9% and the 2015 average of 109.3%. Excluding the credit opinion loan, The Shops at Crystals, the Fitch DSCR is 1.18x and the Fitch LTV is 105.8%, which are still slightly better than recent averages.
High-Quality Collateral: Fitch assigned property quality grades of 'A-' or better to 22.4% of the pool and 30.8% of the portion of the pool that was inspected. Properties assigned 'B+' or higher total 56.3% of the pool, or 77.2% of the pool that was inspected. Additionally, no properties were assigned property quality grades below 'B-'.
Concentrated Pool with High SCI: The 10 largest loans account for 54.4% of the pool by balance. This is in line with the YTD 2016 average of 55.4% and greater than the 2015 average of 49.3%. The pool's average concentration resulted in a loan concentration index (LCI) of 401, which falls between the YTD 2016 average of 428, and the 2015 average of 367. The sponsor concentration index (SCI) is 697, which is much higher than the YTD 2016 average of 491 and 2015 average of 410. Two sponsors, Simon Property Group and CIM Commercial Trust Corporation, each compose more than 10% of the pool at 11.8% and 10.8%, respectively.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 10.2% below the most recent year's net operating income (NOI; for properties for which a full-year NOI was provided, excluding properties that were stabilizing during this period). Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans and in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to JPMCC 2016-JP2 certificates and found that the transaction displays average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'A-sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 13.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Ernst & Young, LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on the analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 27 Aug 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870009
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Jul 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882237
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882401
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130
Rating Criteria for Structured Finance Servicers (pub. 01 Jul 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884140
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1009723
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009723
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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.