Fitch Assigns Final Ratings to JPMCC 2016-NINE Mortgage Securities Trust Commercial P-T Ctfs
--$670,724,000 class A 'AAAsf'; Outlook Stable;
--$186,276,000 class B 'AA-sf'; Outlook Stable.
Since Fitch published its expected ratings on Sept. 6, 2016, the issuer reduced the principal amount of class A to $670,724,000 from $713,724,000 and removed the $713,724,000 class X-A. As such, Fitch withdrew its expected rating of 'AAAsf' for class X-A.
The certificates represent the beneficial interests in the mortgage loan securing the fee and leasehold interests in a 1.68 million square foot (sf), 50-story office tower at 9 West 57th Street in New York, NY. Proceeds of the loan were used to refinance existing debt, fund reserves, pay closing costs and return equity to the borrower.
KEY RATING DRIVERS
Iconic Manhattan Office Building: 9 West 57th Street is a 50-story, class A office building located within the Plaza District submarket in Midtown Manhattan. The property is one of the premier office buildings in the U. S., benefiting from an architecturally significant design, excellent location, and unparalleled views of Central Park. Fitch considers the property to be one of Manhattan's highest quality office buildings.
Low Occupancy and Uncaptured Income Potential: As of June 2016, the property was 63.5% occupied, well below the Plaza District submarket occupancy of 90.1%, according to Reis data. The sponsor is very discerning in terms of tenant selection and considers image, reputation, and financial wherewithal before filling vacancies. The sponsor prefers to leave space vacant and wait for the preferred type of tenant at the rent level the property has been able to maintain. Given the unique positioning of the asset, value is apparent in the vacant space. Such value is not typically accounted for by Fitch in assets not meeting the rarely observed positioning of the subject.
Long-Term Ownership: The sponsor originally developed the property in 1972 and has continually upgraded and improved it for over 40 years. 9 West 57th Street serves as the focal point of the sponsor's portfolio, which consists of approximately 18 commercial and residential properties in New York City. The sponsor has purchased many of the buildings surrounding the property in order to protect the views of 9 West 57th Street.
Fitch found that the 'AAAsf' class could withstand an approximate 70.3% decrease to the most recent actual net cash flow (NCF) prior to experiencing $1 of loss to the 'AAAsf' rated class. Fitch performed several stress scenarios in which the Fitch NCF was stressed. Fitch determined that a 49.7% reduction in Fitch's implied NCF would cause the notes to break even at a 1x debt service coverage ratio (DSCR), based on the actual debt service.
Fitch evaluated the sensitivity of the ratings for class A and found that a 10% decline in Fitch's implied NCF would result in a one-category downgrade, while a 34% decline would result in a downgrade to below investment grade.
The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities. Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www. fitchratings. com' or by clicking on the link.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with third-party due diligence information from Ernst and Young, LLP. The third-party due diligence information was provided on ABS Due Diligence Form-15E and focused on a comparison and re-computation of certain characteristics with respect to the mortgage loan and related mortgaged properties in the data file. Fitch considered this information in its analysis, and the findings did not have an impact on our analysis.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under "Related Research" below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 2016.