Fitch to Rate JPMBB 2015-C32 Commercial Mortgage Securities Trust; Presale Issued
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--\\$80,813,000 class A-1 'AAAsf'; Outlook Stable;
--\\$244,690,000 class A-2 'AAAsf'; Outlook Stable;
--\\$28,747,000 class A-3 'AAAsf'; Outlook Stable;
--\\$100,000,000 class A-4 'AAAsf'; Outlook Stable;
--\\$234,856,000 class A-5 'AAAsf'; Outlook Stable;
--\\$115,238,000 class A-SB 'AAAsf'; Outlook Stable;
--\\$855,381,000b class X-A 'AAAsf'; Outlook Stable;
--\\$57,408,000b class X-B 'AA-sf'; Outlook Stable;
--\\$51,667,000 class A-S 'AAAsf'; Outlook Stable;
--\\$57,408,000 class B 'AA-sf'; Outlook Stable.
The following classes are not expected to be rated:
--\\$99,029,000 class C;
--\\$208,104,000 class EC;
--\\$50,232,000 class D;
--\\$99,029,000ab class X-C;
--\\$50,232,000ab class X-D;
--\\$28,705,000a class E;
--\\$11,481,000a class F;
--\\$11,482,000a class G;
--\\$34,444,648a class NR.
aPrivately placed pursuant to Rule 144A.
bNotional amount and interest-only.
The expected ratings are based on information provided by the issuer as of Oct. 1, 2015.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 89 loans secured by 273 commercial properties having an aggregate principal balance of approximately \\$1.15 billion as of the cutoff date. The loans were contributed to the trust by JPMorgan Chase Bank, N.A., Barclays Bank plc, Starwood Mortgage Funding II, LLC, MC-Five Mile Commercial Mortgage Finance LLC, Redwood Commercial Mortgage Corporation, and RAIT Funding, LLC.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 70.5% of the properties by balance, cash flow analysis of 77.7%, and asset summary reviews on 88.9% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The transaction has higher leverage than other recent Fitch-rated fixed-rate multiborrower transactions. The pool's Fitch debt service coverage ratio (DSCR) of 1.11x is lower than both the year-to-date (YTD) 2015 average of 1.20x and the 2014 average of 1.19x, and the pool's Fitch loan to value (LTV) of 112.4% is higher than both the YTD 2015 average of 109.1% and the 2014 average of 106.2%.
High Geographic Correlation: The largest three loans by loan balance - Hilton Suites Chicago Magnificent Mile, Civic Opera Building, and Palmer House Retail Shops - account for 18.66% of the pool balance and are located in Chicago, IL. In total, 19.51% of the pool is securitized by 14 assets that are located in the Chicago-Naperville-Joliet metropolitan statistical area (MSA). The Pittsburgh MSA represents the second largest geographic concentration with 10 assets that comprise 6.43% of the pool balance.
Strong Amortization: The pool is scheduled to amortize by 17.5% of the initial pool balance prior to maturity, which is greater than the 2014 average of 12.0%. Only one loan (0.3%) is full-term interest-only and 27 loans (43.5%) are partial interest-only. One loan (4.3%) is fully amortizing. The remaining 60 loans (51.9%) are amortizing balloon loans with loan terms of five to 10 years.
For this transaction, Fitch's net cash flow (NCF) was 10.77% below the most recent net operating income (NOI; for properties for which a recent 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 could result in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to JPMBB 2015-C32 certificates and found that the transaction displays slightly 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 senior 'AAAsf' certificates to 'BBB+sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 10 - 11.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.