Fitch to Rate JPMBB 2016-C1 Commercial Mortgage Trust Pass-Through Certificates; Presale Issued
OREANDA-NEWS. Fitch Ratings has issued a presale report on the JP Morgan Chase JPMBB Commercial Mortgage Securities Trust 2016-C1. Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$29,181,000 class A-1; AAAsf; Outlook Stable;
--$95,864,000 class A-2; AAAsf; Outlook Stable;
--$44,513,000 class A-3; AAAsf; Outlook Stable;
--$175,000,000 class A-4; AAAsf; Outlook Stable;
--$317,480,000 class A-5; AAAsf; Outlook Stable;
--$53,301,000 class A-SB; AAAsf; Outlook Stable;
--$774,099,000a class X-A; AAAsf; Outlook Stable;
--$58,760,000a class X-B; AA-sf; Outlook Stable;
--$47,263,000a class X-C; A-sf; Outlook Stable;
--$58,760,000 class A-S; AAAsf; Outlook Stable;
--$58,760,000 class B; AA-sf; Outlook Stable;
--$47,263,000 class C; A-sf; Outlook Stable;
--$56,206,000ab class X-D; BBB-sf; Outlook Stable;
--$34,490,000bc class D-1; BBBsf; Outlook Stable;
--$21,716,000bc class D-2; BBB-sf; Outlook Stable;
--$56,206,000bc class D; BBB-sf; Outlook Stable;
--$29,380,000b class E; BB-sf; Outlook Stable;
--$11,496,000b class F; B-sf; Outlook Stable.
a Notional amount and interest only.
b Privately placed and pursuant to rule 144A
c The class D-1 and class D-2 certificates may be exchanged for class D certificates, and class D certificates may be exchanged for the class D-1 and class D-2 certificates.
The expected ratings are based on information provided by the issuer as of Feb. 15, 2016. Fitch does not expect to rate the $44,708,765 class NR. The certificates represent the beneficial ownership interest in the trust, primary assets of which are 50 loans secured by 110 commercial properties having an aggregate principal balance of approximately $1.02 billion as of the cutoff date. The loans were contributed to the trust by JPMorgan Chase Bank, National Association, Barclays Bank PLC, Starwood Mortgage Funding II LLC, and Redwood Commercial Mortgage Corporation.
Fitch reviewed a comprehensive sample of the transaction's collateral including site inspections on 68.6% of the properties by balance, cash flow analysis of 84.8%, and asset summary reviews on 84.8% 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 DSCR of 1.14x is lower than both the 2015 average of 1.18x and the 2014 average of 1.19x, while the pool's Fitch LTV of 109.5% is in line with the 2015 average of 109.3% and higher than the 2014 average of 106.2%.
Highly Concentrated Pool: The top 10 loans account for 58.9% of the pool, which is well above the 2015 and 2014 averages of 49.3% and 50.5%, respectively. Additionally, the loan concentration index (LCI) is 442, which is above the 2015 and 2014 averages of 367 and 387, respectively.
Property Concentration: The largest property type is office (36.4%), followed by hotel (19.1%), and multifamily (14.7%). The pool's office concentration is above the 2014 averages of 22.8% and the year to date 2015 averages of 23.2%, respectively. The pool's hotel concentration is higher than the 2014 concentration of 14.2%, and the year to date 2015 average of 16.6%. Loans secured by hotels have a higher probability of default in Fitch's multiborrower CMBS model.
Lower Percentage of Loans Below 1.0x Fitch DSCR: 19% of the pool falls below a 1.0x Fitch DSCR. This is lower than recent transactions and below the 2015 average of 23.3%. Additionally, the top 10 loans have a WAVG stressed loss of 3.9%, well below the average loss for the pool.
For this transaction, Fitch's net cash flow (NCF) was 6.2% 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 JPMBB 2016-C1 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 pages 12-13.
DUE DILIGENCE USAGE
Fitch was provided with third party due diligence information from Ernst and 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.