Fitch Ratings Downgrades 5 Classes of JPMCC 2004-PNC1; Assigns Outlooks

2008-11-12 02:19:02 -

- Fitch Ratings downgrades and assigns Rating Outlooks to J.P. Morgan Chase Commercial Mortgage Securities Corp., commercial mortgage pass-through certificates, series 2004-PNC1, as follows:

--$6.9 million class K to 'BB-' from 'BB'; Outlook Negative;

--$4.1 million class L to 'B+' from 'BB-'; Outlook Negative;

--$5.5 million class M to 'B-' from 'B+'; Outlook Negative;

--$2.7 million class N to 'CCC/DR1' from 'B';

--$2.7 million class P to 'C/DR6' from 'B-'.

In addition, Fitch affirms and assigns Rating Outlooks to the following classes:

--$1.6 million class A-1 at 'AAA'; Outlook Stable;

--$234.6 million class A-1A at 'AAA'; Outlook Stable;

--$128.3 million class A-2 at 'AAA'; Outlook Stable;

--$98 million class A-3 at 'AAA'; Outlook Stable;

--$426.2 million class A-4 at 'AAA'; Outlook Stable;

--Interest-only class X at 'AAA'; Outlook Stable;

--$28.8 million class B at 'AA'; Outlook Stable;

--$13.7 million class C at 'AA-'; Outlook Stable;

--$17.8 million class D at 'A'; Outlook Stable;

--$11 million class E at 'A-'; Outlook Stable;

--$16.5 million class F at 'BBB+'; Outlook Stable;

--$11 million class G at 'BBB'; Outlook Stable;

--$20.6 million class H at 'BBB-'; Outlook Negative;

--$2.7 million class J at 'BB+'; Outlook Negative.

Fitch does not rate the $11.5 million class NR certificates.

The downgrades and assignment of the Distressed Recovery (DR) ratings reflect the increased loss expectations on the specially serviced loans since Fitch's last rating action. Classes H through M have been assigned Negative Outlooks based on an assumption of defaults and losses on the Fitch loans of concern. The Rating Outlooks reflect the likely direction of any rating changes over the next one to two years.

As of the October 2008 distribution date, the pool's collateral balance has decreased 5.3% to $1.04 billion from $1.10 billion at issuance. Seventeen loans (22.6%) have defeased, including three (11.7%) of the top ten loans.

Fitch has identified 11 Loans of Concern (18.0%), which include the three specially serviced loans (9.3%), as well as other loans with weak performance. The largest specially serviced loan (5.3%) is collateralized by a portfolio of six retail centers encompassing a total of 683,846 square feet (sf) located in four states. The loan transferred to special servicing in July 2008 due to an impending default. The borrower, a subsidiary of Centro Properties Group, has indicated an inability to refinance before the February 2009 maturity date. The properties are currently listed for sale. Although the borrower has received offers on five of the six properties that indicate limited, if any, losses, Fitch expects that the sale process could be prolonged in light of the restricted lending environment and losses are possible.

The second-largest specially serviced loan, (2.4%), is secured by a 182,322 sf office building in Melville, NY. The principal of the borrower, which is also a major tenant at the property (American Home Mortgage, 59% of NRA), filed for Chapter 11 bankruptcy. The borrowing entity has not filed Chapter 11 and has not been consolidated into the bankruptcy filing. The borrower has kept the loan payments current and the tenant continues to operate at the property; however, the borrower has requested a three-month forbearance. The special servicer is currently evaluating workout options that would result in no losses to the trust. However, Fitch assumed losses based on current market conditions and the uncertainty surrounding the future occupancy of the bankrupt tenant.

The-third largest specially serviced loan (1.7%) transferred to special servicing in October 2007 after the owner/operator, MBS Cos., defaulted on debt service. The loan is secured by a 312-unit multifamily property located in San Antonio, TX. The property is currently listed for sale and losses are expected.

The largest loan in the pool, Centro Retail Portfolio (13.0%), maintains its investment grade shadow rating. The loan is secured by seven anchored retail properties, 54.1% located in Southern CA, and 45.9 % in Northern, CA. Year-end (YE) 2007 servicer reported debt service coverage ratio (DSCR) on net operating income (NOI) was 2.89 times (x) and YE 2007 occupancy was 96%, consistent with occupancy at issuance (95%). The properties are occupied by a diverse tenant base with minimal exposure to currently bankrupt tenants. Major tenants at the properties include Wal-Mart, Target, and Marshall's. The loan has a coupon of 4.85% and matures in 2014. Though collateral performance has been stable to date, Fitch is concerned about the declining financial condition of the loan sponsor, Centro Properties Group. Fitch will continue to monitor the loan.

None of the non-defeased loans are scheduled to mature in 2008 and five non-defeased loans (11.9%) are scheduled to mature in 2009, including the largest specially serviced loan (5.3%). The weighted average coupon for all of the transaction's non-defeased loans is 5.40% and the range is 4.44% to 8.06%.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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 Ratings, Chicago
Elizabeth Elser, +1-312-606-2319
Britt Johnson, +1-312-606-2341
Sandro Scenga, +1-212-908-0278
(Media Relations, New York)
sandro.scenga@fitchratings.com