Fitch Ratings has issued a presale report on JPMDB Commercial Mortgage
Securities Trust 2016-C2 commercial mortgage pass-through certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as
follows:
--$23,342,000 class A-1 'AAAsf'; Outlook Stable;
--$160,394,000 class A-2 'AAAsf'; Outlook Stable;
--$120,000,000 class A-3A 'AAAsf'; Outlook Stable;
--$222,981,000 class A-4 'AAAsf'; Outlook Stable;
--$48,243,000 class A-SB 'AAAsf'; Outlook Stable;
--$700,848,000b class X-A 'AAAsf'; Outlook Stable;
--$44,639,000b class X-B 'AA-sf'; Outlook Stable;
--$75,888,000 class A-S 'AAAsf'; Outlook Stable;
--$44,639,000 class B 'AA-sf'; Outlook Stable;
--$36,828,000 class C 'A-sf'; Outlook Stable;
--$50,000,000a class A-3B 'AAAsf'; Outlook Stable;
--$80,352,000ab class X-C 'BBB-sf'; Outlook Stable;
--$43,524,000a class D 'BBB-'; Outlook Stable;
--$17,856,000a class E 'BBsf'; Outlook Stable;
--$12,276,000a class F 'B-sf'; Outlook Stable.
The following classes are not expected to be rated:
--$36,828,383 class NR.
a)Privately placed pursuant to Rule 144A.
b)Notional amount and interest-only.
The expected ratings are based on information provided by the issuer as
of April 26, 2016.
The certificates represent the beneficial ownership interest in the
trust, primary assets of which are 30 loans secured by 79 commercial
properties having an aggregate principal balance of $892,799,383 as of
the cut-off date. The loans were contributed to the trust by JP Morgan
Chase Bank, National Association and German American Capital Corporation.
Fitch reviewed a comprehensive sample of the transaction's collateral,
including site inspections on 86% of the properties by balance and asset
summary reviews and cash flow analysis of 92% of the pool.
KEY RATING DRIVERS
Low Fitch Leverage: This transaction has lower leverage than other
Fitch-rated transactions. The Fitch debt service coverage ratio (DSCR)
for the trust is 1.26x, while the YTD 2016 and 2015 averages are 1.17x
and 1.18x, respectively. The Fitch loan-to-value (LTV) for the trust is
99.9%, which is lower than both the respective YTD 2016 and 2015
averages of 107.9% and 109.3%. Excluding the credit-opinion loans (10.1%
of the pool), the Fitch DSCR and LTV are 1.21x and 105.1%, respectively.
Concentrated Pool with Low Loan Count: The pool is more concentrated
than other recent Fitch-rated multiborrower transactions. The top 10
loans comprise 59.5% of the pool, which is above recent averages of
55.8% for YTD 2016 and above the 2015 average of 49.3%. Additionally,
the loan concentration index (LCI) and sponsor concentration index (SCI)
are 481 and 653, respectively, above 2015 averages of 367 and 410.
Investment-Grade Credit Opinion Loans: The transaction has two credit
opinion loans, totaling 10.1% of the pool. 787 Seventh Ave (6.7% of the
pool) is the third largest loan in the transaction and has an
investment-grade credit opinion of 'BBB+sf' on a stand-alone basis.
Palisades Center (3.4% of the pool) is the 14th largest loan in the
transaction and has an investment-grade credit opinion of 'AAsf' on a
stand-alone basis. Excluding these loans, the conduit has a Fitch
stressed DSCR of 1.21x and LTV 105.1%, respectively. The implied credit
enhancement levels for the conduit portion of the transaction rated
'AAAsf' and 'BBB-sf' are 23.875% and 8.375%, respectively.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 15% 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 JPMDB 2016-C2
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 12.
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 (RAC).
Additional information is available at www.fitchratings.com.
JPMDB Commercial Mortgage Securities Trust 2016-C2
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=880733
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
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. 03 Mar 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878298
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375
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=1003670
ABS Due Diligence Form 15E 1
https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=1003670&flm_nm=15e_1003670_1.pdf
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003670
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.
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