DBRS Confirms 9 Classes and Downgrades 13 Others of J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4

DBRS has today confirmed the ratings of nine classes of the J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP4as follows:

Class A1A at AAA (sf)
Class A-3A1 at AAA (sf)
Class A-3A2 at AAA (sf)
Class A-4 at AAA (sf)
Class A-SB at AAA (sf)
Class A-M at AAA (sf)
Class P at C (sf)
Class X-2 at AAA (sf)
Class X-1 at AAA (sf)

In addition, DBRS has downgraded the ratings of 13 classes as follows:

Class A-J to A (low) (sf) from AA (low) (sf)
Class B to BBB (low) (sf) from A (low) (sf)
Class C to BB (low) (sf) to BBB (high) (sf)
Class D to B (low) (sf) from BBB (low) (sf)
Class E to CCC (sf) from BB (high) (sf)
Class F to C (sf) from B (low) (sf)
Class G to C (sf) from CCC (sf)
Class H to C (sf) from CCC (sf)
Class J to C (sf) from CCC (sf)
Class K to C (sf) from CCC (sf)
Class L to C (sf) from CCC (sf)
Class M to C (sf) from CCC (sf)
Class N to C (sf) from CCC (sf)

Classes F through P have Interest in Arrears. All trends are Stable.

The downgrades are largely due to the projected loss associated with the largest loan in the pool, Prospectus ID#2, Silver City Galleria (6.05% of the current pool balance as of the June 2011 remittance report). This loan is secured by 715,000 sf of a 971,000 sf regional shopping mall in Taunton, Massachusetts , which is located a 15 miles east of Providence, Rhode Island and 33 miles south of Boston. The loan transferred to the special servicer in October 2009 due to imminent default and subsequently, the borrower defaulted on the December 2009 payment. The property initially began experiencing cash flow issues when a former large tenant, Steve and Barry’s, vacated the premises. Since that time, the property has struggled to attract new tenants, and based on the December 2010 rent roll was 81.7% occupied, with inline vacancy at approximately 15.7%. The property received an updated appraisal in September 2010, which suggests a value of approximately $56 million. When compared against the current outstanding balance on the loan of approximately $124 million, a substantial loss is implied. DBRS has liquidated this loan at a 67% loss severity, deflating the September 2010 appraised value and comparing it to the current outstanding balance on the loan, inclusive of outstanding fees and advances. The projected loss on this loan represents approximately 45% of the losses DBRS has modeled in this review of the transaction.

Further prompting the downgrades is the projected loss associated with the fourth largest loan in the pool, Prospectus ID#6, Creekside Apartments (3.27% of the current pool balance, as of the June 2011 remittance report). This loan is secured by a 1,026 unit garden-style multifamily property located in Bensalem, Pennsylvania , which is approximately 25 miles north of Philadelphia. DBRS previously had this loan on the HotList, as it was anticipated that the loan would experience difficulties when converting from interest-only payments to P&I payments in August 2010. Shortly after the loan began amortizing, the borrower defaulted and the loan was transferred to the special servicer. The property received an updated appraisal in June 2010, indicating a value of $50 million; however, DBRS has obtained a T-12 as of February 2011 operating statement and by using a conservative cap rate against the NOI reported in that operating statement, the implied value is significantly less. DBRS has used this value derived from this NOI and a 10% cap rate to liquidate the loan at a 57% loss severity.

Together, the Silver City Galleria loan and the Creekside Apartments loan represent 65% of the losses DBRS has modeled with this review of the transaction.

As of the June 2011 remittance report, there are 173 loans remaining in the pool, reporting a weighted-average DSCR of 1.46x, which compares well with the weighted-average DSCR of 1.49x at issuance. However, the weighted-average LTV of 94% is significantly higher than the weighted-average LTV of 73% at issuance, and is representative of the 14 loans in special servicing (17.9% of the current pool balance) and their respective decline in value.

With this review, DBRS has confirmed the shadow rating of Prospectus ID#3, Plastipak Portfolio (4.01% of the current pool balance) at BBB (high). This loan is secured by a 14 building industrial and office portfolio that is fully leased to Plastipak Holdings Inc. The January 2011 OSAR reports a DSCR of 2.04x as compared with a DSCR of 1.80x at issuance. Additionally, the loan amortizes on a 20-year schedule, down to $14 psf at maturity in 2015. According to the January 2011 OSAR, the portfolio remains fully occupied. Given the enhancement performance, DBRS has confirmed the shadow rating.

The DBRS analysis included an in-depth look at the top fifteen loans in the transaction, in addition to the loans on the servicer’s watchlist, DBRS Hotlist, shadow-rated loans, and the loans in special servicing. Cumulatively, these loans represent 52% of the current pool balance..

DBRS continues to monitor this transaction on a monthly basis for changes at the bond and loan level. Although DBRS has conservatively projected losses for the specially serviced and most pivotal loans in the transaction, we continue to monitor these loans on a monthly basis for any changes that may impact the losses that those loans may realize.

Notes:

All figures are in U.S dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology and CMBS North American Surveillance Methodology, which can be found on our website under Methodologies.