JP Morgan’s latest offering of commercial mortgage bonds is backed by a less diverse portfolio than many recent conduits rated by Fitch Ratings.
An office property located in the Tribeca neighborhood of New York City shows up as the largest loan in JPMCC 2015-JP1’s pool of collateral. A $100 million non-controlling trust note on the property at 32 Avenue of the America makes up 12.5% of the total balance, according to Fitch.
The note is part of a larger, $425 million pari pasu loan; other parts are being used as collateral for three other transactions, JPMBB 2015-C33 transaction, COMM 2015-LC23 transaction, and another, future transaction.
The 10 largest loans backing JPMCC 2015-JP1 account for 55% of the pool, which makes the deal less diverse than previous CMBS conduits rated by Fitch. The top 10 loans in 2015 conduits average 48.5% of collateral pools and 2014 loans average 50.5% of the total pool. Investors generally prefer pool with less loan concentration because it minimizes the impact of default of any single loan — investors are more levered to the performance of a specific loan.
In more concentrated conduit pools, Fitch may require additional subordination of the notes. It measures concentrations in conduit pools in statistical indices known as loan concentration index (LCI) and the sponsor concentration index (SCI). JPMCC 2015-JP1 has an LCI score of 468, the transaction exhibits higher loan concentration compared to the 2015 YTD of 360.
Additionally, this transaction's SCI score of 500 is higher compared to the 2015 YTD of 398. The last CMBS conduit rated by Fitch on Dec. 2, Wells Fargo's WFCMMT 2015-P2, has a LCI of 356 and an SCI 391.
Fitch plans to rate the super senior notes issued by JPMCC 2015-JPI at 'AAA'. The notes benefit from 30% credit support. The junior senior/notes will be rated 'AAA' and require 26.125% credit enhancement. At the junior level, the trust will offer a tranche of 'BBB-' rated notes that require 9% subordination.
WFCMMT 2015-P2 issued comparably rated tranches at lower subordination levels: the junior/senior notes required 25% subordination and the 'BBB-' notes required 8.5% subordination.
JPMCC 2015-JP1 also has higher leverage than other recent Fitch-rated CMBS conduits. The pool's Fitch debt service coverage ratio of 1.09x is lower than both the YTD 2015 average of 1.18x and the 2014 average of 1.19x, and the pool’s Fitch loan-to-value of 114.1% is higher than both the YTD 2015 average of 109.4% and the 2014 average of 106.2. Wells Fargo's collateral pool had a Fitch DSCR of 1.14x and a Fitch LTV of 111.2%
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