JPMorgan, DB issue $893m CMBS with heavy hotel exposure

While the transaction has above average concentrations of hotel loans, which are more likely to default, it also has an overall lower than average loan-to-value, according to Fitch.

JPMorgan Chase and a subsidiary of Deutsche Bank are marketing the $892.8 million JPMDB Commercial Mortgage Securities Trust 2016-C2, backed by 30 fixed-rate loans on 79 properties.

fitch-ratings-logoFitch Ratings and Moody’s assigned the transaction’s six senior classes ‘AAA’ ratings.

While the transaction has above average concentrations of hotel loans, which are more likely to default, it also has an overall lower than average loan-to-value, according to Fitch.

The transaction has an above-average concentration of office (39.8 percent) and hotel properties (19.9 percent), compared to 2015 Fitch-rated transactions; the 2015 averages are 23.5 percent office and 17 percent hotel for Fitch-rated transactions.

“Hotels have a higher probability of default in Fitch’s multiborrower model,” the ratings agency said in a presale report.

But the report also shows that this transaction has lower leverage than other Fitch-rated transactions. The loan-to-value is 99.9 percent, which is much lower than both the agency’s 2016 (ytd) and 2015 averages of 107.9 percent and 109.3 percent, respectively.

Two of the largest loans in the pool are investment grade, including a $60 million loan on the 787 Seventh Avenue office building in Manhattan and a $30 million loan on Palisades Center retail mall in Nyack, New York.

The report also shows that the top 10 loans comprise 59.5 percent of the pool, which is above the agency’s recent averages of 55.8 percent for 2016 (ytd) and above the 2015 average of 49.3 percent.

There are five loans in this transaction with subordinate debt, including three loans that have secured subordinate debt that is higher than both Fitch’s ytd and 2015 averages of 4.3 percent and 4.4 percent, respectively.

Four loans have mezzanine or preferred equity and approximately 63.8 percent of the pool balance consists of loans with pari passu participation, much higher than ytd and 2015 averages of 39.5 percent and 25.1 percent.

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