TEXT - Fitch cuts 2 classes of JP Morgan 2007-FL1

Mon Nov 19, 2012 4:49pm EST

Nov 19 - Fitch Ratings has downgraded two classes from the pooled portion of
J.P. Morgan Chase Commercial Mortgage Securities Corp. Series 2007-1. A detailed
list of rating actions follows at the end of this release.

The downgrade of class A-2 to 'A' from 'AA' is based on interest shortfalls 
affecting the class.  According to Fitch's criteria, ratings at 'AAA' and 'AA' 
should not incur interest shortfalls. The interest shortfalls began in October 
2012, primarily due to the claw back of interest advances to the Resort 
International loan. Class K has been downgraded to 'D' from 'C' as a result of 
incurred losses. The Negative Rating Outlooks reflect the possibility of further
negative credit migration of the underlying collateral.

Fitch affirmed the remainder of the pooled transaction and the non-pooled junior
component certificates were also affirmed based on Fitch's loss expectations on 
the Resorts International loan. Fitch's performance expectation incorporates 
prospective views regarding commercial real estate values and cash flow 
declines. 

The rating action reflects Fitch's base case loss expectation of 11.5%. Under 
Fitch's updated analysis, 100% of the pooled and non-pooled components are 
modeled to default in the base case stress scenario, defined as the 'B' stress. 
Fitch estimates that average recoveries on the pooled loans will be 
approximately 88.5% in the base case.  In its review, Fitch analyzed servicer 
reported operating statements, STR reports and rent rolls, updated property 
valuations, and recent lease and sales comparisons. 

As of the November 2012 distribution report, the transaction is collateralized 
by eight loans, including six that are secured by hotels (75.3%), one by casino 
(18.7%), and one by office (6%). All eight loans are currently in special 
servicing, including two (24.5%) real estate owned (REO) assets, four (57.7%) in
delinquency and two (17.8%) in forbearance. 

All eight remaining loans have been identified as Fitch Loans of Concern. 
Fitch's analysis resulted in loss expectations for three A-notes, and each of 
the B-note non-pooled components in the 'B' stress scenario. The three pooled 
contributors to losses in the 'B' stress scenario are: PHOV Portfolio (19.3%), 
Resorts International (13.5%) and Sofitel Minneapolis (2.8%). 

 

The PHOV Portfolio loan is secured by 11 full-service hotels (following the 
previous release of the Hilton Rockville), located in FL, CA, SC, IL and NJ.  
Flags include Hilton, Doubletree, Courtyard by Marriott, Sheraton and two 
non-flagged hotels.  The loan was transferred to special servicing in January 
2012 due to imminent maturity default. The loan has passed its final maturity 
date in May 2012 and the special servicer is working with the borrower for a 
loan modification.

  

Four of the 11 properties were severely impacted by Hurricane Katrina and Wilma 
in 2005, with the hotels coming back on line in late 2006 and mid 2007.  While 
year-end (YE) 2011 net operating income improved significantly over YE 2010 and 
YE 2009, it remains below issuance expectations. For YE 2011, the revenue per 
available room (RevPAR) was $80.26, compared to $74.3 at YE 2010, $67.58 at YE 
2009 and $87.58 at issuance.

The Resorts International loan was originally collateralized by four 
casino/hotel properties located in Atlantic City, NJ, East Chicago, IN, 
Robinsonville, MS and Tunica, MS. The Resorts East Chicago property was released
from the portfolio in September 2007, paying down the senior trust component by 
approximately 47%. The loan was foreclosed in November 2011 and the Atlantic 
City Hilton property was released to the borrower due to negative property 
value. The remaining two properties became REO assets. The loan secures two 
additional non-trust pari passu A notes of $32.4 million each, an $87.7 million 
non-pooled senior participation included in the transaction and a $233 million 
junior participation held outside the trust. The current appraisal value 
obtained by the special servicer indicated losses upon liquidation of the 
assets.  

The Sofitel Minneapolis loan is secured by a 282 room Sofitel Hotel in 
Bloomington, MN.  The loan transferred to the special servicer in February 2012 
due to payment default. The loan matured in July 2012. Borrower indicated that 
occupancy is insufficient to meet debt obligation. The borrower reported 
September 2012 trailing 12 month (TTM) occupancy, ADR and RevPar are 65.2%, 
$113.22, and $73.85, respectively. The special servicer is pursuing foreclosure 
and the appointment of a receiver. The current appraisal value obtained by the 
special servicer indicated losses upon liquidation of the assets.

Fitch downgrades the following classes and revises Rating Outlooks as indicated:

--$243.1 million class A-2 to 'Asf' from 'AAsf'; Outlook to Negative from 
Stable;

--$15 million class K to 'Dsf' from 'Csf'; RE0%.

Fitch affirms the following classes and revises Rating Outlooks as indicated:

--$111.8 million class A-1 at 'AAAsf'; Outlook Stable;
--$45.4 million class B at 'Asf'; Outlook to Negative from Stable;
--$32.4 million class C at 'Asf'; Outlook Negative;
--$30.8 million class D at 'BBBsf'; Outlook Negative;
--$37.3 million class E at 'Bsf'; Outlook Negative
--$26 million class F at 'CCCsf'; RE100%';
--$26 million class G at 'CCsf'; RE40%;
--$35.7 million class H at 'Csf'; RE0%;
--$32.5 million class J at 'Csf'; RE0%; 
--$0 million class L at 'Dsf'; RE0%;
--$11.9 million class RS-1 at 'Csf'; RE0%; 
--$12.8 million class RS-2 at 'Csf'; RE0%;
--$15.6 million class RS-3 at 'Csf'; RE0%; 
--$11.1 million class RS-4 at 'Csf'; RE0%; 
--$15.4 million class RS-5 at 'Csf'; RE0%;
--$13.2 million class RS-6 at 'Csf'; RE0%; 
--$7.6 million class RS-7 at 'Csf'; RE0%.

The interest-only class X-1 has paid in full. Fitch withdrew its rating on the 
interest-only class X-2 at prior review.