Westin Portfolio still trying to move markets, Again

A bankruptcy judge dealing with the Westin Portfolio (JPMCC 2007-C1 & JPMCC 2008-C2) has ordered a 0% interest rate and a 15-year extension! I mean wow! I'm pretty sure that is unprecedented in the CMBS market, although I haven't read all the sell-side research that I'm sure has been published on it the last couple of weeks. Surely that will be overturned.

This was in the WSJ a couple of weeks ago (I'm still catching up, give me a break).

You may think I'm joking about it moving markets, but when it defaulted in 2008, CMBS was all of a sudden all over the MSM and the head of Citi's CMBS research was on CNBC talking about it.

We've previously posted updates on this loan here, here, and here. You might actually recall it because it defaulted in 2008... just 8 months after it was originated.

JPMCC 2008-C2 & JPMCC 2007-C1 Appraisal Reductions

The fact that there were appraisal reductions related to the Promenade Shops at Dos Lagos and the Westin Portfolio (in both JPMCC 2007-C1 and 2008-C2), which were so widely reported in November they helped move the market to historical wides, was no surprise. However, the ASER calculation was off by a $100,000 on the Promenade Shops loan - a mistake that you really don't expect to see. It is a rather simple calculation.

Keeping in mind the '08 deal in particular was a small deal dominated by several large weak loans, the interest shortfall reached high into the capital stack effecting as high up as the A-rated (orig. rating) F class (higher if they stick to the incorrect calculation - there has not been a comment on the error yet...). This is significant - the subordination rate on this class is over 9% (3x historical losses) and it's already being hit with shortfalls. Again, it was a weak deal, a small deal, and a chunky deal, but a significant event nonetheless.

The 2008-C2 deal has since added another large delinquency to its list of problems. Regency Portfolio is a 60-day delinquent $25 mm loan on 20 properties mostly located in Iowa. More on this later...

The whole story is worth putting up the picture of the man, J.P. Morgan, with a knife in his hand ready to cut out the entrails of the poor originator who made these pathetic loans in the first place.