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Rating Action: Moody's affirms nine classes of JPMCC 2016-JP3Global Credit Research - 01 Mar 2021Approximately $937 million of structured securities affectedNew York, March 01, 2021 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on nine classes in J.P. Morgan Chase Commercial Mortgage Securities Trust, Commercial Mortgage Pass-Through Certificates, Series 2016-JP3:Cl. A-2, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-3, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-4, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-5, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-SB, Affirmed Aaa (sf); previously on Dec 3, 2018 Affirmed Aaa (sf)Cl. A-S, Affirmed Aa2 (sf); previously on Dec 3, 2018 Affirmed Aa2 (sf)Cl. B, Affirmed A2 (sf); previously on Dec 3, 2018 Affirmed A2 (sf)Cl. X-A*, Affirmed Aa1 (sf); previously on Dec 3, 2018 Affirmed Aa1 (sf)Cl. X-B*, Affirmed A2 (sf); previously on Dec 3, 2018 Affirmed A2 (sf)* Reflects interest-only classesRATINGS RATIONALEThe ratings on the P&I classes were affirmed due to their credit support and because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges.The ratings on the IO classes were affirmed based on the credit quality of the referenced classes.The coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue to disrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of commercial real estate from the current weak US economic activity and a gradual recovery for the coming months. Although an economic recovery is underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertainty around our forecasts is unusually high. Stress on commercial real estate properties will be most directly stemming from declines in hotel occupancies (particularly related to conference or other group attendance) and declines in foot traffic and sales for non-essential items at retail properties.We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.Moody's rating action reflects a base expected loss of 8.0% of the current pooled balance, compared to 4.8% at Moody's last review. Moody's base expected loss plus realized losses is now 7.4% of the original pooled balance, compared to 4.8% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.METHODOLOGY UNDERLYING THE RATING ACTIONThe principal methodology used in rating all classes except interest-only classes was "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778. The methodologies used in rating interest-only classes were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in September 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1244778 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies. DEAL PERFORMANCEAs of the February 15, 2021 distribution date, the transaction's aggregate certificate balance has decreased by 7% to $1.13 billion from $1.22 billion at securitization. The certificates are collateralized by 48 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten loans (excluding defeasance) constituting 53% of the pool. Two loans, constituting 14% of the pool, have investment-grade structured credit assessments. Two loans, constituting 4% of the pool, have defeased and are secured by US government securities.Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 24, compared to 28 at Moody's last review.As of the February 2021 remittance report, loans representing 86% were current, 5% were beyond their grace period but less than 30 days delinquent, 2% were between 30 -- 59 days delinquent and 6% were 90+ days delinquent.Ten loans, constituting 20% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.No loans have been liquidated from the pool. Nine loans, constituting 14% of the pool, are currently in special servicing. All of the specially serviced loans have transferred to special servicing since March 2020.The largest specially serviced loan is the Laguna Design Center Loan ($38.2 million -- 3.4% of the pool), which is secured by the borrower's fee simple interest in a 236,727 square feet (SF), mixed-use retail showroom and office property located in Laguna Niguel, California. The Loan transferred to special servicing in July 2020 due to payment default. As of June 2020, the property was 80% leased, compared to 85% in December 2019 and 90% in December 2018. The loan has been delinquent for several months throughout 2020, however, as of the February 2021 remittance report, the loan was last paid through its January 2021 payment date. The loan remains in its initial five-year interest only period and begins to amortize in August 2021. As of September 2020, the loan's actual NOI DSCR was 2.09X, however, the debt service payments will increase approximately 38% upon its conversion from interest only to amortizing payments. The special servicer is currently negotiating a potential workout agreement with the borrower. Due to the property's historical performance and loan leverage, the loan was included in the conduit statistics with a Moody's LTV of 141%.The second largest specially serviced loan is the 100 East Wisconsin Avenue loan ($22.9 million -- 2.0% of the pool), which represents a pari-passu portion of a $49.4 million first mortgage loan. The loan is secured by a 435,629 SF office building located in downtown Milwaukee. The loan transferred to special servicing in May 2020 due to a relief request in relation to coronavirus impact and imminent default. The property's cash flow has declined as a result of the largest tenant (21% of the property's net rentable area (NRA)) vacating at its lease expiration in 2020. Furthermore, several other tenants have requested COVID related rent relief. The property was 58% leased as of September 2020, compared to 82% leased as of December 2019 and 81% leased in December 2018. As of the February 2021 remittance report, the loan was last paid through its December 2020 payment date. The Borrower has requested a modification of loan terms and the Special Servicer is dual tracking enforcement of the loan documents while continuing to review the modification request. The loan has amortized 8% since securitization.The third largest specially serviced loan is the Cicero Marketplace Loan ($18.3 million -- 1.6% of the pool), which is secured by a 146,526 SF grocery anchored shopping center located in Cicero, New York. The property is also adjacent to a Lowe's Home Improvement, which is not part of the collateral. The loan transferred to specials servicing in May 2020 due to imminent default and a relief request in relation to coronavirus impact. The borrower indicated that several tenants stated their inability to pay rent due to the government mandated shutdowns of non-essential businesses. As of the February 2021 remittance report, the loan was last paid through its January 2021 payment date. The property was 91% leased as of June 2020, however, the property faces significant upcoming rollover risk with the largest tenants (61% of NRA) having a lease expiration in 2023. The special servicer is discussing terms of a potential reinstatement. Due to the property's historical performance and loan leverage, the loan was included in the conduit statistics with a Moody's LTV of 115%.The remaining seven specially serviced loans are comprised of six loans secured by limited service hotel properties which have been impacted by coronavirus related business disruptions and one loan secured by a single-tenant ground floor retail condominium that is located in Manhattan's Meatpacking District in which the tenant is currently closed. Moody's estimates an aggregate $26.5 million loss for the non-performing specially serviced loans (26% expected loss on average).The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR, and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's loan-to-value ratio, referred to as the Moody's LTV or MLTV. As described in the CMBS methodology used to rate this transaction, we make various adjustments to the MLTV. We adjust the MLTV for each loan using a value that reflects capitalization (cap) rates that are between our sustainable cap rates and market cap rates. We also use an adjusted loan balance that reflects each loan's amortization profile. The MLTV reported in this publication reflects the MLTV before the adjustments described in the methodology.Moody's received full year 2019 operating results for 96% of the pool, and partial year 2020 operating results for 96% of the pool (excluding specially serviced loans). Moody's weighted average conduit LTV is 118%, compared to 114% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 21% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.9%.Moody's actual and stressed conduit DSCRs are 1.69X and 0.95X, respectively, compared to 1.72X and 0.96X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.The loan with a structured credit assessment is the 9 West 57th Street Loan ($100.0 million -- 8.9% of the pool), which is secured by a 50-story, Class A office building located on West 57th Street in New York City. The building is located directly south of the Plaza Hotel and provides views of Central Park above the 27th floor. There is 1.52 million SF of office space, 71,704 SF of grade and lower level retail, 25,005 SF of basement storage space and also a 60,000 SF subterranean parking garage (285 spaces). The loan represents a pari-passu portion of a $1.01 billion first mortgage loan. The property is also encumbered with a $186.3 million subordinate B-Note. As of September 2020, the property was 70% leased. Apollo Management Holdings (194,494 SF, 12% of the NRA) has extended its lease expiring in 2020 on a portion of its space through 2036. Another large tenant, Kohlberg, Kravis, Roberts & Co. (KKR) (196,124 SF, 12% of NRA) vacated the property at lease expiration in 2020. According to the servicer, Apollo is taking four floors that were previously occupied by KKR with a rent commencement in May 2021. Moody's structured credit assessment and stressed DSCR are aaa (sca.pd) and 1.31X, respectively.The other loan with a structured credit assessment is the Westfield San Francisco Loan ($60.0 million -- 5.3% of the pool), which represents a pari-passu portion of a $433 million first mortgage loan. The total mortgage debt also includes subordinate B-notes with an aggregate balance of $125 million, which is held outside the trust. The loan is secured by a 794,521 SF component of a 1,445,449 SF, nine-story super regional mall and office development located in the Union Square district of San Francisco, California. The mall is anchored by Bloomingdale's, Nordstrom, and a 9-screen Century Theatre. As of September 2020, the collateral was 82% occupied, compared to collateral occupancy of 90% in 2019, 92% in 2018 and 96% at securitization. The decline in occupancy was largely due to two major tenants vacating the office component. The loan is interest-only through its entire term and Moody's structured credit assessment and stressed DSCR are baa2 (sca.pd) and 1.11X, respectively.The top three conduit loans represent 19.1% of the pool balance. The largest loan is the Opry Mills Loan ($80.0 million -- 7. 1% of the pool), which is secured by a pari-passu interest in a $375 million senior mortgage loan. The loan is secured by a 1.2 million SF super-regional mall located in Nashville, Tennessee. Simon Property Group, L.P. is the loan sponsor. The property is part of Opryland, which includes the Grand Ole Opry and the Gaylord Opryland Resort and Convention Center. The convention center, which includes 2,881 rooms and 600,000 SF of meeting space, has over 3.0 million visitors each year. The mall is anchored by Bass Pro Shops, Regal Cinemas, Dave & Buster's, and Forever 21. The property was 96% leased as of September 2020 and has maintained strong occupancy since securitization. The loan is interest only for its entire term and Moody's LTV and stressed DSCR are 92% and 1.00X, respectively, the same as at last review.The second largest loan is the 693 Fifth Avenue Loan ($75.0 million -- 6.7% of the pool), which represents a pari-passu portion of a $234.5 million first-mortgage loan secured by a 96,514 SF, 20-story, mixed-use building located in New York, New York. The property is located along Manhattan's Fifth Avenue retail corridor and contains 14,527 SF of retail space and 82,089 SF of office space. The property's office component was 50% vacant as of June 2020, similar to the occupancy level at securitization. While the retail portion of the property accounts for 15% of the NRA, it accounts for 84% of the in-place rental revenue. The retail component of the property was 100% leased to Italian fashion brand, Valentino, through July 2029. In June 2020, Valentino filed a lawsuit against the property's landlord to end their lease, citing difficulties due to business disruptions in relation to the coronavirus outbreak. As of February 2021, Valentino lost its bid and owes $207 million in rent. The landlord has now countersued Valentino for broken lease and damages. The loan remains current and Moody's LTV and stressed DSCR are 159% and 0.56X, respectively.The third largest loan is the 1 Kaiser Plaza Loan ($60.0 million -- 5.3% of the pool), which represents a pari-pasu portion of a $97.1 million first-mortgage loan secured by a 28-story office building located in the CBD of Oakland, California. The property has served as the corporate headquarters for the largest tenant, Kaiser Foundation Health Plan, Inc., since 1971. The remaining tenants at the property consist of a mix of law firms, consulting groups, and non-profit organizations. The property was 89% leased as of December 2020, compared to 97% leased in December 2019 and 94% leased in December 2018. The property's cash flows has generally increased since securitization due to higher rental revenue. The loan is interest only for its entire term and Moody's LTV and stressed DSCR are 118% and 0.98X, respectively, the same as at the last review.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.Moody's did not use any stress scenario simulations in its analysis.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.At least one ESG consideration was material to the credit rating action(s) announced and described above.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Kevin Li Asst Vice President - Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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