Fitch Places 1 Class of J.P. Morgan 2006-FL2 on Rating Watch Negative

Business Wire, Sept 24, 2008

NEW YORK -- Fitch Ratings has placed the following class of J.P. Morgan Chase Commercial Mortgage Securities Corp., series 2006-FL2, on Rating Watch Negative:

--$29.3 million class L at 'BBB-'.

In addition, Fitch affirms the following classes:

--$306.2 million class A-1 at 'AAA';

--$298.2 million class A-2 at 'AAA';

--Interest-only class X-2 at 'AAA';

--$33 million class B at 'AA ';

--$28.1 million class C at 'AA';

--$19.5 million class D at 'AA-';

--$22 million class E at 'A ';

--$22 million class F at 'A';

--$19.5 million class G at 'A-';

--$24.4 million class H at 'BBB ';

--$24.4 million class J at 'BBB';

--$22 million class K at 'BBB-';

--$7.4 million class LV-1 at 'BB ';

--$2.6 million class LV-2 at 'BB'.

Interest-only class X-1 has paid in full.

The Rating Watch Negative placement is due to upcoming maturity risk associated with one loan: the SOMA Portfolio (1.9%). The affirmations reflect generally stable performance demonstrated by the remainder of the pool since Fitch's last rating action.

The SOMA Portfolio loan (1.9%) is secured by four hotels located in San Francisco, CA, with a total of 308 rooms. At issuance, the borrower planned to reposition the portfolio by performing over $7.4 million in renovations, to be completed by 2008. An initial cash equity contribution of approximately 33% was made. The loan is scheduled to mature Oct. 11, 2008. Three extension options are available; however, their exercise is subject to a minimum debt service coverage ratio (DSCR) of 1.20 times (x), 1.30x, and 1.40x for the first, second, and third options, respectively. The loan does not currently meet the performance hurdle required for extension. If the borrower cannot extend or refinance the loan, it would be in default and could be transferred to the special servicer, which could result in interest shortfalls to class L. Fitch will revisit the ratings as additional information becomes available upon loan maturity.

Of the 10 loans remaining in the pool, three (24.6%) are considered Fitch loans of concern, including the SOMA Portfolio. The largest Fitch loan of concern is Marina Village (13.4%), which consists of 34 low- to mid-rise office properties located within a master-planned development in Alameda, CA. Year-end 2007 reported occupancy stood at 76%, compared to the 79.6% leased at issuance. The borrower has thus far been unable to re-lease large blocks of space vacated prior to issuance, and the Alameda submarket remains challenging, with an average vacancy rate of approximately 30%. The sponsor had invested approximately 30% cash equity in the property at issuance, and a portion of the $23.5 million B-2 note future funding facility remains available for leasing costs and capital expenditures. The loan is in its first of three extension options, with an extended maturity date of Feb. 9, 2009.

The 1111 Marcus Avenue loan (9.3%), collateralized by a mixed-use property in New Hyde Park, NY, is also a Fitch loan of concern. Occupancy at the property has increased slightly, to 84.1% as of Dec. 31, 2007 from 80% at issuance. However, actual servicer-reported expenses for 2007 were higher than anticipated at issuance, resulting in a current Fitch stressed DSCR of 1.06x on the trust balance, compared to 1.40x at issuance.

All other loans within the pool are performing at or above expectations at issuance. The RREEF Silicon Valley Office Portfolio (16.8%) is the largest loan in the transaction. It is secured by a portfolio of 119 office and industrial properties located throughout four submarkets of Silicon Valley, CA. Occupancy across the portfolio has increased slightly since issuance, to 77% as of Dec. 31, 2007 from 71.4%. The loan had a Fitch stressed DSCR of 1.46x on the trust balance A-3 note, compared to 1.30x at issuance. The loan matures on Nov. 9, 2008, and has three one-year extension options.

The second largest loan is secured by 697,151 square feet (sf) of in-line and leased fee space corresponding to the Lehigh Valley Mall (16.3%), a regional mall located in Whitehall, PA, which at issuance comprised 1,049,504 sf of total space. In October 2007, a lifestyle center opened at the property, which consists of approximately 120,000 sf of additional space. The loan has experienced stable performance since issuance. The loan is within the second of three one-year extension options, and has an extended maturity date of Aug. 9, 2009.

The Doubletree Metropolitan collateralizes the third largest loan. Located in Midtown Manhattan, the property is a 755-room full-service hotel built in 1961 and renovated in 2005. Performance has improved since issuance, with year-end 2007 occupancy rising to 95.3% from 94.4% at issuance, and the Fitch stressed DSCR on the whole loan increasing to 2.56x from 2.17x at issuance. The loan is within its first of three one-year extension options, with an extended maturity date of May 9, 2009.

All but one (9.3%) of the loans mature by 2008. However, every loan within the pool has one or more one-year extension options remaining. All pooled whole loans, A notes, or senior participations of whole loans in the trust maintain investment-grade shadow ratings.