Fitch Downgrades First Union National Bank 2000-C1

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded two classes of First Union National Bank Commercial (FUNBC) Mortgage Trust's commercial mortgage pass-through certificates, series 2000-C1. A full list of rating actions follows at the end of this release.

The downgrades reflect Fitch modeled losses of 5.41% of the remaining pool; modeled losses of the original pool are at 2.66%, including losses already incurred to date. Fitch has identified 11 loans (44.4%) as Fitch Loans of Concern, which includes six specially-serviced loans (24.8%). Of the six loans in special servicing, three loans (18.9%) are in foreclosure, one loan (1.35%) is 90 days or more delinquent, one loan (3.4%) is past maturity and non-performing, and one loan (1.15%) is past maturity and performing. Fitch expects losses from loans currently in special servicing to deplete class N and impact class M significantly.

Of the original 143 loans, 24 loans remain outstanding. As of the June 2011 distribution date, the pool's aggregate principal balance has reduced by 84.8% to $118.1 million from $776.3 million at issuance. In addition seven loans (29.8%) have been fully defeased. Interest shortfalls totaling $990,756 are currently affecting classes M and N.

The largest contributor to modeled losses is a loan (6.97%) secured by a 206,011 square foot (sf) retail center located in Decatur, IL. The loan was transferred to special servicing in January 2010 due to the borrower's request for a discounted payoff. The servicer reported occupancy as of March 2011 is 8% even though the property is 87% leased with two vacant anchor tenant spaces paying rent. The special servicer has agreed to a Deed in Lieu of Foreclosure to expedite the foreclosure process.

The second largest contributor to modeled losses is a limited service hotel (7.7%) with 141 rooms located in Tampa, FL. The loan was previously modified extending the maturity date until January 2012 and reducing the interest rate. The servicer reported debt service coverage ratio (DSCR) as of year end (YE) 2010 was .88 times (x) and the occupancy was 65%.

The third largest contributor to modeled losses is a loan (1.15%) secured by a 12,057 sf office complex located in Las Vegas, NV. The loan was transferred to Special Servicing in January 2011 due to the loan's pending maturity default of February 2011. The original maturity date was February 2010 and the borrower was granted a one-year extension but has still been unable to refinance. The special servicer is currently in discussions with the borrower on the workout strategy.

Fitch stressed the cash flow of the remaining loans by applying a 5% reduction to 2009 or 2010 fiscal YE net operating income, and applying an adjusted market cap rate between 8.10% and 11.00% to determine value.

All the loans also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Of the 24 remaining loans 16 are considered to pay off at maturity and could refinance to a DSCR above 1.25x. The current weighted average DSCR is 1.17x.

Fitch has downgraded and revised or assigned Recovery Ratings (RRs) to the following classes as indicated:

--$5.8 million class L to 'CCC/RR2' from 'B-/LS3';
--$8.7 million class M to 'C/RR4' from 'CCC/RR3'.

Fitch has affirmed the following classes and revised Outlooks and Loss Severity ratings as indicated:

--$6.2 million class C at 'AAA'; LS to LS4' from 'LS1'; Outlook Stable;
--$11.6 million class D at 'AAA'; LS to 'LS3' from 'LS1'; Outlook Stable;
--$25.2 million class E at 'AAA'; LS to 'LS3' from 'LS2'; Outlook Stable;
--$11.6 million class F at 'AAA/LS3'; Outlook Stable;
--$29.1 million class G at 'A+'; LS to 'LS2' from 'LS3'; Outlook to Positive from Stable;
--$7.8 million class H at 'A/LS3'; Outlook to Stable from Negative;
--$3.9 million class J at 'A-'; LS to 'LS4' from 'LS3'; Outlook to Stable from Negative;
--$7.8 million class K at 'B-/LS3'; Outlook to Stable from Negative.

Class N, which is not rated by Fitch has been reduced to $327,425 from $14.6 million at issuance due to realized losses. Classes A-1, A-2, and B have paid in full.

Fitch withdraws the ratings of the interest-only class IO. (For additional information, see 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities', dated June 23, 2010.)

Additional information on Fitch's criteria is available in the Nov. 17, 2010 report 'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions', which is available at www.fitchratings.com under the following headers:

Structured Finance >> CMBS >> Criteria Reports

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 13, 2010);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Nov. 17, 2010).

Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=574208

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