NEW YORK--()--Fitch Ratings has downgraded five classes and affirmed 16 classes of ML-CFC Commercial Mortgage Trust commercial mortgage pass-through certificates series 2007-6. A detailed list of rating actions follows at the end of this press release.
Fitch modeled losses of 20.5% of the remaining pool; expected losses on the original pool balance total 19.4%, including losses already incurred. The pool has experienced $21.5 million (1% of the original pool balance) in realized losses to date. The pool contains 20 specially serviced assets (38.5%), and Fitch has designated 48 loans as Fitch Loans of Concern.
As of the October 2012 distribution date, the pool's aggregate principal balance has been reduced by 10.3% to $1.93 billion from $2.15 billion at issuance. No loans have defeased since issuance. Interest shortfalls are currently affecting classes AJ through Q. The largest contributor to losses was MKSP Retail Portfolio - A2, which is secured by eight neighborhood, regional, and power centers located in four distinct markets in Florida. Five properties are located in the Orlando metropolitan statistical area (MSA), one in the Palm Beach MSA, one in the Ft. Lauderdale MSA, and one in Port Charlotte in southwest Florida. Significant tenants include Publix, Bed Bath & Beyond, Bealls, and Ross Dress for Less.
Property performance has steadily declined due to weak local retail markets, which has resulted in lower rents and a drop in occupancy from 88% at issuance to 78% at June 30, 2012. The loan was modified in March 2012 while in special servicing. Terms of the modification included the bifurcation of the loan into a senior ($130.3 million) and junior ($93.1 million) component. Although losses are not expected imminently, any recovery to the subject B-note is contingent upon full recovery to the A-note proceeds at the loan's maturity in March 2019. Unless collateral performance improves, recovery to the B-note component is unlikely.
The second largest contributor to losses was Peter Cooper Village/Stuyvesant Town (PCV/ST), which is in special servicing. PCV/ST comprises 56 multi-story buildings, situated on 80 acres, and includes a total of 11,227 apartments. The special servicer has gained control of the property by acquiring the mezzanine debt of the borrower. The special servicer is working to stabilize the asset and has engaged Rose Associates as property manager. Property performance continues to be below what is needed to service the debt. The most recent servicer reported occupancy is 99%. A litigation affecting over 4,000 units is ongoing simultaneous with settlement talks to decide future legal rents and historical overcharge liability. Per the Special Servicer, litigation resolution is a prerequisite to optimal capital recovery, and likely not possible until 2014.
The third largest contributor to losses was MKSP Retail Portfolio B2, which is secured by one grocery-anchored and one unanchored retail center in two distinct markets in Florida. The grocery-anchored center is located in Ft. Lauderdale, and the unanchored center is located in Palm Beach County. Significant tenants include Winn Dixie and CVS. Total occupancy on the portfolio has gradually declined from 92% at issuance to 78% at June 30, 2012, driven by occupancy at the Palm Beach County property. The loan was modified in March 2012 while in special servicing. Terms of the modification included the bifurcation of the loan into a senior ($29.7 million) and junior ($29.7 million) component. Although losses are not expected imminently, any recovery to the subject B-note is contingent upon full recovery to the A-note proceeds at the loan's maturity in March 2019. Unless collateral performance improves, recovery to the B-note component is unlikely.
Fitch downgrades the following classes and assigns or revises Recovery Estimates (REs) as indicated:
--$214.6 million class AM to 'BBsf' from 'BBB-sf', Outlook Negative;
--$16.1 million class C to 'CCsf' from 'CCCsf', RE 0%;
--$34.9 million class D to 'CCsf' from 'CCCsf', RE 0%;
--$24.1 million class F to 'Csf' from 'CCsf', RE 0%;
--$24.1 million class G to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes but assigns or revises REs as indicated:
--$107.4 million class AJ at 'CCCsf', RE 100%;
--$75 million class AJ-FL at 'CCCsf', RE 25%;
--$42.9 million class B at 'CCCsf', RE 0%;
--$18.8 million class E at 'CCsf', RE 0%;
--$26.8 million class H at 'Csf', RE 0%.
Fitch affirms the following classes as indicated:
--$83 million class A-2 at 'AAAsf', Outlook Stable;
--$73 million class A-2FL at 'AAAsf', Outlook Stable;
--$60.7 million class A-3 at 'AAAsf', Outlook Stable;
--$729 million class A-4 at 'AAAsf', Outlook Stable;
--$345.4 million class A-1A at 'AAAsf', Outlook Stable;
--$5.4 million class J at 'Csf', RE 0%;
--$5.4 million class K at 'Csf', RE 0%;
--$5.4 million class L at 'Csf', RE 0%;
--$5.4 million class M at 'Csf', RE 0%;
--$5.4 million class N at 'Csf', RE 0%;
--$5.4 million class P at 'Csf', RE 0%.
Fitch previously withdrew the rating on the interest-only class X certificates. Class A-1 has paid in full, and class Q is not rated by Fitch.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 21, 2011 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'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Dec. 21, 2011).
Applicable Criteria and Related Research:
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
Global Structured Finance Rating Criteria