CHICAGO--()--Fitch Ratings has downgraded 7 classes and affirmed 13 classes of commercial mortgage pass-through certificates from Bear Stearns Commercial Mortgage Securities Trust, series 2006-PWR11. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The downgrades reflect an increase in Fitch modeled losses primarily due to updated values on specially serviced assets.
Fitch modeled losses of 9.6% of the original pool balance compared to 7.7% losses modeled at Fitch's last review. As of the December 2012 distribution date, the pool's aggregate principal balance has decreased 13.3% to $1.61 billion from $1.86 billion at issuance. Fitch has designated 31 loans (20.5%) as Fitch Loans of Concern, including nine (4.4%) specially serviced loans.
As of December 2012, cumulative interest shortfalls in the amount of $4.9 million are affecting classes H through P.
The two largest contributors to modeled losses, the Investcorp Retail Portfolio 1 loan (6% of the remaining pool balance) and the Investcorp Retail Portfolio 2 loan (5.5%), are cross-collateralized and cross-defaulted retail portfolios. The collateral consists of eight retail properties totaling approximately 1.6 million square feet (sf), seven of which are located in Ohio and one in Indiana. Anchor tenants are Wal-Mart, Kohl's, Dick's Sporting Goods and Officemax.
The properties have been suffering from occupancy issues. Petsmart, which leases a total of 53,704 sf at two of the properties, vacated one space in June 2008 but is still paying rent. The lease expires in January 2013. Sears, which leases 11,165 sf at one property, also went dark but is still paying rent. Its lease expires in June 2013. Best Buy leases a total of 60,814 sf at two of the properties; one lease expires in January 2013 and will not be renewed. Hobby Lobby, which leases a total of 127,205 sf at two of the properties, vacated one space in September 2012 but is still paying rent. Its lease expires in December 2014.
The combined occupancy as of Sept. 30, 2012 for Investcorp Retail Portfolio I decreased to 86.2% from 89.3% at YE 2011. The third quarter (3Q) 2012 servicer-reported DSCR was 1.17x, compared to 1.03x at YE2011 and 1.14x at YE2010. The combined occupancy for Investcorp Retail Portfolio 2 decreased to 88.3% as of Sept. 30, 2012 from 92.3% at YE2011. The 3Q 2012 servicer-reported DSCR was 1.28x, compared to 1.15x at YE2011 and 1.21x at YE 2010. The interest only loans are sponsored by Investcorp and Cast.
The third largest contributor to losses is a retail property located in Louisville, KY (1.2%). The loan was transferred to the special servicer in April 2009 due to imminent default and was foreclosed in November 2011. The real estate owned (REO) asset was sold in December 2012 with significant realized losses.
Fitch has downgraded the following classes:
--$146.4 million class A-J to 'BB/sf' from 'A/sf'; Outlook Stable;
--$37.2 million class B to 'B/sf' from 'BBB-/sf'; Outlook Negative.
Fitch has downgraded the following classes and assigned Recovery Estimate Ratings as indicated:
--$23.2 million class C to 'CCCsf' from 'BBsf'; RE 50%;
--$27.9 million class D 'CCsf' from 'Bsf'; RE0%;
--$18.9 million class E to 'CCsf' from 'CCCsf'; RE0%;
--$20.9 million class F to 'Csf' from 'CCsf'; RE0%';
--$18.9 million class G to 'Csf' from 'CCs'; RE0%.
Fitch has affirmed the following classes as indicated:
--$18.5 million class A-2 at 'AAAsf'; Outlook Stable;
--$44.8 million class A-3 at 'AAAsf'; Outlook Stable;
--$73.4 million class A-AB at 'AAAsf'; Outlook Stable;
--$830.7 billion class A-4 at 'AAAsf'; Outlook Stable;
--$104.6 million class A-1A at 'AAAsf'; Outlook Stable;
--$185.9 million class A-M at 'AAAsf'; Outlook Stable;
--$23.2 million class H at 'Csf'; RE0%;
--$7 million class J at 'Csf'; RE0%;
--$7 million class K at 'Csf'; RE0%;
--$7 million class L at 'Csf'; RE0%;
--$2.3 million class M at 'Csf'; RE0%;
--$6.2 million class N at 'Csf'; RE0%;
--$4 million class O at 'Dsf'; RE0%.
Class A-1 has paid in full. Fitch does not rate class P. Fitch has previously withdrawn the rating on the interest-only class X.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria ', 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);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (Dec. 18, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria