NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded eight classes and affirmed 16 classes of Bear Stearns Commercial Mortgage Securities Trust, series 2007-PWR18. In addition, Fitch has removed from Rating Watch Negative and assigned Negative Outlooks to the class A-M and AM-A notes. A detailed list of rating actions follows at the end of this press release.
SENSITIVITY/RATING DRIVERS
The downgrades reflect an increase in Fitch modeled losses primarily due to lower values on the specially serviced assets. The Negative Outlooks are due to uncertainties related to the resolution of several large specially serviced loans.
Fitch modeled losses of 14.4% of the original pool balance, including losses realized to-date, compared to 9.4% modeled at Fitch's last review. As of the January 2013 distribution date, the pool's aggregate principal balance has decreased 18.6% to $2.04 billion from $2.5 billion at issuance. Fitch has designated 40 loans (37.7%) as Fitch Loans of Concern, including 10 (21.3%) specially serviced loans.
As of January 2013, cumulative interest shortfalls in the amount of $4.2 million are affecting classes K, L, N and S.
The largest contributor to Fitch expected losses is a portfolio of 19 office and retail properties totaling 5.2 million square feet (SF) with locations across six major markets including Atlanta, GA (1), Austin, TX (1), Birmingham, AL (7), Charlotte, NC (1), Orlando, FL (6), and Tampa, FL (3)(12.2%). The whole loan consists of three pari passu notes. Only the A3 note is securitized in this transaction.
The loan was transferred to the special servicer in August 2012 due to imminent default. Although the loan remains current, portfolio cash flow has fallen due to a decline in occupancy as well as lower rental rates, both of which are the result of weaker economic conditions in the portfolio's represented markets. As of year-end 2012, the portfolio occupancy rate was 81%; compared to 84% at YE2011, 86% at YE2010 and 95% at issuance. The loan was modified in December 2012 and the loan maturity has been extended for two years to July 2016 from July 2014.
The second largest contributor to Fitch expected loss is a one-million square foot (SF) regional mall located in Morrow, GA (3.3%), approximately 15-miles from downtown Atlanta. Collateral for the loan is the 273,997 sf of in-line space in the shopping center. The mall is anchored by Macy's and Sears which are not part of the collateral. The center also contains two dark anchor spaces previously occupied by JCPenney and Macy's, which are also not part of the collateral. The loan was initially transferred to the special servicer in April 2009 due to a borrower (GGP) bankruptcy. The loan was modified and returned to the master servicer in January 2011 as a corrected loan. The loan was transferred back to the special servicer in June 2012 due to imminent default and is now in foreclosure. The borrower has requested to convey the property to the lender. The servicer-reported first quarter (1Q) 2012 DSCR was 1.00x, compared to 1.03x at YE2011 DSCR and 1.32x at issuance. As of June 2012, the property was 89% occupied, down from 91% at YE 2011.
The third largest contributor to Fitch expected losses is a 600-key full-service hotel in Houston, TX (3.8%). Hotel performance, which deteriorated through 2010, has showed signs of improvement in recent years. Based on trailing 12 month (TTM) data, as of November 2012, the occupancy rate improved to 62.9%, from 62.5% in 3Q11 and 54% in 2010. As of TTM November 2011, the hotel RevPAR also improved to $79.32 from $74.24 as of TTM Q3 2011 and $66.38 at YE2010. The servicer-reported debt service coverage ratio (DSCR) (based on net operating income [NOI]) was 1.12x, compared to 1.05 times (x) at year-end 2010.
Fitch downgrades and removes from Rating Watch Negative the following classes and assigned Outlooks as indicated:
--$211.6 million class A-M to 'AAsf' from 'AAAsf'; Outlook Negative;
--$38.9 million class A-MA to 'AAsf' from 'AAAsf'; Outlook Negative;
Additionally, Fitch downgrades the following:
--$25 million class B to 'CCsf' from 'CCCsf; RE0%;
--$25 million class C to 'CCsf' from 'CCCsf; RE0%;
--$18.9 million class D to 'CCsf' from 'CCCsf'; RE0%;
--$25 million class E to 'Csf' from 'CCsf'; RE0%;
--$18.9 million class F to 'Csf' from 'CCsf'; RE0%;
--$21.9 million class H to 'Dsf' from 'Csf'; RE0%.
Fitch affirms the following classes:
--$86.6 million class A-2 at 'AAAsf'; Outlook Stable;
--$269.7 million class A-3 at 'AAAsf'; Outlook Stable;
--$131.9 million class A-AB at 'AAAsf'; Outlook Stable;
--$710 million class A-4 at 'AAAsf'; Outlook Stable;
--$211.6 million class A-1A at 'AAAsf'; Outlook Stable;
--$182.5 million class A-J at 'CCCsf'; RE65%;
--$33.6 million class A-JA at 'CCCsf'; RE65%;
--$25 million class G at 'Csf'; RE0%.
Fitch has also affirmed classes J through Q at 'D/RE0%' as they have been depleted due to realized losses. Class A-1 has paid in full. Fitch does not rate class S. Fitch has withdrawn the ratings assigned to the interest only classes X-1 and X-2 at the previous review.
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
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696969
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