NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 19 classes of ML-CFC Commercial Mortgage Trust, series 2006-1. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are due to the overall stable pool performance since Fitch's last rating action. Fitch modeled losses of 9.3% of the remaining pool; expected losses on the original pool balance total 9.5%, including $87.8 million (4.1% of the original pool balance) in realized losses to date. Fitch has designated 24 loans (21.3%) as Fitch Loans of Concern, which include 10 specially serviced loans (6.8%).
As of the September 2013 distribution date, the pool's aggregate principal balance has been reduced by 41.5% to $1.25 billion from $2.14 billion at issuance. One loan (0.5% of the pool) is defeased. Interest shortfalls are currently affecting classes F through Q.
The 'AAA' rated classes are expected to remain stable due to continued paydown. The 'BBB-' rated class may be subject to future downgrades should pool performance deteriorate and losses on the specially serviced loans exceed projections. In addition, the distressed classes (rated below 'B') may be subject to further rating actions as losses are realized.
The largest contributor to expected losses is a loan (2.3% of the pool) secured by two office properties located in suburban Atlanta, GA totaling 323,526 SF. The portfolio has been underperforming since year end (YE) 2009 due to the loss of several large tenants. The servicer-reported YE 2012 portfolio debt service coverage ratio (DSCR) was 0.52x with a 72% occupancy rate, compared to a DSCR of 1.29x and 91.5% occupancy rate at issuance.
The second largest contributor to expected losses is a loan (4.3%) secured by a portfolio of five medical office buildings and one surgical center totaling 323,013 square feet (sf) located in Texas, Arizona and Missouri. Three of the six properties are occupied by single tenants. The portfolio's performance improved in 2012, but it remains below performance expectations at issuance. The servicer servicer-reported YE 2012 DSCR was 1.09x, compared to a DSCR of 0.54x at YE2011 and 1.54x at issuance. Several tenants are in the process or have recently renegotiated leases. As of March 2013, the portfolio was 77.5% occupied, including one property at 48%, compared to 93.3% at issuance.
The third largest contributor to expected losses is a loan (1.9%) secured by a 170,796 SF retail center located in Reno, Nevada. The property's performance continues to deteriorate as a result of the decline in occupancy. The loan began amortizing in April 2011, which also affected cash flow. The property occupancy dropped sharply in 2009 to 72% from 95.5% at issuance when the largest tenant vacated upon lease expiration. The property is struggling to find new tenants. The servicer reported YE 2012 DSCR was 0.92x, compared to 1.01x at YE2011 and 1.39x at issuance. Based on August 2013 rent roll, the property is 64.4% occupied.
Fitch affirms the following classes as indicated:
--$2.6 million class A-SB at 'AAAsf', Outlook Stable;
--$489.5 million class A-4 at 'AAAsf', Outlook Stable;
--$204.2 million class A-1A at 'AAAsf', Outlook Stable;
--$214.2 million class AM at 'AAAsf', Outlook Stable;
--$82.1 million class AJ at 'BBB-sf', Outlook Negative;
--$100 million class AN-FL at 'BBB-sf', Outlook Negative;
--$50.9 million class B at 'CCCsf', RE70%;
--$21.4 million class C at 'CCCsf',RE0%;
--$29.5 million class D at 'CCsf', RE0%;
--$16.1 million class E at 'CCsf', RE0%;
--$24.1 million class F at 'Csf', RE0%;
--$16.1 million class G at 'Csf', RE0%;
--$1.5 million class H at 'Dsf', RE0%;
--$0 class J at 'Dsf', RE0%;
--$0 class K at 'Dsf', RE0%;
--$0 class L at 'Dsf', RE0%;
--$0 class M at 'Dsf', RE0%;
--$0 class N at 'Dsf', RE0%;
--$0 class P at 'Dsf', RE0%.
The class A-1, A-2, A-3, A-3FL and A-3B certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the rating on the interest-only class X certificates.
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 then CMBS then Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'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