NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded five and affirmed nine classes of Wachovia Bank Commercial Mortgage Trust (WBCMT) commercial mortgage pass-through certificates series 2005-C21. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades reflect an increase in expected losses, most of which involves the 6116 Executive Boulevard loan (2.8% of the pool) which transferred to special servicing in January 2014. Fitch modeled losses of 7.3% of the remaining pool; expected losses on the original pool balance total 6.2%, including $60.5 million (1.9% of the original pool balance) in realized losses to date. Fitch has designated 48 loans (48.1%) as Fitch Loans of Concern, which includes six specially serviced assets (8.6%).
As of the January 2014 distribution date, the pool's aggregate principal balance has been reduced by 40.8% to $1.92 billion from $3.25 billion at issuance. Per the servicer reporting, nine loans (3.6% of the pool) are defeased. Interest shortfalls are currently affecting classes J through P.
The largest contributor to expected losses is the specially-serviced 6116 Executive Boulevard loan (2.8% of the pool), which is secured by a 207,055 square foot (sf) office building in Rockville, MD. The collateral transferred to special servicing in January 2014 for imminent default following the November 2013 lease expirations and tenant vacancies of the General Services Administration (GSA), National Institute of Health (NIH) (90% of the net rentable area (NRA)). According to the servicer, occupancy is at 10% with no prospective tenants currently identified. There are approximately $3.2 million in total property reserves, including $2.8 million for tenant improvements. The loan is paid through the January 2014 payment date.
The next largest contributor to expected losses is the specially-serviced Park Place II loan (2.3%), which is secured by a 253,674 sf retail center in Sacramento, CA anchored by Kohl's, and Marshalls. The center had experienced cash flow issues following the major tenant vacancies of Borders Books (previously 10% NRA) in January 2009 and Bed Bath & Beyond (10% NRA) in December 2011. The loan transferred to special servicing in January 2012 due to imminent default, and subsequently went into payment default in September 2012. The foreclosure sale was completed in April 2013 and the property is now real estate owned (REO). The servicer is working to lease up the vacant space, with occupancy reported at 73% as of January 2014.
The third largest contributor to expected losses is the NGP Rubicon GSA Portfolio loan (9.6%), which is secured by 13 office properties and one distribution center located in 10 states and the District of Columbia, containing over 3 million sf. The primarily single-tenant properties are leased to the GSA and occupied by a variety of government agencies. Occupancy has declined to 88% as of January 2014, compared to 100% at the end of 2012. Two properties are now 100% vacant following GSA lease expirations, which include an 182,554-sf office building in Kansas City, KS (6% of portfolio NRA) that has been vacant since 2012, and a 53,830-sf office building in Norfolk, VA (2% of portfolio NRA) that recently became vacant in December 2013. Another 81,512-sf office property in Philadelphia, PA (3% of portfolio NRA) is currently 50% occupied after a portion of the GSA lease expired in November 2013. Leases for an additional 10% of the portfolio NRA are scheduled to mature prior to the loan's maturity in June 2015. The net operating income debt service coverage ratio declined to 1.23x for year-to-date September 2013, compared to 1.45x at year-end December 2012. There is currently $5.3 million in property reserves. The loan remains current as of the January 2014 payment date.
The Negative Outlooks on classes C through F reflect property performance concerns for several of the loans in the top-15, including major tenant vacancies and rollover risk, combined with secondary and tertiary market exposure. The Negative Outlooks reflect the potential for further rating actions should realized losses be greater than Fitch's expectations.
Fitch downgrades the following classes and assigns or revises Rating Outlooks and Recovery Estimates (REs) as indicated:
--$65 million class B to 'AAsf' from 'AAAsf', Outlook Stable;
--$60.9 million class D to 'BBBsf' from 'Asf', Outlook to Negative from Stable;
--$36.6 million class E to 'BBsf' from 'BBBsf', Outlook to Negative from Stable;
--$40.6 million class F to 'Bsf' from 'BBsf', Outlook Negative;
--$32.5 million class G to 'CCCsf' from 'Bsf', RE 25%.
Fitch affirms the following classes and assigns or revises Rating Outlooks and REs as indicated:
--$780 million class A-4 at 'AAAsf', Outlook Stable;
--$230.3 million class A-1A at 'AAAsf', Outlook Stable;
--$325 million class A-M at 'AAAsf', Outlook Stable;
--$215.3 million class A-J at 'AAAsf', Outlook Stable;
--$32.5 million class C at 'AAsf', Outlook to Negative from Stable;
--$40.6 million class H at 'CCsf', RE 0%.
--$16.3 million class J at 'CCsf', RE 0%;
--$16.3 million class K at 'Csf', RE 0%;
--$16.3 million class L at 'Csf', RE 0%.
The class A-1, A-2PFL, A-2C, A-3 and A-PB certificates have paid in full. Fitch does not rate the class M, N, O and P certificates. Fitch previously withdrew the rating on the interest-only class IO certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 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. 11, 2013).
Applicable Criteria and Related Research:
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Global Structured Finance Rating Criteria