NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded three classes and affirmed 19 classes of Merrill Lynch Mortgage Trust (MLMT) series 2008-C1, commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations and Positive Outlooks reflect lower loss expectations and relatively stable performance of the pool. The downgrades to the already distressed classes are a result of incurred losses to the most subordinate classes and increased certainty of expected losses to these classes.
Fitch modeled losses of 4.3% of the remaining pool; expected losses on the original pool balance total 5.7%, including $28.2 million (3% of the original pool balance) in realized losses to date. Fitch has designated 29 loans (40.3%) as Fitch Loans of Concern, which includes two specially serviced assets (1.8%).
As of the February 2014 distribution date, the pool's aggregate principal balance has been reduced by 37.3% to $594.5 million from $948.8 million at issuance. Per the servicer reporting, two loans (1.2% of the pool) are defeased. Interest shortfalls are currently affecting classes N through T.
The largest contributor to expected losses is the Heritage Financial Center loan (1.9% of the pool), which is secured by a 61,163-sf office building located in Agoura Hills, CA, in northwest Los Angeles County. The loan was previously with the special servicer for monetary default. The loan was brought current on payments and a modification was given for a 12-month extension of interest-only payments that expired in June 2013. The servicer reported occupancy and net operating income (NOI) debt service coverage ratio (DSCR) was 95.5% and 1.37 times (x), respectively, as of the third-quarter 2013. In addition, as per the property's third-quarter 2013 rent roll, there is a 54.7% rollover risk in 2014, including the first and third largest tenants at 25% and 17.4%, respectively.
The next largest contributor to expected losses is the Landmark Towers loan (2.7%), which is secured by 25-story, 212,959-sf office building located in St. Paul, MN. The property has been suffering from poor performance over the last several years due an increase in expenses and tenant rollovers. The property's expense ratio has been above 71% since 2009. The servicer reported occupancy was 92.7% as of the third-quarter 2013. Additionally, the servicer reported DSCR declined to 1.01x as of the year-end 2012 from 1.23x as of year-end 2011.
The third largest contributor to expected losses is the Park Creek Apartments loan (2%), which is secured by a 200-unit multifamily complex in Gainesville, GA. The property has suffered from poor performance over the last couple of years due to local market conditions and increased competition. As per the property's rent roll, occupancy increased to 89% as of year-end 2013 from 78% as of year-end 2012. However, the DSCR dropped to 0.93x as of year-end 2013 from 0.99x as of year-end 2012 due to lower rental rates and concessions.
The Rating Outlooks on classes A4 though AM-A remains Stable. The rating Outlooks on classes AJ through AJ-AF have been revised to Positive as a result of increased credit enhancement from continued principal paydowns since Fitch's last rating action. Should stable to improved performance continue, these classes may be upgraded. The distressed classes (those rated below 'B') could be subject to further rating actions as losses are realized.
Fitch downgrades the following classes and assigns Recovery Estimates (REs) as indicated:
--$10.7 million class K to 'CCsf' from 'CCCsf'; RE 15%;
--$8.3 million class L to 'Csf' from 'CCsf'; RE 0%;
--$3.6 million class M to 'Csf' from 'CCsf'; RE 0%.
Fitch affirms the following classes, revises Rating Outlooks and assigns REs as indicated:
--$321.8 million class A4 at 'AAAsf'; Outlook Stable;
--$41.7 million class A-1A at 'AAAsf'; Outlook Stable;
--$71.2 million class AM at 'AAAsf'; Outlook Stable;
--$6.3 million class AM-A at 'AAAsf'; Outlook Stable;
--$41.8 million class AJ at 'AAsf'; Outlook to Positive from Stable;
--$3.7 million class AJ-A at 'AAsf'; Outlook to Positive from Stable;
--$2.2 million class AJ-AF at 'AAsf'; Outlook to Positive from Stable;
--$10.7 million class B at 'Asf'; Outlook Stable;
--$11.9 million class C at 'Asf'; Outlook Stable;
--$8.3 million class D at 'BBBsf'; Outlook Stable;
--$8.3 million class E at 'BBB-sf'; Outlook Stable;
--$9.5 million class F at 'BBsf'; Outlook Stable;
--$9.5 million class G at 'BBsf'; Outlook to Stable from Negative;
--$10.7 million class H at 'Bsf'; Outlook to Stable from Negative;
--$11.9 million class J at 'CCCsf'; RE 100%;
--$2.7 million class N at 'Dsf'; RE 0% ;
--$0 class P at 'Dsf'; RE 0% ;
--$0 class Q at 'Dsf'; RE 0% ;
--$0 class S at 'Dsf'; RE 0% .
The class A-1, A-2, A-3, A-SB, A-1AF and AM-AF certificates have paid in full. Fitch does not rate the class T 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. 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 >> CMBS >> 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:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria