NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded two classes and affirmed nine classes of Wachovia Bank Commercial Mortgage Trust, commercial mortgage pass-through certificates, series 2003-C9. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades are due to concerns with the credit quality of the remaining pool as the top 10 (91.3%) of the remaining 16 loans are in special servicing.
Fitch modeled losses of 39.9% of the remaining pool; expected losses on the original pool balance total 8.5%, including $74.1 million (6.5% of the original pool balance) in realized losses to date. As of the March 2014 distribution date, the pool's aggregate principal balance has been reduced by 94.9% to $59.1 million from $1.15 billion at issuance. No loans are defeased. Interest shortfalls are currently affecting classes G through P.
The largest contributor to expected losses is the largest loan in the pool (32.8% of the pool), which is secured by a 360-unit multifamily apartment complex located in Gainesville, FL. The loan returned to special servicing on March 6, 2014 for maturity default. The loan was previously with the special servicer until it was modified in May 2010. The modification included an interest rate reduction of 200 basis points and interest-only (IO) payments until April 2012. After converting back to principal and interest payments, the loan continues to struggle under its original terms. As of third-quarter 2013, the servicer-reported property occupancy and debt service coverage ratio (DSCR) was 91.1% and 1.04x, respectively.
The next largest contributor to expected losses is the second largest asset, an 84,983-square foot (sf) retail center located in Worcester, MA (10.3%). The loan transferred to special servicing in February 2012 due to imminent default after the grocery anchor vacated. The asset became real estate owned (REO) in February 2013, and the special servicer is working on marketing and leasing the property. In addition, the special servicer reports that the property's occupancy is 35.9% as of November 2013.
The third largest loan and contributor to expected losses is a 50,621-sf office building located in North Castle, NY. The loan was first transferred to the special servicer in October 2009 for monetary default; the loan was modified, reducing the interest rate and IO period and returned to the master servicer. In July 2011 it returned to the special servicer for imminent default. The loan was modified a second time, which included a loan split of $4.3 million to the A note and $3.1 million B note. In addition, there was an interest rate reduction to the A note for 24 months with an increase for the last three months before the new maturity of October 2014. The A note struggles to perform under the modification; the special servicer reports year-end 2012 DSCR was 0.52x and occupancy as of first-quarter 2013 was 90.1%. The borrower is currently is contributing to the debt service shortfalls out of pocket.
Rating Outlooks on classes D and E remain Negative due to the high concentration of specially serviced loans in the remaining pool, as well as the credit quality of the performing loans.
Fitch downgrades the following classes as indicated:
--$19.7 million class D to 'BBsf' from 'BBB-sf'; Outlook Negative;
--$14.4 million class E to 'Bsf' from 'BBsf'; Outlook Negative.
Fitch affirms the following classes and revises Recovery Estimates (REs) as indicated:
--$15.8 million class F at 'Csf'; RE 10%;
--$9.2 million class G at 'Dsf'; RE 0%;
--$0 class H at 'Dsf'; RE 0%;
--$0 class J at 'Dsf'; RE 0%;
--$0 class K at 'Dsf'; RE 0%;
--$0 class L at 'Dsf'; RE 0%;
--$0 class M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%;
--$0 class O at 'Dsf'; RE 0%.
The class A-1, A-2, A-3, A-4, B, C and X-P certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class X-C 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:
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Global Structured Finance Rating Criteria