Fitch Downgrades 1 Class of Key 2007-SL1

CHICAGO--()--Fitch Ratings has downgraded one class and affirmed 10 classes of Key Commercial Mortgage Securities Trust commercial mortgage pass-through certificates series 2007-SL1. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Fitch modeled losses of 18.1% of the remaining pool; expected losses on the original pool balance total 10.1%, including $10 million (4.2% of the original pool balance) in realized losses to date. Fitch has designated 27 loans (48.8%) as Fitch Loans of Concern, none of the loans are specially serviced.

As of the March 2014 distribution date, the pool's aggregate principal balance has been reduced by 67.6% to $77 million from $237.5 million at issuance. No loans are defeased. Interest shortfalls are currently affecting classes E through L.

The largest contributor to expected losses (7.7% of the pool) is secured by a 72,374 square foot (sf) mixed-use property (retail/self-storage) located in Kent, WA, which is approximately 20 miles south of Seattle. The debt service coverage ratio (DSCR) as of the Dec. 31, 2012 operating statement was at 0.92x which was inline with the prior year same period Dec. 31, 2011. The loan has been operating below 1.0x since 2010 due to soft market conditions. The property is 87% occupied as of the March 2013 rent roll. The retail portion is 100% occupied while the self-storage portion is 74% occupied.

The next largest contributor to expected losses (5.8%) is secured by a 41,341 sf office property located in Tacoma, WA. The largest tenants are Camber Health Partners (18%); Pinnacle Capital Mortgage Corp. (15%); and Ameriprise Financial Services (12%). The borrower is currently negotiating a long-term extension with Camber Health Partners. As of December 2013, the property is 67% occupied, which is an increase from 50% at December 2012. The DSCR has also improved to 0.84x at December 2013 from 0.50x at December 2012.

The third largest contributor to expected losses (3.1%) is secured by a 117,208 sf retail property located in Conneaut, OH, which is approximately 70 miles east of Cleveland. The property is anchored by Kmart (54%) with a lease expiration of May 15, 2014. On April 1, 2014, the company announced that the store will close upon the lease expiration. Due to the upcoming Kmart vacancy and reports of major roof damage, the borrower has expressed their intention to relinquish the property back to the servicer. A transfer of this loan to the special servicer is assumed to be imminent.

RATING SENSITIVITY

Rating Outlooks on classes A-2 and A-1A remain Negative due to the transaction's geographic concentration in Washington (49%) and Ohio (25%) and the high number of Fitch Loans of Concern (49%). These classes may be downgraded if additional loans transfer to special servicing and / or performance of the pool continues to deteriorate. The distressed classes rated 'CCC' and below may be subject to further downgrades as losses are realized or additional loans default.

Fitch downgrades the following class and assigns a Recovery Estimate (RE) as indicated:

--$5.3 million class B to 'CCCsf' from 'Bsf', RE 100%.

Fitch affirms the following class but revises the RE as indicated:

--$5.6 million class C at 'CCCsf', RE 10%.

Fitch affirms the following classes as indicated:

--$38.4 million class A-2 at 'BBBsf', Outlook Negative;

--$20.3 million class A-1A at 'BBBsf', Outlook Negative;

--$4.8 million class D at 'CCsf', RE 0%;

--$2.1 million class E at 'Csf', RE 0%;

--$415,662 class F at 'Dsf', RE 0%;

--$0 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%.

The class A-1 certificates have paid in full. Fitch does not rate the class L, R and LR 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:

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826518

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Daniel Anderson, +1-312-368-2305
Associate Director
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Daniel Anderson, +1-312-368-2305
Associate Director
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com