NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of Wachovia Bank Commercial Mortgage Trust (WBCMT) series 2007-WHALE 8. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The affirmations reflect the relatively stable performance of the pool in line with Fitch expectations since its last rating action. The pool remains highly concentrated, with the largest loan comprising 68% of the pooled balance, and hotels accounting for 93.9% of the pool. As of the April 2014 distribution date, the pools aggregate principal balance has been reduced by 49.6% to $887 million from $1.76 billion at issuance, of which $232.6 million was repaid over the past year as a result of expected collateral releases in the LXR Hospitality Pool (LXR Pool).
The transaction is collateralized by five loans, including four secured by hotels (93.9% of the pool balance) and one (6.1%) is secured by a portfolio of multifamily properties. The four hotel loans are specially serviced; three transferred due to imminent maturity and one is real estate owned (REO) (5.8%). The four non-REO loans in the pool have forbearance agreements in place or otherwise scheduled to mature in 2014 or 2015. The final rated maturity for the transaction is June, 2020. All of the loans have additional debt in the form of non-pooled rake bonds within the trust, and/or subordinate B-Note or mezzanine debt outside of the transaction.
To determine a sustainable Fitch cash flow and stressed value, Fitch analyzed servicer-reported operating statements (year end 2013), STR reports, and updated property valuations. Fitch took additional adjustments to cash flow and values to account for foreign sovereign exposure, though minimal relative to loan size and transaction size in the cases of Rose Hall Resort & Country Club in the LXR Pool, and Four Seasons Nevis. Additional information regarding sovereign risk and structured bonds can found in Fitch's 'Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds', published April 11, 2014.
Ratings are expected to remain stable as continued de-levering of the LXR Loan (68% of the pool) through property releases will offset risks from the increasing concentration. The Stable Rating Outlook for classes A-1 and A-2 reflects the deleveraging that has already occurred on this loan.
The largest loan, LXR Hospitality Pool (68%), is collateralized by eight luxury resorts and hotels consisting of 3,826 keys located in beachfront and waterfront locations, including Puerto Rico, Jamaica, Florida, and Arizona. All of the properties are under management and affiliation agreements with various Hilton brands under Blackstone's LXR platform. Three of the hotels within the portfolio are located in Puerto Rico and contain a casino/gaming component: El Conquistador Golf Resort and Casino, El San Juan Hotel and Casino, and Condado Plaza Hotel and Casino.
Performance overall is significantly below issuance expectations and the loan transferred to the special servicer in April 2012 in advance of its June 2012 maturity. In September 2012 the special servicer entered into a Forbearance Extension and Property Disposition Agreement with the Borrower. The plan requires certain properties to be sold or refinanced by specific dates to repay principal, and requires the special servicer to trap all excess cash flow generated from the properties for further principal reduction. The loan de-levered since Fitch's last rating action with the sale of the two properties and additional principal paydown from trapped excess cash flow. Four properties (out of the original 12 at issuance) have been sold to date. The Fitch adjusted net operating income (NOI) year-ended (YE) 2013 for the eight remaining properties has improved from YE 2012 by over 24%. The current NOI remains significantly lower than that at issuance.
The next largest loan is the Longhouse Hospitality Portfolio (15.4%). The loan is secured by 42 extended stay lodging properties (approximately 5,600 keys) located throughout 11 states and 21 distinct metropolitan statistical areas (MSAs). Major markets include Atlanta, New Orleans, Orlando, Houston and Dallas. The loan transferred to the special servicer in May 2012 in advance of its June 2012 maturity. A forbearance agreement was reached in December 2012. As of trailing twelve month (TTM) February 2014, occupancy reported at 62.6%, ADR at $36.16, and RevPAR at $22.64 compared to YE 2011 at 54.8% occupancy, $37.04 ADR, and $20.30 RevPAR.
The REO property is the Four Seasons Nevis (5.8%). The collateral consists of a 196-key hotel located in Charlestown, Nevis. The hotel, which was built in 1991, is the largest full-service luxury resort on the island of Nevis in the West Indies. The property sits on 346 acres and provides amenities such as a private beach, two swimming pools, five food and beverage outlets, 5,600 square feet (sf) of flexible meeting and ballroom space, 10 tennis courts, an 18-hole golf course, and 14,000 sf of health club facilities. The property suffered hurricane damage and was subsequently closed in October 2008. The special servicer foreclosed on the property in May 2010. The property has since been repaired and re-opened for business in December 2010. The property is currently not being marketed for sale. Fitch modeled a significant loss based on a haircut to the current appraised value and accounting for significant servicer advances which are in excess of $40 million.
Fitch has affirmed the following classes as indicated:
--$163.2 million class A-1 at 'AAsf'; Outlook Stable;
--$345.4 million class A-2 at 'Bsf'; Outlook Stable;
--$61.6 million class B at 'CCCsf' RE 50%;
--$47.5 million class C at 'CCCsf' RE 0%;
--$71.2 million class D at 'CCCsf' RE 0%;
--$46.6 million class E at 'CCCsf' RE 0%;
--$46.6 million class F at 'CCCsf' RE 0%;
--$46.6 million class G at 'CCsf' RE 0%;
--$30.5 million class H at 'CCsf' RE 0%;
--$10.1 million class J at 'Csf' RE 0%;
--$5.2 million class K at 'Csf' RE 0%;
--$12.5 million class L at 'Csf' RE 0%;
--$53 million class LXR-1 at 'Csf' RE 0%;
--$70.7 million class LXR-2 at 'Csf' RE 0%;
--$3.8 million class LP-1 at 'Csf' RE 0%;
--$9.1 million class LP-2 at 'Csf' RE 0%;
--$2.1 million class LP-3 at 'Csf' RE 0%;
--$3.3 million class FSN-1 at 'Csf' RE 0%;
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transaction' (Sept. 20, 2013);
-- Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds (April 11, 2014)
Applicable Criteria and Related Research:
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions
Criteria for Sovereign Risk in Developed Markets for Structured Finance and Covered Bonds