NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded one class, revised the outlook of one class and affirmed 15 classes of LB-UBS Commercial Mortgage Trust series 2007-C1 (LBUBS 2007-C1). A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrade and outlook revision is due to a decrease in Fitch's expected losses, primarily from lower realized losses on the Bethany Portfolio than anticipated at Fitch's last review. Fitch modeled losses of 10.6% of the remaining pool; expected losses on the original pool balance total 11.8%, including $175 million (4.7% of the original pool balance) in realized losses to date. Fitch has designated 27 loans (14.5%) as Fitch Loans of Concern, which includes 13 specially serviced assets (6.5%).
As of the November 2014 distribution date, there are 109 loans remaining from the original 146 loans and the pool's aggregate principal balance has been reduced by 32.2% to $2.54 billion from $3.75 billion at issuance. Per the servicer reporting, six loans (2.7% of the pool) are defeased. Interest shortfalls are currently affecting classes G through T and class BMP.
The largest contributor to expected losses is the 1745 Broadway loan (13.4% of the pool), which is secured by a 636,598 square foot (sf) class A office in the midtown west submarket of New York, NY. The building is 100% occupied by Random House, which uses this location as its headquarters. Random House (parent company and guarantor is Bertelsman AG [rated 'BBB+' by Fitch]) occupies its space pursuant to a triple net lease with 53% expiring in June 2023 and 47% expiring in June 2018. The loan is scheduled to mature in November 2017 and Random House's lease is significantly below market. The year-end 2013 servicer-reported debt service coverage ratio (DSCR) was 1.13x. Fitch's analysis used the year-end 2013 servicer-reported net operating income (NOI) and a stressed cap rate; however, given the strong location and long term, investment grade tenant, losses may not be incurred.
The next largest contributor to expected losses is the Del Amo Financial Center loan (2.1%), which is secured by a 348,185 sf office property located in Torrance, CA. The servicer reported a NOI DSCR as of year-end 2013 of .77x, down from .88x at year-end 2012 and .98 at year-end 2011. The decrease in DSCR was due to the upgrades and repairs of the freight elevator and plumbing systems. The occupancy as of June 2014 was 64% with rollover of approximately 30% possible for 2014 through 2015. Concessions are currently being offered which depend on the tenant and the length of the lease.
The third largest contributor to expected losses is the specially-serviced Eastland Mall loan (1.5%), which is secured by a 245,471 sf and two pad sites ground leased by JC Penny and Firestone of a 1,020,765 sf enclosed mall located in Columbus OH. The loan was transferred to the Special Servicer in October 2012 and became real estate owned (REO) in July 2014. The servicer reported occupancy as of September 2014 was 58% for the entire property and 82% for the inline, which has resulted in a low NOI DSCR of 0.85x as of year-end 2013.
RATING SENSITIVITIES
The Rating Outlooks on classes A-3 and A-1A are Stable due to sufficient credit enhancement and continued paydown. The Rating Outlook on class A-M was revised to Positive from Stable due to lowered expected losses. Although the top five loans represent 54% of the remaining pool, given their strong locations and generally stable performance, they are likely to pay off at maturity. Should losses remain stable or be significantly lower than expected, future upgrades to the A-M class are possible. Downgrades to the distressed classes (below 'B') are likely as additional losses are realized.
Fitch upgrades the following classes and assigns a Rating Outlook as indicated:
--$315.6 million class A-J to 'Bsf' from 'CCCsf', Outlook Stable.
Fitch affirms the following classes and assigns or revises Rating Outlooks and REs as indicated:
--$1.1 billion class A-4 at 'AAAsf', Outlook Stable;
--$424 million class A-1A at 'AAAsf', Outlook Stable;
--$371.3 million class A-M at 'Asf', Outlook to Positive from Stable;
--$27.8 million class B at 'CCCsf', RE 100%;
--$55.7 million class C at 'CCsf', RE 15%;
--$37.1 million class D at 'CCsf', RE 0%;
--$18.6 million class E at 'CCsf', RE 0%;
--$32.5 million class F at 'Csf', RE 0%;
--$32.5 million class G at 'Csf', RE 0%;
--$41.8 million class H at 'Csf', RE 0%;
--$41.8 million class J at 'Csf', RE 0%;
--$4.7 million 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%.
Fitch does not rate the class P, Q, S, T and BMP certificates. Classes A-1, A-2, A-3, and A-AB have paid in full. Fitch previously withdrew the ratings on the interest-only class X-CP, X-W and X-CL 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' (Aug 4, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=943675
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.