NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of Banc of America Commercial Mortgage Trust, commercial mortgage pass-through certificates, series 2007-2 (BACM 2007-2). 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 collateral pool since Fitch's last rating action. Fitch modeled losses of 17.2% of the remaining pool; expected losses on the original pool balance total 15.5%, including $180.1 million (5.7% of the original pool balance) in realized losses to date. Fitch has designated 33 loans (21.2% of the current pool) as Fitch Loans of Concern, which includes 17 assets (9.7%) in special servicing.
As of the January 2015 distribution date, the pool's aggregate principal balance has been reduced by 42.9% to $1.81 billion from $3.17 billion at issuance. No loans are defeased. Interest shortfalls are currently affecting classes A-J and A-JFL through class S.
The largest contributor to Fitch-modeled losses is the Connecticut Financial Center (7.2% of pool). The loan is secured by a 466,049 square foot (sf) office building located in New Haven, CT. The loan was previously transferred to special servicing in June 2012 for imminent default after the initial largest tenant, which leased nearly 47% of the total property square footage, vacated a significant block of their occupied space at its June 2012 lease expiration, causing both occupancy and cash flow to drop significantly. A modification was executed in August 2013 whereby the loan was bifurcated into a $70 million A-note and a $60.4 million B-note, the borrower contributed $4.83 million in new equity to fund tenant improvements and pay delinquent accrued interest, and the debt service payment was reduced to be interest-only at 2% in the first year, 3% in the second year, and then the note rate until the loan's March 2017 maturity date. The loan was returned to the master servicer in January 2014 and is performing under the modified terms.
As of the September 2014 rent roll, the property was 74% occupied compared to 91% at issuance. The three largest tenants, which comprise nearly 40% of the NRA, all have leases extending beyond the loan's maturity. Although there has been no significant new leasing, the property has renewed and extended a few of its in-place tenants, primarily three General Services Administration (GSA) leases that comprise 11% of the property square footage. Near-term lease rollover is limited to less than 1% in 2015 and approximately 10% in 2016.
The second largest contributor to Fitch-modeled losses is the Beacon Seattle & DC Portfolio (9.2%). The loan was initially secured by a portfolio consisting of 16 office properties, the pledge of the mortgage and the borrower's ownership interest in one office property, and the pledge of cash flows from three office properties. In aggregate, the initial portfolio of 20 properties comprised approximately 9.8 million sf of office space. The loan was transferred to special servicing in April 2010 for imminent default and was modified in December 2010. Key modification terms included a five-year extension of the loan to May 2017, a deleveraging structure that provided for the release of properties over time, and an interest rate reduction. The loan was returned to the master servicer in May 2012 and is performing under the modified terms.
There have been no new property releases since Fitch's last rating action. Nine properties remain as collateral as of December 2014. Under the modification, 11 properties have been released to date, including Market Square (Washington, D.C.); Key Center (Bellevue, WA); City Center Bellevue (Bellevue, WA); 1616 North Fort Myer Drive (Arlington, VA); Liberty Place (Washington, D.C.); Army and Navy Building (Washington, D.C.); 1300 North Seventeenth Street (Arlington, VA); Reston Town Center (Reston, VA); Washington Mutual Tower (Seattle, WA); Wells Fargo Center (Seattle, WA); and Plaza Center (Bellevue, WA).
As reported by the servicer and as of December 2014, the loan has paid down by $1.57 billion (58% of the original overall loan balance). As of year-end (YE) 2013, the portfolio occupancy of the remaining nine properties has fallen to 77%, down significantly from the 97% occupancy reported at issuance for the same properties. Cash flow at the remaining properties continues to decrease, with the servicer-reported net operating income as of YE 2013 at $66.9 million for the remaining nine properties, down 8% from YE 2012 and 16% from YE 2011. The portfolio continues to be subject to tenant lease rollover risk.
The third largest contributor to Fitch-modeled losses is the real-estate owned, Pleasant Hill asset (1.7%). The asset is a 252,266 sf retail property in Duluth, GA. The loan was transferred to special servicing in November 2013 for imminent default due to cash flow difficulties stemming from low occupancy. The borrower indicated the property has been hampered by tenant issues over the last several years. Several tenants have vacated at or prior to their scheduled lease expirations due to new competition in the area and the property has evolved into more of a secondary retail location. Foreclosure was completed in November 2014. As of the January 2015 rent roll, the asset was 52% occupied compared to 97% at issuance. The vacant spaces continue to be marketed for lease.
RATING SENSITIVITIES
Rating Outlooks on the super senior 'AAA' classes remain Stable due to sufficient credit enhancement and expected continued paydown.
The Negative Outlook on class A-M reflects the uncertainty surrounding the ultimate workout on many of the specially serviced assets in the pool and the possibility for further underperformance on loans in the top 15, many of which are highly leveraged and secured by retail properties located in secondary markets. Ten of the top 15 loans (32.3%) are secured by retail properties located in various secondary markets in Georgia (9.7%), Louisiana (7.3%), Oregon (6.6%), North Carolina (2.7%), Florida (2.2%), Kentucky (2.2%), and Alabama (1.6%).
Distressed classes (those rated below 'Bsf') may be subject to further downgrades as additional losses are realized.
Fitch affirms the following classes as indicated:
--$43.7 million class A-2 at 'AAAsf'; Outlook Stable;
--$3.2 million class A-2FL at 'AAAsf'; Outlook Stable;
--$162.6 million class A-3 at 'AAAsf'; Outlook Stable;
--$16.1 million class A-AB at 'AAAsf'; Outlook Stable;
--$602 million class A-4 at 'AAAsf'; Outlook Stable;
--$212.6 million class A-1A at 'AAAsf'; Outlook Stable;
--$317.3 million class A-M at 'Asf'; Outlook Negative;
--$153.8 million class A-J at 'CCCsf'; RE 60%;
--$100 million class A-JFL at 'CCCsf'; RE 60%;
--$15.9 million class B at 'CCCsf'; RE 0%;
--$47.6 million class C at 'CCsf'; RE 0%;
--$31.7 million class D at 'Csf'; RE 0%;
--$15.9 million class E at 'Csf'; RE 0%;
--$27.8 million class F at 'Csf'; RE 0%;
--$27.8 million class G at 'Csf'; RE 0%;
--$34 million 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%;
--$0 class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%.
The class A-1 certificates have paid in full. Fitch does not rate the class S certificates. Fitch previously withdrew the rating on the interest-only class XW certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 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. 10, 2014).
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=812608
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=971415
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