CHICAGO--(BUSINESS WIRE)--Fitch Ratings has upgraded four and affirmed the remaining classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMS) commercial mortgage pass-through certificates 2005-PWR7. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The upgrades reflect an increase in credit enhancement (CE) from principal payment from loan payoffs, as the transaction has paid down $605 million since Fitch's last rating action. Despite high CE, the upgrades were limited given concerns about the recoveries from the specially serviced loan resolutions and the highly concentrated nature of the remaining pool.
Fitch modelled losses of 40.3% of the remaining pool and expected losses based on the original pool balance are 7.0%, of which 2.6% are realized losses to date. Of the original 124 loans, 12 remain, of which Fitch has designated six loans (45.7% of the pool balance) as Fitch Loans of Concern, and includes three specially serviced loans (35.5%). Two loans (2.2%) are fully defeased. The loans' final maturity dates are in 2016 (44.5%), 2019 (1.8%), 2020 (16.0%), and 2025 (2.2%).
The pool's aggregate principal balance has been paid down by 89.1% to $122.3 million from $1.125 billion at issuance. Seven of the remaining 12 loans reported partial or full-year 2014 financials. Based on servicer financial statements, the pool's overall net operating income (NOI) decreased 1.5% since issuance and 17.1% over 2013 reported financials.
The largest contributor to expected losses is the real estate owned 375,486 square foot (sf) retail center, Quintard Mall, located in Oxford, AL. The property experienced cash flow issues starting 2012 due to occupancy declines and increase in expenses associated with renewing a number of large tenants. The asset was transferred to the special servicer in May 2013 for payment default and the special servicer completed the foreclosure process in October 2014. The property's occupancy is currently 85%, which is down from the high of 96% in 2011. The special servicer indicated that occupancy could dip further due to several lease expirations scheduled for 2015 and 2016. The special servicer is evaluating options before determining the disposition strategy.
The second largest contributor to expected losses is secured by 60,941-sf unanchored retail center located outside of Las Vegas, NV. The loan transferred to special servicing in January 2015 after a maturity default. The property, built in 1988 and renovated in 1995, is located in the Canyon Gate community in a heavily trafficked commercial zone. The property's occupancy was 88% as of December 2014 compared with 96% at securitization. The sponsor was working to secure a lender commitment to refinance the property; however, the sponsor recently filed for Chapter 11 bankruptcy. The special servicer is evaluating the workout strategy.
The third largest contributor to losses is the specially serviced loan, Tipp City Plaza, secured by a 113,919-sf anchored retail center located in Tipp City, OH, approximately 15 miles north of Dayton. The subject was built in 1976 and renovated in 2001. The property's occupancy decreased to 76% as of March 2015 from 84% at issuance. The sponsor was unable to attain a lender commitment to refinance the loan prior to the maturity date of December 2014. A modification proposal was submitted in early 2015 and is under review. The special servicer is reviewing receivership and property management proposals along with starting the legal foreclosure process. The current plan is to have the loan resolved and disposed by the end of 2015.
RATING SENSITIVITIES
The ratings of classes A-J and B have Stable Outlooks due to high credit enhancement and anticipation that the classes' CE will continue to increase due to additional paydown. Classes C and D also have Stable Outlooks given increasing CE; however, despite the increasing CE, further upgrades are not warranted due to adverse selection of the remaining collateral and high percentage of specially serviced loans. Downgrades to the non-investment-grade category are possible if additional loans transfer to special servicing and/or expected losses increase significantly.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded the following classes as indicated:
--$12.7 million class A-J to 'AAAsf' from 'Asf''; Outlook to Stable from Positive;
--$33.7 million class B to 'BBBsf' from 'Bsf''; Outlook Stable;
--$8.4 million class C to 'BBsf' from 'B-sf''; Outlook to Stable from Negative;
--$15.5 million class D to 'Bsf' from 'CCCsf''; Outlook Stable assigned.
Fitch affirms the following classes as indicated:
--$11.2 million class E at 'CCsf'; RE 90% from RE 0%;
--$11.2 million class F at 'CCsf'; RE 0%;
--$9.8 million class G at 'Csf'; RE 0%;
--$12.7 million class H at 'Csf'; RE 0%.
--$4.2 million class J at 'Csf'; RE 0%;
--$2.7 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%;
--$0 class P at 'Dsf'; RE 0%.
The classes A-1, A-2, A-AB and A-3 certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=988443
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988443
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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