NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded one, downgraded one, and affirmed 10 classes of Bear Stearns Commercial Mortgage Securities Trust commercial mortgage pass-through certificates series 2005-PWR8 (BSCMS 2005-PWR8). A full list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrade is the result of significant deleveraging of the transaction due to $925.8 million in loan repayments since the last rating action. The downgrade reflects a greater certainty of loss on the specially serviced assets. Fitch modeled losses of 40.2% of the remaining pool; expected losses on the original pool balance total 5.8%, including $72.6 million (4.1% of the original pool balance) in realized losses to date.
As of the July 2015 distribution date, the pool's aggregate principal balance has been reduced by 95.7% to $75.9 million from $1.8 billion at issuance. The pool has paid down 52.4% of the original pool balance since the last rating action and 91.6% since issuance. Of the original 193 loans, 18 currently remain compared to 130 loans at the last rating action. Fitch has designated 11 loans (64.7% of current pool) as Loans of Concern, which includes nine specially serviced assets (60.3%). According to servicing reporting, one loan (0.9%) has defeased. The nine remaining non-specially serviced loans have final maturities in 2017 (one loan; 2.7% of pool), 2020 (five loans; 11.6%), 2024 (one loan; 1.3%), 2027 (one loan; 3.1%); and 2033 (one loan; 21%). The one defeased loan has an April 2020 maturity date.
The largest contributor to Fitch-modeled losses, which remains the same since the last rating action, is the specially-serviced La Borgata at Serrano asset (15.7% of the pool), which is a 62,183 square foot (sf) mixed-use office/retail property located in El Dorado Hills, CA (30 miles east of Sacramento, CA). The loan was transferred to special servicing in March 2012 for imminent default and the asset became real-estate owned (REO) in August 2013. The asset has been impacted by declining occupancy coupled with increasing operating expenses since issuance. As of the May 2015 rent roll, the asset was 49% occupied compared to 87% at issuance. Occupancy has remained in the mid-to-upper 40% range over the past few years; however, a newly executed 65-month lease with a spa tenant is expected to increase occupancy to 55%. The special servicer continues to place effort on leasing up the asset prior to marketing it for sale.
The next largest contributor to Fitch-modeled losses is the specially-serviced One Corporate Drive loan (8.1%), which is secured by a 46,680 sf office building located in Holtsville, NY. The loan, which was recently transferred to special servicing in May 2015, is currently classified as 30 days delinquent as of the July 2015 distribution date. The property has become vacant as the prior two tenants occupying the property vacated. IRS Personnel (63% of total property sf) vacated at the end of March 2015 and Tax Advocate Office (34%) vacated in January 2013. The special servicer indicated there has not been any interest in the vacant spaces at this time.
The third largest contributor to Fitch-modeled losses is the specially-serviced 310 Technology Parkway Office Building asset (5.9%), which is a 61,244 sf office building located in Norcross, GA. The loan was transferred to special servicing in September 2013 for payment default and the asset became REO in April 2014. The asset became vacant when the single-tenant, Pediatric Services of America, vacated when its lease expired in January 2013. The special servicer indicated there are no new leasing prospects at this time.
Another property, the Fed Ex Burlington (3.1%), is expected to become vacant prior to year-end 2015 as Fed Ex is not expected to renew its lease expiring at the end of November 2015.
RATING SENSITIVITIES
The Stable Rating Outlook on class C reflects the high credit enhancement (CE) and anticipated payoff of this class. Class D also has a Stable Rating Outlook given increasing CE; however, despite the increasing CE, an upgrade was not warranted due to adverse selection of the remaining pool, the high percentage of specially serviced assets, and the long dated maturities. The distressed classes (those rated below 'Bsf') may be subject to further downgrades as additional losses are realized.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded the following class:
-- $0.6 million class C to 'AAAsf' from 'BBsf'; Outlook Stable.
Fitch has downgraded the following class:
-- $19.9 million class F to 'Csf' from 'CCsf'; RE 70%.
Fitch has affirmed the following classes:
-- $26.5 million class D at 'Bsf'; Outlook Stable;
-- $17.7 million class E at 'CCCsf'; RE 100%;
-- $11.3 million 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%;
-- $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 class A-1, A-2, A-3, A-AB, A-4, A-4FL, and B certificates have paid in full. Fitch does not rate the fully depleted 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=988714
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988714
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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