CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded one and affirmed 24 classes of Citigroup Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 2007-C6. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrade follows an increase to realized losses, which has fully diminished class P and reduced the original principal balance of class O by 48.8%. Since the last review, 14 loans have been disposed from the trust, 10 of which were a result of liquidations. Three loans have transferred to special servicing in this time. In total, there are 37 assets in special servicing, 32 of which are REO. Fitch modelled losses of 19.5% of the remaining pool; expected losses on the original pool balance total 17%, including $89 million (1.9% of the original pool balance) in realized losses to date.
The weighted-average servicer reported loan to value (LTV) for the pool is 95.9%. Of the loans representing 62.2% of the current pool balance, 103 loans have Fitch LTVs in excess of 100%. The deal is concentrated by property type, with 45.3% of the pool secured by retail properties. There is also a lack of amortization in the transaction, as 65 loans, representing 48.9% of the current pool balance, are interest only for the full term.
As of the July 2015 remittance, the pool has experienced 22.5% of collateral reduction since issuance. Five loans have been fully defeased since the last review, bringing defeasance in the pool to a total of 3.5%. All but three loans are scheduled to mature by YE2017.
The largest contributor to modelled losses is Moreno Valley Mall (2.1% of the current pool balance), which is also the largest loan in special servicing. The collateral comprises 472,844 square feet (sf) of a 1.1 million sf regional mall in Moreno Valley, CA. Sears, JCPenney, Macy's, Round 1 Entertainment, and Harkins Theatres act as anchor tenants, although only Round 1 Entertainment and Harkins Theatres are included as collateral. Another anchor pad is currently vacant. At securitization, the property was owned and operated by GGP, and the loan was modified in conjunction with the sponsor's bankruptcy filing before being transferred back to the special servicer in August 2010 for imminent default. The property became REO in February 2011 and the special servicer continues to negotiate new leases. Inline and total occupancy were reported to be 69% and 90%, respectively, according to the March 2015 rent roll. The net operating income (NOI) and property value have improved in the last year, although the most recent appraisal is still below the debt amount. Total sales for the trailing 12-month period ending in February 2015 were reported to be $258 per sf (psf).
The second largest contributor to modelled losses is Hyde Park Apartment Portfolio (3% of the current pool balance). This loan is not in special servicing, but has been on the servicer's watchlist for low debt service coverage ratio (DSCR), reported to be 0.75x for YE2014, down from 0.83x at YE2013. The loan was originally secured by a portfolio of 43 multifamily properties in Chicago's Hyde Park neighborhood, comprising a total of 951 units. The YE2014 NOI represents a 58% decline from issuance, although occupancy has remained steady in the low 90% range for the last few years. According to servicer commentary, the collateral properties were recently renovated and the borrower believes much of the NOI decline has been attributable to renovation-related expenses. The most recent rent roll, dated March 2014, indicates the average rental rate achieved for the portfolio properties was $1,305 per unit, which is higher than the Reis-reported submarket rate of $1,025 per unit, suggesting there is little room for rent growth. Fitch has not received evidence confirming that renovations had been completed at the properties and there are no reserves available to the loan. Fitch will continue to monitor this loan closely.
100 Technology Center Drive (1% of the current pool balance) is the third largest contributor to modelled loss and the second largest loan in special servicing. The subject is a 197,000 sf six-story office building in Stoughton, MA. The loan transferred to special servicing in May 2013 for imminent default following the departure of the sole tenant when it vacated the building at the end of its lease, and the property has been REO since September 2013. Reis reported that the average submarket vacancy for office space was 19.9% at first quarter 2015 (1Q15). The subject is located 20 miles south of the Boston CBD and there has been no leasing activity since it became vacant. The appraised value has declined substantially since issuance, and sale of the asset at the dark value would result in a significant loss to the loan.
RATING SENSITIVITIES
Rating Outlooks on classes A-3 through A-1A are expected to remain Stable due to sufficient credit enhancement and defeasance collateral. Downgrades to the A-M and A-MFX classes are possible if resolutions for the 32 REO assets cannot be reached in a timely manner and values continue to deteriorate, or if additional loans transfer to special servicing. Conversely, the Outlook for the A-M classes may be revised to Stable if the special servicer is able to resolve the REO assets near current Fitch assumed loss expectations. Downgrades to the distressed classes are expected as they experience realized losses.
Fitch has downgraded the following class:
--$6.1 million class O to 'Dsf' from 'Csf', RE 0%.
Fitch has affirmed the following classes:
--$14.3 million class A-3 at 'AAAsf', Outlook Stable;
--$126.3 million class A-3B at 'AAAsf', Outlook Stable;
--$46.5 million class A-SB at 'AAAsf', Outlook Stable;
--$1.6 billion class A-4 at 'AAAsf', Outlook Stable;
--$200 million class A-4FL at 'AAAsf', Outlook Stable;
--$400.2 million class A-1A at 'AAAsf', Outlook Stable;
--$425.6 million class A-M at 'BBsf', Outlook Negative;
--$50 million class A-MFX at 'BBsf', Outlook Negative;
--$248.3 million class A-J at 'CCCsf', RE 50%;
--$150 million class A-JFX at 'CCCsf', RE 50%;
--23.8 million class B at 'CCsf', RE 0%;
--$71.3 million class C at 'CCsf', RE 0%;
--$35.7 million class D at 'CCsf', RE 0%;
--$29.7 million class E at 'Csf', RE 0%;
--$35.7 million class F at 'Csf', RE 0%;
--$47.6 million class G at 'Csf', RE 0%;
--$53.5 million class H at 'Csf', RE 0%;
--$65.4 million class J at 'Csf', RE 0%;
--$53.5 million class K at 'Csf', RE 0%;
--$11.9 million class L at 'Csf', RE 0%;
--$11.9 million class M at 'Csf', RE 0%;
--$17.8 million class N at 'Csf', RE 0%;
--$0 class P at 'Dsf', RE 0%;
--$0 class Q at 'Dsf', RE 0%.
Fitch does not rate the first loss piece, class S. Classes A-1 and A-2 are paid in full. The rating on classes X, A-MFL and A-JFL are withdrawn.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
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=988803
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=988803
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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