Fitch Takes Various Actions on CD 2007-CD4

NEW YORK--()--Fitch Ratings has downgraded 10, upgraded two, and affirmed nine classes of CD Commercial Mortgage Trust commercial mortgage pass-through certificates series (2007-CD4). A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The upgrades are the result of increased credit enhancement due to additional defeasance and paydown since Fitch's last rating action. The downgrades reflect the realized losses incurred on loans recently liquidated.

Fitch modeled losses of 4% of the remaining pool; expected losses on the original pool balance total 4.3%, including $155.5 million (2.3% of the original pool balance) in realized losses to date. Fitch has designated 26 loans (6.8%) as Fitch Loans of Concern, which includes five specially serviced assets (1.4%).

As of the January 2016 distribution date, the pool's aggregate principal balance has been reduced by 52.1% to $3.18 billion from $6.64 billion at issuance. Per the servicer reporting, 36 loans (28.8% of the pool) are defeased. Interest shortfalls are currently affecting classes J through S.

The largest contributor to expected losses is the specially-serviced Lake Center V loan (0.5% of the pool), which is secured by an 88,785 square foot (sf) office property located in Marlton, NJ. The largest tenants include Virtua Health Inc. (65%), expiration May 31, 2015; and Paychex North America, Inc. (24%), March 31, 2017. The loan was transferred to special servicing in February 2015 due to imminent default. Virtua Health, Inc., whose lease expired in May 2015, is expected to vacate after a period of holdover. Once Virtua vacates, the property's occupancy will decrease to 26%. The special servicer was unable to confirm at this time if Virtua has vacated and has contacted the borrower for an update. As of December 2015, the property was 92% occupied with average rent $39 per sf. Per REIS as of third quarter (3Q15), the Burlington office submarket vacancy is 18.3% with asking rent $21.50 per sf.

The next largest contributor to expected losses is the 2500 Building loan (0.4%), a 97,476 sf office building that was built in 1982 and is located in Doral, FL. The largest tenants are Student Aid Center (20%), expiration Oct. 31, 2019; and Recovera, Inc. (6%), Oct. 31, 2019. The property has suffered fluctuations in occupancy since 2007; the largest tenant downsized their space 7% from 27,623 sf to 19,334 sf. Per the Sept. 30, 2015 rent roll, the property is 69% occupied with average rent $17.57 per sf. Two new leases totaling 2% were signed in 4Q15, which brings occupancy to 70%. Per REIS as of 3Q15, the Miami metro office vacancy is 15.2% with average asking rent $32.25 per sf. The most recently reported debt service coverage ratio as of Sept. 30, 2015 was 0.20x, up from the prior year's 0.01x.

The third largest contributor to expected losses is the The Shoppes at South Bay (Walmart) loan (1.1%), which is secured by a 196,912 sf retail center located in Los Angeles, CA. The largest tenants are Wal-Mart (75%), expiration June 14, 2025; Dollar Tree (5%), March 31, 2018; and Lumber Liquidators (3%), Feb. 29, 2020. The decline in performance is due to low occupancy and declining rental rates. Additionally, there are three tenants whose leases expired who are currently paying month-to-month rent and negotiations continue for lease renewals/extensions. As of the Sept. 30, 2015 rent roll, the property's occupancy has declined to 77% from 95% with average rent $15.54 per sf. Per REIS as of 3Q15, the South Bay/Torrance retail submarket vacancy is 4.2% with average asking rent of $31 per sf.

RATING SENSITIVITIES

Rating Outlooks on classes A-4, A-1A, A-MFX, A-MFL, WFC-1, WFC-2, WFC-3, and WFC-X remain Stable due to increasing credit enhancement and continued paydown. Further upgrades to classes A-MX and A_MFL are not likely due to increasing concentration and adverse selection; conversely, downgrades to these classes are not likely due to the large balance of the already distressed class A-J, which is sufficient to absorb future losses.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch upgraded the following ratings:

--$595 million class A-MFX to 'Asf' from 'BBsf'; Outlook Stable;

--$65 million class A-MFL to 'Asf' from 'BBsf'; Outlook Stable.

Fitch downgraded the following ratings:

--$544.5 million class A-J to 'Dsf' from 'Csf'; RE 0%;

--$0 class B to 'Dsf' from 'Csf'; RE 0%;

--$0 class C to 'Dsf' from 'Csf'; RE 0%;

--$0 class D to 'Dsf' from 'Csf'; RE 0%;

--$0 class E to 'Dsf' from 'Csf'; RE 0%;

--$0 class F to 'Dsf' from 'Csf'; RE 0%;

--$0 class G to 'Dsf' from 'Csf'; RE 0%;

--$0 class H to 'Dsf' from 'Csf'; RE 0%;

--$0 class J to 'Dsf' from 'Csf'; RE 0%;

--$0 class K to 'Dsf' from 'Csf'; RE 0%.

Fitch affirmed the following ratings:

--$1.3 billion class A-4 at 'AAAsf'; Outlook Stable;

--$591.1 million class A-1A at 'AAAsf'; Outlook Stable;

--$0 class L at 'Dsf'; RE 0%;

--$0 class M at 'Dsf'; RE 0%;

--$0 class N at 'Dsf'; RE 0%;

--Interest-only class WFC-X at 'BBB+sf'; Outlook Stable;

--$7.7 million class WFC-1 at 'BBB+sf'; Outlook Stable;

--$8.7 million class WFC-2 at 'BBBsf'; Outlook Stable;

--$24.1 million class WFC-3 at 'BBB-sf'; Outlook Stable.

Classes A-1, A-2A, A-2B, and A-3 are paid in full. Fitch does not rate the class O, P, Q and S certificates. Fitch previously withdrew the ratings on the interest-only class XP, XC and XW 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. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=998574

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=998574

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Lisa Cook
Director
+1-212-908-0665
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Lisa Cook
Director
+1-212-908-0665
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com