CHICAGO--(BUSINESS WIRE)--Fitch Ratings has upgraded one and affirmed one class of DLJ Commercial Mortgage Corp. (DLJ) commercial mortgage pass-through certificates series 1998-CG1. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrade of class B-7 is based on the stable performance of the underlying collateral pool, increasing credit enhancement and the continued expected amortization. The affirmation of class B-6 is based on the class being fully covered by the defeased collateral.
As of the March 2016 remittance report, the transaction has paid down 97.5% to $39.4 million from $1.564 billion at issuance. Fitch modeled losses 2.54% of the remaining pool; expected losses of the original pool are at 1.07% including losses already incurred to date (1.01%). Thirteen of the original 303 loans remain outstanding. There are no specially serviced loans, but four loans are on the servicer watchlist (24%) of which three (15.7%) are considered Fitch Loans of Concern. Three loans (47.4%), including the largest loan in the pool (37.8%), are fully defeased. The remaining non-defeased loans consist of fully amortizing (74.2%) and ARD loans (17.2%). The loans' final maturity dates are in 2017 (8.6%), 2018 (27.6%), 2022 (8.3%), and 2023 (55.5%). The remaining loans are low levered, with a weighted average LTV of 46.4%
The largest Fitch loan of concern (7.4%) is secured by a 59,238 sf retail center, Oxford Square, located in Casselberry, FL a suburb 10 miles northeast of the Orlando central business district (CBD). The loan was formerly in special servicing and modified in May 2012 whereby the loan term was increased by 115 months and the interest rate reduced to 6.25% from the issuance rate of 7%. The occupancy of the center reached a new low of 75% in December 2014 from an issuance high of 97%. During the 2015 calendar year, occupancy improved 100 basis points as management signed a small new tenant and renewed The Dollar General Store, which exercised a three-year renewal option. The volatile performance of the asset is expected to continue as the property management company continues to secure new tenants and works to renew leases for 25% of the net rentable area (NRA) during the next 12 months. The loan's scheduled maturity date is October 2017.
The second largest Fitch loan of concern (5.7%) is secured by The Market at Merrill Shopping Center, a 122,204 sf retail center located in Little Rock, AR a suburb located eight miles west of the Little Rock, AR (CBD). The property's occupancy was listed at 73% as of fourth quarter 2015 after a high of 85% in December 2014. The property management team is currently working to secure renewals for the majority of tenants as 85% of the NRA rolls during the next 24 months. The sponsor indicates that the market is experiencing economic weakness which is hindering leasing efforts. The loan remains current and is scheduled to mature in June 2018.
The last Fitch Loan of Concern (1.8%) is secured by University Shoppes, a 50,797 sf neighbourhood retail center located in Lauderhill, FL, a suburb located 13 miles northwest of the city center. The property's current occupancy is listed at 62% as of September 2015. The property's operating cash flows remain weak with the servicer-reported third quarter 2015 debt service coverage ratio at 0.86x. The sponsor indicates that the leasing environment is difficult due to demographic changes in the area and large retail suites not being ideal for current prospective lessees. The loan is current and the scheduled maturity date is March 2018.
RATING SENSITIVITIES
The Rating Outlook on class B-7 is Stable as additional upgrades are not expected due to the concentrated nature of pool with only 13 loans remaining, 66% of which are collateralized by retail properties. Class B-6 is expected to pay in full from defeased collateral and amortization. Downgrades, while unlikely, could occur if loans transfer to special servicing and expected losses increase significantly.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch upgrades the following class:
--$15.6 million class B-7 to 'BBsf' from 'Bsf', Outlook Stable.
Fitch affirms the following class:
--$16.1 million class B-6 at 'AAAsf', Outlook Stable.
The class A-1A, A-1B, A-1C, A-2, A-3, A-4, B-1, B-2, B-3, B-4, and B-5 certificates have paid in full. Fitch does not rate the class C certificates. Fitch previously withdrew the rating on the interest-only class S 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=1001736
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1001736
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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