CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded two distressed classes and affirmed the remaining 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 downgrades follow an increase to realized losses, which has fully diminished class M and reduced the original principal balance of class L by 77.8%. The affirmations reflect the pool performing in line with Fitch's expectations. Overall, Fitch's loss projections are relatively unchanged since the last rating action. Since that time, six assets have liquidated from the trust, and five new loans have transferred to special servicing. In total, there are 34 loans in special servicing, 27 of which are real estate owned (REO). Fitch modeled losses of 18.9% of the remaining pool; expected losses on the original pool balance total 17.1%, including $134.1 million (2.8% of the original pool balance) in realized losses to date.
The lack of resolutions for loans in special servicing continues to be a concern for the stability of the pool. The average REO aging in the pool is 39 months, with the majority of those assets being REO three years or more. Five assets have been REO since 2011, six since 2012 and three since 2013. Although six REO assets were disposed from the trust in the last 12 months, three specially serviced assets have newly become REO in that time frame.
The weighted average servicer reported loan to value (LTV) for the pool is 93.8%. The deal is concentrated by property type, with 44.2% of the pool secured by retail properties. There is also a lack of amortization in the transaction, as 59 loans, representing 48.7% of the pool balance, are interest only for the full term.
The largest contributor to modeled losses is Moreno Valley Mall (2.2% of the pool), 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, excluding temporary tenants, were reported to be 72% and 66% respectively as of March 2016. Total sales for the trailing 12-month period ending in February 2016 were reported to be $250 per sf (psf), compared to $258 psf as of February 2015.
The second largest contributor to loss is the second largest loan in the pool, Greensboro Corporate Center (3.5% of the pool). The subject is a 434,463 sf office property located in McLean, VA. It consists of two 10-story buildings developed in 2000. The loan is on the watchlist for occupancy issues. The property was 72.1% occupied as of April 2016, and leases representing 23% of the net rentable area (NRA) are scheduled to roll by year-end. Occupancy initially dropped in 2014 after MITRE Corporation (previously the largest tenant with 19.8% of the NRA) vacated at lease expiration. Submarket vacancy has increased in the last year to 14.8%, up from 7.5% at first quarter 2015 (1Q15). The loan has $2.2 million in reserves.
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 the average vacancy rate for office space in the submarket was 18.2% at 1Q16 (down from 19.9% at 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-3B 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 27 REO assets cannot be reached in a timely manner and values continue to deteriorate, or if additional loans transfer to special servicing. Conversely, the A-M class may be upgraded should the special servicer resolve the REO assets above the current Fitch loss expectations. Downgrades to the distressed classes are expected as they experience realized losses.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following classes:
--$99 million class A-3B at 'AAAsf', Outlook Stable;
--$19 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;
--$393.9 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%;
--$0 million class N at 'Dsf', RE 0%;
--$0 million class O at 'Dsf', RE 0%;
--$0 class P at 'Dsf', RE 0%;
--$0 class Q at 'Dsf', RE 0%.
Fitch has also downgraded two classes, which have experienced realized loss:
--$2.6 million class L to 'Dsf', RE 0% from 'Csf', RE 0%;
--$0 class M to 'Dsf', RE 0% from 'Csf', RE 0%.
Fitch does not rate class S. Classes A-1, A-2 and A-3 are paid in full. The rating on classes X, A-MFL and A-JFL are withdrawn.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130
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=1008191
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008191
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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