CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded one class and affirmed 18 classes of commercial mortgage pass-through certificates from Banc of America Commercial Mortgage Trust (BACM), series 2007-1. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The affirmations reflect sufficient credit enhancement (CE) relative to Fitch-modeled loss expectations for the pool. Although CE has improved since Fitch's last rating action, this was offset by higher modeled loss expectation on the Skyline Portfolio loan, which was transferred back to the special servicer in April 2016. The downgrade to class A-J reflects the deterioration of class CE relative to Fitch's increase in modeled loss.
Fitch modeled losses of 17.1% of the remaining pool; expected losses on the original pool balance total 17.1%, including $287.5 million (9.1% of the original pool balance) in realized losses to date. Fitch has designated 33 loans (34.3% of the current pool balance) as Fitch Loans of Concern, which includes two specially serviced assets (18.8%).
As of the June 2016 distribution date, the pool's aggregate principal balance has been reduced by 53.5% to $1.46 billion from $3.15 billion at issuance. According to servicer reporting, 14 loans (6.9%) are defeased. Cumulative interest shortfalls totaling $40.9 million are currently affecting the A-J class through class Q.
The largest contributor to Fitch-modeled losses is the Skyline Portfolio loan (18.6% of pool), which is secured by a portfolio of eight office buildings totaling approximately 2.6 million square feet (sf) located in Falls Church, VA. The loan re-transferred to the special servicer in April 2016 for imminent default. Portfolio performance has not improved since the loan was modified in October 2013 and returned to the master servicer in February 2014. Overall portfolio occupancy, which is expected to further decline, is currently below 50%, compared with 52% in 2014, 54% in 2013 and 97% at issuance. The special servicer is moving forward with putting a receiver in place.
The loan was first transferred to special servicing back in March 2012 when portfolio occupancy was significantly affected as a result of the Base Realignment and Closure statute. The buildings in the portfolio were leased mainly to various GSA tenants and their related contractors. From 2011 through 2013, the portfolio lost one of its largest tenants, the Department of Defense, as well as its various subcontractors, which occupied in total nearly one-third of the portfolio square footage. Additionally, the properties in the portfolio were initially built to be near a prospective D.C. metro station, but tenants slowly began to vacate because the station was not built. The loan was modified in October 2013, whereby the total debt was split into a $350 million A-note and a $328 million B-note (trust portion consists of a $140 million A-note and $131.2 million B-note). The loan maturity was extended to February 2022 with a one-year extension option if certain performance metrics are attained.
The next largest contributor to modeled losses is a loan (1.7% of pool) secured by a 157,839-sf grocery-anchored retail center located in Brunswick, ME. The loan transferred to special servicing in April 2015 for imminent default, modified into an A and B note with a four-year extension, and returned to the master servicer in May 2016. The center is anchored by a Shaw's supermarket with lease expiration in 2025; however, the last reported occupancy was 54%. The subject property is located less than two miles from Bowdoin College.
RATING SENSITIVITIES
The Stable Outlook on classes A-4 and A-1A reflect sufficient CE, these classes' seniority, and expected continued paydown. The Outlook on classes A-MFX and A-MFL was revised to Negative from Stable due to the uncertainty surrounding the ultimate resolution and disposition of the Skyline Portfolio, which is in special servicing. Additionally, Fitch will monitor maturities as approximately 75% of the pool is scheduled to mature or has an anticipated repayment date (ARD) by year-end 2017. Downgrades to the distressed classes will occur as losses are realized.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch downgrades the following class:
--$259.5 million class A-J to 'Csf' from 'CCsf'; RE 30%.
Fitch has affirmed the following classes and revised Rating Outlooks as indicated:
--$588.9 million class A-4 at 'AAAsf'; Outlook Stable;
--$218.2 million class A-1A at 'AAAsf'; Outlook Stable;
--$214.5 million class A-MFX at 'BBBsf'; Outlook to Negative from Stable;
--$60 million class A-MFL at 'BBBsf'; Outlook to Negative from Stable;
--$27.5 million class B at 'Csf'; RE 0%;
--$35.4 million class C at 'Csf'; RE 0%;
--$19.1 million class D at 'Dsf'; RE 0%;
--$0 million class E at 'Dsf'; RE 0%;
--$0 million class F at 'Dsf'; RE 0%;
--$0 million class G at 'Dsf'; RE 0%;
--$0 million class H at 'Dsf'; RE 0%;
--$0 million class J at 'Dsf'; RE 0%;
--$0 million class K at 'Dsf'; RE 0%;
--$0 million class L at 'Dsf'; RE 0%;
--$0 million class M at 'Dsf'; RE 0%;
--$0 million class N at 'Dsf'; RE 0%;
--$0 million class O at 'Dsf'; RE 0%;
--$0 million class P at 'Dsf'; RE 0%.
Classes A-1, A-2, A-3 and A-AB are paid in full. Fitch does not rate the fully depleted class Q. Fitch previously withdrew the rating on the interest-only class XW and the $40 million class A-MFX2.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882401
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=1009192
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1009192
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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