NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of Bear Stearns Commercial Mortgage Securities Trust series 2006-PWR14 commercial mortgage pass-through certificates. A detailed list of rating actions follows the end of the release.
KEY RATING DRIVERS
The affirmations are the result of sufficient credit enhancement relative to expected losses and overall stable performance of the underlying collateral since Fitch's last rating action. Loans representing 87% of the remaining pool are scheduled to mature in 2016, including five ARD loans (10.8%) and six defeased loans (6.8%). In addition, two loans (9.1%) will mature at the end of 2017. The majority of these loans are expected to pay off at maturity; however, Fitch's stressed analysis indicates some of the more highly leveraged loans may have trouble refinancing and could default. Fitch has applied additional stresses in its base case analysis to factor in the refinancing risks.
Fitch modeled losses of 13.8% for the remaining pool; expected losses on the original pool balance total 11.1%, including $132.5 million (5.4% of the original pool balance) in realized losses to date. Fitch has designated 34 loans (42.3%) as Fitch Loans of Concern, which includes seven specially serviced assets (6.9%).
As of the September 2016 remittance report, the pool's aggregate principal balance has been reduced by 58.1% to $1.03 billion from $2.47 billion at issuance. Interest shortfalls are affecting classes E through P, with the exception of classes J and K. Nine loans (9%) are defeased, including the fourth (4.7%) largest loan in the pool.
The largest contributor to Fitch's modeled losses is an interest only loan (IO) (8.9%) secured by a 418,026 sf office building located in the Newark, NJ central business district. In October 2013, the loan was modified into an A/B note structure and the term of the loan was extended 72 months to December 2017. Based on the March 2016 rent roll, the collateral was 96% occupied, in line with year-end (YE) 2015 and an improvement from 90% at YE2014. The collateral was 98% occupied at issuance. Leases representing 18% of the net rentable area (NRA) roll in 2017. The servicer reported first-quarter (1Q) 2016 DSCR for the A note is 1.53x, compared to 1.71x at YE 2015 and 1.62x at YE2014. According to Reis, as of 2nd quarter 2016, the Newark class 'A' office submarket had a vacancy rate of 17.5% with an average asking rent of $31 psf, which is in line with the current in-place rent of the subject property.
The second largest contributor to losses consists of two crossed loans (3%)in special servicing.. The City Center West loan is secured by a 106,617 SF Class B office building located in Northwest Las Vegas, NV. The Molina Building loan is secured by a 124,671 sf office building located in northern Albuquerque, NM. The loans were transferred to special servicing in October 2015 for imminent default. Both properties suffered from declining cash flows due to the losses of major tenants. Loan modification discussions were not successful and the servicer is moving forward with foreclosure. As of April 2016, City Center West was 51.6% occupied. The Molina Building is currently 67% occupied. Recent property appraisals indicate significant declines in values relative to the outstanding loan amounts.
The third largest contributor to losses is Fountain Square,an IO loan (3.8%) secured by a 165,872 sf retail center located in Brookfield, WI. The loan had an anticipated repayment date (ARD) of Oct. 1, 2016. Going forward, debt service coverage is expected to decline as the interest rate increases according to terms of the ARD. The final loan maturity is October 2036. The property has been 100% occupied since 2010 when two major tenants signed long term leases. The servicer reported YE2015 DSCR was 1.11x, compared to 1.08x at YE2014 and YE2013.
The Stable Outlooks on classes A-4 and A-1A reflect sufficient credit enhancement (CE) and expected continued paydown. Fitch maintains the Negative Outlook on the class A-M notes due to uncertainty in the refinancing prospects of loans in the pool with Fitch loan-to-value ratios at or near 100%. Should higher leveraged loans refinance without issue, the negative outlooks on class A-M could be revised to stable. The distressed classes (those rated below 'Bsf') may be subject to further downgrades as additional losses are realized.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following classes:
--$327.7 million class A-4 at 'AAAsf'; Outlook Stable;
--$98.4 million class A-1A at 'AAAsf'; Outlook Stable;
--$246.8 million class A-M at 'AAAsf'; Outlook Negative;
--$222.1 million class A-J at 'CCCsf; RE 95%';
--$46.3 million class B at 'CCCsf'; RE 0%;
--$24.7 million class C at 'CCsf'; RE 0%;
--$37 million class D at 'Csf'; RE 0%.
--$21.6 million class E at 'Csf'; RE 0%
--$9.4 million class F at 'Dsf'; RE 0%
Fitch does not rate class P. Class A-1, A-2, A3 and A-AB have paid in full. Class G, H, J, K, L, M, N, and O are affirmed at 'Dsf; RE 0%' due to losses incurred. Fitch has previously withdrawn the ratings on the interest-only classes X-1, X-2 and X-W.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
Dodd-Frank Rating Information Disclosure Form
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