CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded one class and affirmed 18 classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMSI) commercial mortgage pass-through certificates series 2007-PWR16. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrade of class G reflects realized losses. The affirmations reflect continued paydown and overall stable performance since Fitch's last rating action. Fitch remains concerned about a number of highly leveraged loans, which may have trouble refinancing. Fitch has applied additional stresses in its base case analysis to factor in the refinancing risks. All of the loans in the pool mature in 2017. Fitch modeled losses of 15.2% of the remaining pool; expected losses on the original pool balance total 14.3%, including $220.5 million (6.7% of the original pool balance) in realized losses to date.
As of the October 2016 distribution date, the pool's aggregate principal balance has been reduced by 49.9% to $1.66 billion from $3.31 billion at issuance. Per the servicer reporting, nine loans (3.4% of the pool) are defeased. Interest shortfalls are currently affecting classes G through S.
There was a variance from criteria related to class A-M for which the model output suggested that an upgrade was possible. Fitch determined that an upgrade is not warranted at this time as modeled loss on the remaining pool remains high and the significant maturity risk that exists with 100% of the pool maturating in 2017.
Highly Leveraged Loans: There are a number of highly leveraged loans within the pool. Eleven of the top 15 performing loans have Fitch loan-to-values (LTVs) above 100%, which may impact the ability of the loans to refinance at maturity.
2017 Maturities: All of the performing loans within the pool mature in 2017 exposing the transaction to significant maturity risk. The majority of the maturities (90%) occur in the second quarter of 2017.
Specially Serviced Assets: There are six specially serviced assets representing 4.60% of the pool. Five of the assets are real estate owned (REO). The largest specially serviced asset and second largest contributor to losses is the North Grand Mall (1.8%), a 297,008 square foot (sf) regional mall located in Ames, IA. The loan was transferred to the special servicer in June 2014 for imminent default. Anchor tenants at the mall include JCPenney (31.6% net rentable area [NRA]), which extended their lease for an additional seven years through March 2020 and Younkers (16.8% NRA), which expires in 2022. The third largest tenant, a movie theatre, closed in 2014. Sears closed its location at the mall in 2008, after which its store was demolished and replaced with Kohl's, TJ Maxx, and Shoe Carnival. The servicer-reported occupancy at the property as of August 2016 is 85.0%, a decline from the 92.7% reported at year-end 2013. The servicer reports that the property is under contract with an expected closing in December 2016. Fitch expects significant losses on the asset upon disposition.
The second largest specially serviced asset and third largest contributor to losses is Ashford Oaks, a 190,819 sf suburban property, located in San Antonio, TX. The property became REO after foreclosure was completed in October 2015. The servicer is focused on new leases and renewals as well as upgrades to common areas, restrooms and a security desk. The property is being marketed for sale and current occupancy is 55%.
Beacon Seattle & DC Portfolio: The Beacon Seattle & DC Portfolio remains the largest contributor to modeled losses. The loan was initially secured by a portfolio consisting of 16 office properties, the pledge of the mortgage and the borrower's ownership interest in one office property, and the pledge of cash flows from three office properties. In aggregate, the initial portfolio of 20 properties comprised approximately 9.8 million square feet of office space. The loan was transferred to special servicing in April 2010 for imminent default and was modified in December 2010. Key modification terms included a five-year extension of the loan to May 2017, a deleveraging structure that provided for the release of properties over time, and an interest rate reduction. The loan was returned to the master servicer in May 2012 and is performing under the modified terms.
Per the recent master servicer comments, the borrower is marketing the four remaining properties in order to liquidate the entire portfolio by the May 2017 extended maturity date. As of June 2016, the portfolio occupancy is 84.4%.
RATING SENSITIVITIES
Stable Outlooks on classes A-4, A-1A and A-M reflect their seniority and sufficient credit enhancement. Downgrades to the senior classes are not expected unless there is a material decline in loan performance or if losses on the specially serviced loans exceed current expectations. Upgrades are possible if specially serviced assets are resolved with better than anticipated recoveries. Downgrades to the distressed classes will occur as 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 downgrades the following class:
--$23.9 million class G to 'Dsf' from 'Csf'; RE 0%.
Fitch affirms the following classes and revises the RE as indicated:
--$273.4 million class A-J at 'CCCsf'; RE 60%.
Fitch affirms the following classes:
--$640 million class A-4 at 'AAAsf'; Outlook Stable;
--$246.6 million class A-1A at 'AAAsf'; Outlook Stable;
--$331.4 million class A-M at 'Asf'; Outlook Stable;
--$33.1 million class B at 'CCCsf'; RE 0%;
--$33.1 million class C at 'CCCsf'; RE 0%;
--$33.1 million class D at 'CCsf'; RE 0%;
--$20.7 million class E at 'CCsf'; RE 0%;
--$24.9 million class F at 'Csf'; RE 0%;
--$0 class H at 'Dsf'; RE 0%;
--$0 class J at 'Dsf'; RE 0%;
--$0 class K at 'Dsf'; RE 0%;
--$0 class L at 'Dsf'; RE 0%;
--$0 class M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%;
--$0 class O at 'Dsf'; RE 0%;
--$0 class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%.
The class A-1, A-2, A-3 and A-AB certificates have paid in full. Fitch does not rate the class S certificates. Fitch previously withdrew the rating on the interest-only class X certificates.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
https://www.fitchratings.com/site/re/886006
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)
https://www.fitchratings.com/site/re/882401
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
https://www.fitchratings.com/site/re/883130
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/site/re/873395
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1013895
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1013895
Endorsement Policy
https://www.fitchratings.com/regulatory
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