Fitch Downgrades 2 Classes of PCMT 2003-PWR1
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded two and affirmed seven classes of Prudential Commercial Mortgage Trust 2003-PWR1 (PCMT 2003-PWR1) commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrades are a result of an increase in expected losses. The affirmation of the remaining investment grade class is due to sufficient credit enhancement that offsets the increased loan concentration and adverse selection with only three assets remaining.
Fitch modeled losses of 67.8% of the remaining pool; expected losses on the original pool balance total 7.6%, including $38.6 million (4% of the original pool balance) in realized losses to date. Fitch considers the three remaining assets to be Fitch Loans of Concern, two of which are specially serviced (40.7%).
As of the January 2014 distribution date, the pool's aggregate principal balance has been reduced by 94.8% to $50.4 million from $960 million at issuance. Interest shortfalls are currently affecting classes F through P.
The largest loan in the pool is the Brandywine Office Building & Garage loan (59.3% of the pool), which is secured by a 405,844 square foot (sf) office building with a 660 parking space garage located in Wilmington, DE. The loan underwent a modification in June 2011, which included a $15.1 million write-off of principal; an interest rate reduction with periodic rate increases until December 2015; and interest-only payments until maturity May 2020. The property's performance has continued to suffer due to declining occupancy and deteriorating cash flows. The servicer reported property's debt service coverage ratio (DSCR) was 0.98x as of the third-quarter 2013. As per the property's rent roll, occupancy declined to 34.3% as of the third-quarter 2013 from 43% as of year-end 2012.
The next largest asset is The Landings (27.4%), a 112,861-sf anchored retail center located in Bolingbrook, IL. The loan transferred to special servicing in February 2012 due to monetary default after its largest tenant, Borders (22.2%), vacated the property. The loan became real estate owned (REO) in December 2013 and the special servicer expects the property to be divested around July 2014. The special servicer reports that the occupancy was 49% as of year-end 2013.
The third largest asset is the Holley Mason Building (13.3%), a 107,259-sf office building located in Spokane, WA. The loan transferred to special servicing in June 2011 for monetary default and became REO in August 2012. Disposition of the property is unknown pending resolution of a parking easement at the property. The special servicer reports occupancy was 83% as of year-end 2013.
Rating Outlooks on classes E and F are Negative due to increasing interest shortfalls and insufficient cash flows from the remaining assets to pay the bonds without servicer advances.
Fitch downgrades the following classes and assigns Recovery Estimates (REs) as indicated:
--$10.8 million class F to 'Bsf' from 'BBsf'; Outlook Negative;
--$12 million class G to 'Csf' from 'CCCsf'; RE 15%.
Fitch affirms the following classes, and revises Rating Outlooks and REs as indicated:
--$8.6 million class E at 'BBB-sf'; Outlook to Negative from Stable;
--$16.8 million class H at 'Csf'; RE 0%.
--$2.2 million class J at 'Dsf', RE 0%;
--$0 class K at 'Dsf';
--$0 class L at 'Dsf';
--$0 class M at 'Dsf';
--$0 class N at 'Dsf'.
The class A-1, A-2, B, C, D and X-2 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class X-1 certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria