Fitch Affirms Cobalt 2007-C2 (CWCI 2007-C2)
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 21 classes of COBALT CMBS Commercial Mortgage Trust's (COBALT) commercial mortgage pass-through certificates 2007-C2. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are the result of the relatively stable performance of the pool and sufficient credit enhancement to offset the minimal increase in expected losses since last rating action.
Fitch modeled losses of 13% of the remaining pool; expected losses on the original pool balance total 13.2%, including $65.3 million (2.7% of the original pool balance) in realized losses to date. At Fitch's last rating action, Fitch modeled 12.5% in losses out of the original pool balance. Fitch has designated 43 loans (39.9%) as Fitch Loans of Concern, which includes 16 specially serviced assets (23.2%).
As of the January 2014 distribution date, the pool's aggregate principal balance has been reduced by 19% to $1.96 billion from $2.42 billion at issuance. No loans are defeased. Interest shortfalls are currently affecting classes G through S.
The largest three contributors to Fitch modeled losses remain the same, the largest of which is the Peter Cooper Village/Stuyvesant Town (PCV/ST) loan (10.6% of the pool). The specially-serviced loan is secured by a 56-building multi-family complex with 11,227 units located on the east side of Manhattan in New York City. The loan transferred to special servicing in November 2009 at the borrowers request. Subsequently, in October 2012 PCV/ST suffered damage from Hurricane Sandy; property restoration efforts are on-going including repairs to the laundry rooms and basement areas. Additionally, in November 2012 the special servicer (CWCapital) announced a settlement to The Roberts Litigation to address historical overcharges and future rents for over 4,300 units. Final approval for the settlement was received in April 2013 and it is anticipated that implementation will take approximately 18 months. The second-quarter 2013 net operating income (NOI) debt service coverage ratio (DSCR) was 0.92x and current occupancy is 98%. Fitch believes that stabilization of the property remains on schedule and expects the property to be marketed for sale in mid-to-late 2014.
The next largest contributor to expected losses is a 15-story, 293-key full-service hotel located in Fort Lauderdale, FL (2.1%). The loan transferred to special servicing in June 2013 due to imminent default after the borrower requested a modification. The property's performance has struggled due to pricing pressures from new competition entering the market over the last several years. In addition, the loan began amortizing in May 2012. The special servicer reports that occupancy has remained consistent over the last couple of years at 72% as of year-end 2012. The year-end 2012 DSCR was 1.03x and declined further in the third-quarter of 2013 to 0.96x.
The third largest contributor to expected losses is a 135,285 square foot (sf) grocery anchor retail center in Ormond Beach, FL (1.2%). The loan transferred to special servicing in August 2010 for imminent default due to a large tenant vacating the property. Foreclosure occurred in March 2012. The special servicer reported that the property is 88% occupied as of January 2014 and is currently marketing it for sale.
Rating Outlooks on classes A-3 and A-1A remain Stable resulting from increasing credit enhancement and continued paydown. Rating Outlooks on classes A-MFX and A-MFL remain Negative due to concerns with several highly leveraged loans within the top 15, including several with high tenant concentrations and rolling leases. Additionally, there remains uncertainty related to the final disposition of the PCV/ST loan. Distressed ratings (those below 'B') may be subject to further downgrades as losses are realized.
Fitch affirms the following classes and assigns Recovery Estimates (REs) as indicated:
--$846.6 million class A-3 at 'AAAsf', Outlook Stable;
--$452.9 million class A-1A at 'AAAsf', Outlook Stable;
--$221.9 million class A-MFX at 'AAAsf', Outlook Negative;
--$20 million class A-M at 'AAAsf', Outlook Negative;
--$102.6 million class A-JFX at 'CCCsf', RE 80%;
--$100 million class A-JFL at 'CCCsf', RE 80%;
--$21.2 million class B at 'CCsf', RE 0%;
--$27.2 million class C at 'CCsf', RE 0%;
--$21.2 million class D at 'CCsf', RE 0%;
--$15.1 million class E at 'CCsf', RE 0%;
--$18.1 million class F at 'Csf', RE 0%;
--$30.2 million class G at 'Csf', RE 0%;
--$24.2 million class H at 'Csf', RE 0%;
--$24.2 million class J at 'Csf', RE 0%;
--$30.2 million class K at 'Csf', RE 0%;
--$4.2 million 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%.
Fitch does not rate the class S certificates. Fitch previously withdrew the rating on the interest-only class X 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