Fitch Downgrades One Distressed Class of BACM 2007-2
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded one class and affirmed 23 classes of Banc of America Commercial Mortgage Trust, commercial mortgage pass-through certificates, series 2007-2 (BACM 2007-2). A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The downgrade of class H reflects realized losses. The affirmations of the other classes are due to the relatively stable performance of the collateral pool since Fitch's last rating action. Fitch modeled losses of 16.4% of the remaining pool; expected losses on the original pool balance total 14.9%, including $170.5 million (5.4% of the original pool balance) in realized losses to date. Fitch has designated 35 loans (22.4%) as Fitch Loans of Concern, which includes 19 assets (17%) in special servicing.
The Stable Outlooks on the super senior 'AAA' classes reflect the seniority of these classes and sufficient credit enhancement.
The Negative Outlook on class A-M reflects the high leverage and the possibility for further underperformance of the top 15 loans (57% of the pool). Twelve loans in the top 15 (51%) have Fitch loan-to-values greater than 90% and these loans may experience difficulties at the time of refinancing. The pool also has a high concentration of retail loans (47%); 10 (32%) of which are in the top 15 loans and are located in weaker markets with risks of tenant lease rollover.
Distressed classes (those rated below 'Bsf') may be subject to further downgrades as additional losses are realized.
As of the February 2014 distribution date, the pool's aggregate principal balance has been reduced by 41.6% to $1.85 billion from $3.17 billion at issuance. No loans are defeased. Interest shortfalls are currently affecting classes D through S.
The largest three contributors to modeled losses remain the same as the last rating action, the largest of which is the Beacon Seattle & DC Portfolio loan (9% of the pool). 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 (sf) 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.
Under the modification, 11 properties have been released to date, two of which occurred after Fitch's last rating action. These properties included Market Square (Washington, D.C.); Key Center (Bellevue, WA); City Center Bellevue (Bellevue, WA); 1616 North Fort Myer Drive (Arlington, VA); Liberty Place (Washington, D.C.); Army and Navy Building (Washington, D.C.); 1300 North Seventeenth Street (Arlington, VA); Reston Town Center (Reston, VA); Washington Mutual Tower (Seattle, WA); Wells Fargo Center (Seattle, WA); and Plaza Center (Bellevue, WA).
As reported by the servicer and as of February 2014, the loan has paid down by $1.58 billion (58% of the original overall loan balance). As of year-end (YE) 2013, the portfolio occupancy of the remaining nine properties has fallen below 80%, down significantly from the 97% occupancy reported at issuance for the same properties. The portfolio continues to be subject to tenant lease rollover risk. As of YE 2012, the net operating income was $72.2 million for the remaining nine properties, representing a 2.5% increase from YE 2011, a 1.6% decline from YE 2010, and a 4.9% decline from NOI reported at issuance for the same properties.
The next largest contributor to modeled losses is the Connecticut Financial Center loan (7%). The loan is secured by a 466,049 square foot (sf) office building located in New Haven, CT. The loan was transferred to special servicing in June 2012 for imminent default. The largest tenant (initially leasing approximately 47% of the property square footage at an above market rate) vacated a significant block of their occupied space at its June 2012 lease expiration. This caused both occupancy and cash flow to drop significantly. As of March 2013, property occupancy was 71% compared to 91% at issuance. The loan was modified in August 2013 into a $70 million A-note and a $60.4 million B-note. Fitch modeled a full loss on the B-note portion of the loan.
The third largest contributor to modeled losses is the Venture Pointe loan (1.4%). The loan is secured by a 335,420 sf shopping center located in Atlanta, GA. The loan was transferred to special servicing in March 2011 for imminent default. The borrower had previously engaged a listing broker to market the property for sale, but offers were not sufficient to receive the lender's approval. A receiver is currently in place and is working to lease-up and stabilize the property before it is marketed for sale. The property is currently 68% occupied. A new tenant recently executed a lease that commenced during the fourth quarter 2013 for approximately 10% of the total property square footage. The tenant is currently in its build-out stage.
Fitch downgrades the following classes as indicated:
--$43 million class H to 'Dsf' from 'Csf'; RE 0%.
Fitch affirms the following classes as indicated:
--$46.9 million class A-2 at 'AAAsf'; Outlook Stable;
--$3.4 million class A-2FL at 'AAAsf'; Outlook Stable;
--$162.6 million class A-3 at 'AAAsf'; Outlook Stable;
--$39 million class A-AB at 'AAAsf'; Outlook Stable;
--$602 million class A-4 at 'AAAsf'; Outlook Stable;
--$220.1 million class A-1A at 'AAAsf'; Outlook Stable;
--$317.3 million class A-M at 'Asf'; Outlook Negative;
--$153.8 million class A-J at 'CCCsf'; RE 65%;
--$100 million class A-JFL at 'CCCsf'; RE 65%;
--$15.9 million class B at 'CCCsf'; RE 0%;
--$47.6 million class C at 'CCsf'; RE 0%;
--$31.7 million class D at 'Csf'; RE 0%;
--$15.9 million class E at 'Csf'; RE 0%;
--$27.8 million class F at 'Csf'; RE 0%;
--$27.8 million class G at 'Csf'; 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 certificates have paid in full. Fitch does not rate the class S certificates. Fitch previously withdrew the rating on the interest-only class XW 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