Fitch Affirms Ratings for 21 Classes of MLMT 2007-C1
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 21 classes of Merrill Lynch Mortgage Trust commercial mortgage pass-through certificates, series 2007-C1 (MLMT 2007-C1). A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are the result of sufficient credit enhancement despite the increase in modeled losses when compared to the previous review. Fitch modeled losses of 23.1% of the remaining pool; expected losses on the original pool balance total 23.7%, including $323.2 million (8% of the original pool balance) in realized losses to date. Fitch has designated 76 loans (52%) as Fitch Loans of Concern, which includes seven specially serviced assets (3.6%).
As of the June 2014 distribution date, the pool's aggregate principal balance has been reduced by 32.2% to $2.75 billion from $4.05 billion at issuance. Interest shortfalls are currently affecting classes AJ through Q.
The largest two contributors to expected losses are the Empirian Portfolio Pool 1 (12.5% of the pool) and Pool 3 (10.4%) loans. Both loans were transferred to the special servicer in November 2010 and returned to the master servicer in February 2013 after being modified. The modifications consisted of bifurcating both loans into an A and a B note with a 70/30 split. Pool 1 was originally secured by 78 multifamily properties (7,964 units) located across eight states. Pool 3 was originally secured by 79 multifamily properties (6,864 units) located across eight states. The borrower is permitted to release a limited amount of properties from the portfolio prior to full payoff of the loans;Pool 1 has released 15 properties while Pool 3 has released 19 properties to date. The properties within the two portfolios are generally of class B and C collateral quality, many of which were constructed in the 1980s and lack common amenities. Most of the properties have significant deferred maintenance and only a small amount of the required repair obligations have been completed on the remaining portfolio. As of January 2014, the occupancy for Pool 1 and Pool 3 were approximately 89%, representing a decline from the 93% and 90.9% reported at issuance.
The next largest contributor to expected losses is the DRA/Colonial Office Portfolio loan (7.6% of the pool). The interest-only loan is secured by 16 office and retail buildings that comprise approximately 4.4 million square feet (sf) and are located across five metropolitan statistical areas (MSAs), primarily in the south and southeast. The loan has a total balance of $621.8 million and is split into three equal pari passu notes. The loan transferred to special servicing in August 2012 for imminent default due to declining occupancy with significant rollover. The loan was returned to the master servicer in May 2013 after the loan was modified which included an increased interest-only period for 24 months with a new maturity of July 2016. The servicer-reported net operating income (NOI) debt service coverage ratio (DSCR) was 1.21x as of September 2013, and the occupancy was 84.5% as of year-end 2013.
Rating Outlooks on classes A-3 through A-1A are revised to Negative as downgrades are possible if losses to the Empirian Portfolios or other large assets in pool increase. Fitch will continue to monitor property releases from the Empirian Portfolios, paying attention to the remaining collateral to ensure the asset quality and performance reflects Fitch's views from the current review. The distressed classes (those rated below 'B') are expected to be subject to further downgrades as losses are realized on specially serviced loans.
Fitch affirms the following classes and revises Rating Outlooks as indicated:
--$219.9 million class A-3 at 'Asf'; Outlook to Negative from Stable;
--$88.7 million class A-3FL at 'Asf'; Outlook to Negative from Stable;
--$57.2 million class A-SB at 'Asf'; Outlook to Negative from Stable;
--$442.2 million class A-4 at 'Asf'; Outlook to Negative from Stable;
--$1 billion class A-1A at 'Asf'; Outlook to Negative from Stable;
--$405 million class AM at 'CCCsf'; RE 65%;
--$134.1 million class AJ at 'CCsf'; RE 0%;
--$200 million class AJ-FL at 'CCsf'; RE 0%;
--$86.1 million class B at 'Csf'; RE 0%;
--$40.5 million class C at 'Csf'; RE 0%;
--$26.2 million class D at 'Dsf'; RE 0%;
--$0 class E at 'Dsf'; RE 0%;
--$0 class F at 'Dsf'; RE 0%;
--$0 class G at 'Dsf'; 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 P at 'Dsf'; RE 0%.
The class A-1, A-2 and A-2FL certificates have paid in full. Fitch does not rate the class Q 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 20, 2014);
--'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