Fitch Affirms Cobalt 2006-C1

NEW YORK--()--Fitch Ratings has affirmed all classes of Cobalt CMBS Commercial Mortgage Trust series 2006-C1. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The affirmations are the result of stable overall pool performance since Fitch's last rating action. Fitch modeled losses of 11.6% for the remaining pool; expected losses on the original pool balance total 19.1%, including $330 million (13% of the original pool balance) in realized losses to date. Fitch has designated 22 loans (25.7%) as Fitch Loans of Concern, which includes six specially serviced assets (8.7%).

As of the July 2014 distribution date, the pool's aggregate principal balance (including rakes) has been reduced by 47.7% to $1.34 billion from $2.56 billion at issuance. Three loans (1.8%) are defeased. Interest shortfalls totaling $17.3 million are currently affecting class AJ, and classes G through P.

The largest contributor to modeled losses is a loan (4.6% of the pool) secured by a 537,400 SF class A office property located in downtown Cincinnati, OH. The loan transferred to the special servicer in December 2012 due to the loss of Chiquita Brands International, the former largest tenant, which represented a significant portion of the net rentable area and vacated at its lease expiration. The bankruptcy subsequently filed by a majority of the TIC ownership structure was dismissed by the court. A receiver (CBRE) has been appointed. The trust is currently engaged in legal proceedings with the ground lessor for a ground lease default allegation. The property is currently 66% occupied. A cash management agreement is in place.

The second largest contributor to modeled losses is an interest only (IO) loan (2.7%) secured by a 296,308 SF Class A office building located in Bloomington, MN. The loan was modified and restructured into an A/B note split effective November 2012. The servicer reported year-end (YE) 2013 DSCR was 0.78x compared to 0.97x at YE 2012 DSCR. The decline in performance as of YE 2013 was primarily due to a decrease in effective gross income and a significant increase in real estate taxes (91% from YE2012). The continued decline in performance since the modification has resulted in higher Fitch modeled losses. Per March 2014 rent roll, the property was 65% occupied, unchanged since YE2012.

The third largest contributor to modeled losses is an IO loan (3%) secured by a 336-unit multifamily property located in Glendale, AZ. As Arizona State University's (ASU) West Campus is located within close proximity of the subject, a significant portion of the residents at the property are students of ASU. The servicer reported 1st quarter 2014 DSCR was 1.14x, compared to 1.03x at YE2013 and 0.98x at YE2012. As of March 31, 2014, the property was 93% occupied.

RATING SENSITIVITIES

The 'AAA' rated classes are expected to remain stable and no near-term rating actions are anticipated. The 'BB' rated class may be subject to future downgrades should pool performance deteriorate and losses exceed expectations.

Fitch affirms the following classes as indicated:

--$680.3 million class A-4 at 'AAAsf'; Outlook Stable;

--$227.3 million class A-1A at 'AAAsf'; Outlook Stable;

--$253.1 million class A-M at 'BBsf'; Outlook Negative;

--$176.7 million class A-J at 'Dsf'; RE 10%;

--$0 class B at 'Dsf'; RE 0%;

--$0 class C at 'Dsf'; RE 0%;

--$0 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 O at 'Dsf'; RE 0%.

The classes A-1, A-2, A-AB, A-3, AMP-E1 and AMP-E2 have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class IO certificates.

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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=846275

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst:
Amy Gan, +1-212-908-9143
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Amy Gan, +1-212-908-9143
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com