NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded two and affirmed 16 classes of commercial mortgage pass-through certificates from TIAA Seasoned Commercial Mortgage Trust series 2007-C4. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades are primarily due to an increase in credit enhancement as a result of 24.5% principal paydown since Fitch's last rating action. The affirmations are the result of overall stable pool performance. Fitch modeled losses of 13.7% of the remaining pool; expected losses on the original pool balance total 5%, including losses already incurred to date (1.1%). Fitch has identified 12 loans (25.6%) as Fitch loans of concern (LOC), including three specially serviced assets (15.6%).
As of the September 2014 distribution date, the pool's aggregate principal balance has been reduced by 71.5% to $596.1 million from $2.09 billion at issuance. Currently there are no defeased loans. Interest shortfalls in the amount of $3.7 million are affecting classes K through T.
The largest contributor to expected losses consists of two pari-passu notes that are secured by two phases of a shopping center in Algonquin, IL (14.4% of the pool, collectively). The loans are cross collateralized and cross defaulted. In June 2010, the Phase I loan was modified for a 24 months interest-only (IO) period. Both loans transferred back to special servicing two years later due to imminent default. Foreclosure was filed in December 2012 but the proceedings have not yet progressed due to ongoing litigation initiated by the special servicer. The servicer reported second-quarter (2Q) 2012 Debt Service Coverage Ratio (DSCR) for Phase I and Phase II were 0.67x and 0.89x, respectively. Per the June 2014 rent roll, Phase I was 87.9% occupied, compared to 97% at issuance; Phase II was 100% occupied, compared to 89.8% at issuance.
The second largest contributor to expected losses is a loan secured by two adjacent office properties in Greenbelt, MD (2.6%).
Park East is an 84,630 square foot (SF) office building. As of first quarter (1Q) 2014, the servicer reported DSCR declined to 0.92x from 1.26x at YE2013. The decline in performance is primarily due to a decrease in rental revenue and an increase in utility expenses. Per the September 2014 rent roll, the property was 87.7% occupied. Leases representing 27% of the property net rentable area (NRA) are scheduled to expire in 2015, including Chasen & Boscolo, the third largest tenant that occupies 20.6% of the property.
Park West is an 84,581 SF office building. As of September 2014 rent roll, the property was 100% leased. Bozzuto & Associates, the largest tenant that occupied 88% of the property, extended its leases for only one month after they expired in August 2014. Fitch excluded rental revenues from this tenant in its analysis as the tenant is expected to vacate at the end of the lease extension. The servicer reported 1Q'14 DSCR was 1.79x, compared to 1.3x at YE2013.
The third largest contributor to expected losses is a 132,102 sf office property in Jacksonville, FL. The property has been a real estate owned asset (REO) since October 2012. The property is being leased and managed by Cushman & Wakefield. Currently the property is 88.8% occupied, down from 93.3% at January 2014. The property was under contract for sale, but the transaction did not go through. Per special servicer, UPS, the second largest tenant that leases 26,000 sf of the property, will downsize to 9,000 SF when its lease expires in October 2014.
The ratings on all investment grade classes are expected to remain stable due to sufficient credit enhancement and continued paydown. Future downgrades on class E are possible if the final resolution on the specially serviced assets results in higher than expected losses. The distressed classes (rated below 'B') may be subject to further rating actions as losses are realized.
Fitch upgrades the following classes as indicated:
--$227.5 million class A-J to 'AAA' from 'AAsf'; Outlook Stable;
--$10.5 million class B to 'AA' from 'Asf'; Outlook Stable.
Fitch affirms the following classes and revises Recovery Estimates (REs) as indicated:
--$145.9 million class A-3 at 'AAAsf'; Outlook Stable;
--$55.1 million class A-1A at 'AAAsf'; Outlook Stable;
--$28.8 million class C at 'BBBsf'; Outlook Stable;
--$18.3 million class D at 'BBsf'; Outlook Stable;
--$5.2 million class E at 'BBsf'; Outlook Negative;
--$15.7 million class F at 'CCCsf'; RE 100%.
--$20.9 million class G at 'CCCsf'; RE 0%;
--$13.1 million class H at 'CCsf'; RE 0%;
--$23.5 million class J at 'Csf'; RE 0%;
--$7.8 million class K at 'Csf'; RE 0%;
--$7.8 million class L at 'Csf'; RE 0%.
--$7.9 million class M at 'Csf'; RE 0%;
--$2.6 million class N at 'Csf'; RE 0%;
--$5.5 million class P at 'Dsf'; RE 0%.
The class A-1 and A-2 certificates have paid in full. Classes Q and S have been depleted due to realized losses and are affirmed at 'Dsf' / RE 0%. Fitch does not rate the class T certificates. Fitch previously withdrew the rating on the interest-only class X 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 - Effective from 20 May 2014 to 4 August 2014
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria