NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 18 classes of ML-CFC Commercial Mortgage Trust commercial mortgage pass-through certificates, series 2007-5. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations and Rating Outlooks reflect continued paydown with recoveries on specially serviced loans above expectations, since Fitch's last rating action. Fitch modeled losses of 15.2% of the remaining pool; expected losses on the original pool balance total 18.4%, including $301.7 million (6.8% of the original pool balance) in realized losses to date. Fitch has designated 94 loans (56.2% of the pool) as Fitch Loans of Concern, which includes 15 specially serviced assets (30.3% of the pool).
As of the September 2014 distribution date, the pool's aggregate principal balance has been reduced by 23.6% to $3.39 billion from $4.44 billion at issuance. Per the servicer reporting, nine loans (2.4% of the pool) are defeased. Interest shortfalls are currently affecting classes AJ through Q.
The largest contributor to expected losses remains the specially-serviced Peter Cooper Village/Stuyvesant Town (PCV/ST) asset (23.6% of the pool), 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 nearing completion. The final projects include the new management office and a new day care center located in the old management office space, both of which are expected to be completed by the end of 2014. The special servicer continues to pursue the remaining claim amounts from the insurance providers.
On June 3, 2014, the trust received title to the property via deed-in-lieu of foreclosure which canceled the UCC foreclosure action previously initiated. On July 3, 2014, certain mezzanine lenders who had recently purchased their positions filed a complaint alleging that the deed-in-lieu breached the terms of the intercreditor agreement, among other claims. These mezzanine lenders are pursuing damages from the special servicer as Senior Lender. The special servicer filed a motion to dismiss on Aug. 18, 2014. Per the special servicer, the current and future legal fees are anticipated to be covered by property operations; therefore, additional fees will not be taken from the trust's interest. Any potential sale of the property cannot occur until this litigation is resolved; therefore, Fitch is not expecting an imminent resolution.
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. According to the special servicer, the implementation is proceeding on schedule.
An updated 2014 appraisal is still pending, therefore, Fitch continues to model losses based on the proportional amount of the most-recent $3.4 billion appraisal (September 2013) less assumed fees and expenses. Property performance continues to improve with 99% occupancy as of September 2014.
The next largest contributor to expected losses is the specially-serviced HSA Memphis Industrial Portfolio loan (1.8% of the pool), which was originally secured by 15 industrial/flex/office buildings with nearly 1.6 million square feet (sf) disbursed across three industrial parks in Memphis, TN. The loan transferred to special servicing in September 2010 due to imminent monetary default. Foreclosure occurred in October 2011 and subject is currently real estate owned (REO). To date, a total of six properties have been sold: In November 2013 one building (227,500 sf) was sold and in June 2014, five properties totaling 551,264 sf were sold. The remaining nine properties were included in an auction sale in August 2014, which resulted in four executed contracts (sales pending). Currently, the portfolio totals roughly 808 million sf and is 30% leased as of September 2014.
Rating Outlooks on classes A-4, A-4FL, and A-1A are revised to Stable from Negative; 16 specially serviced loans have liquidated since the last review with total losses below previous expectations. The Negative Outlooks on classes AM and AM-FL reflect the potential for future downgrades should losses increase on the remaining specially serviced loans and Fitch loans of concern. In addition, the final outcome of the PCV/ST loan is still uncertain.
Fitch affirms the following classes and revises Outlooks as indicated:
--$1.1 billion class A-4 at 'AAAsf', Outlook to Stable from Negative;
--$237.7 million class A-4FL at 'AAAsf', Outlook to Stable from Negative;
--$1.1 billion class A-1A at 'AAAsf', Outlook to Stable from Negative;
--$341.7 million class AM at 'BBsf', Outlook Negative;
--$100 million class AM-FL at 'BBsf', Outlook Negative;
--$211.5 million class AJ at 'CCCsf', RE 15%;
--$175 million class AJ-FL at 'CCCsf', RE 15%;
--$77.3 million class B at 'Csf', RE 0%;
--$33.1 million class C at 'Csf', RE 0%;
--$77.3 million class D at 'Csf', RE 0%;
--$7.5 million 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 N at 'Dsf', RE 0%.
The class A-1, A-2, A-2FL, A-2FX, A-3, and A-SB certificates have paid in full. Fitch does not rate the class M, P and 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 then CMBS then Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 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