NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of Banc of America Commercial Mortgage Trust, commercial mortgage pass-through certificates, series 2007-5 (BACM 2007-5). A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations reflect the relatively stable performance of the pool since Fitch's last rating action. Fitch modeled losses of 19.1% of the remaining pool; expected losses on the original pool balance total 18.8%, including $105.3 million (5.7% of the original pool balance) in realized losses incurred to date. Fitch has designated 25 loans (55% of the current pool) as Fitch Loans of Concern, which includes seven specially serviced assets (11.4%). As of the November 2014 distribution date, the pool's aggregate principal balance has been reduced by 31.4% to $1.28 billion from $1.86 billion at issuance. Four loans (4.3%) are defeased. Interest shortfalls are currently affecting classes E through S.
The three largest contributors to Fitch modeled losses remain the same as the last rating action.
The largest contributor to Fitch modeled losses is the Smith Barney Building loan (7.8% of pool), which is secured by a 10-story, 193,456 square foot (sf) office building located in the La Jolla submarket of San Diego, CA. The property's occupancy was significantly impacted when the two largest tenants at issuance vacated at their 2009 and 2010 lease expirations; however, property performance rebounded in 2012 as the borrower was able to sign a long term lease with the property's current largest tenant through 2020 for 33% of the total property square footage. Property occupancy was 99% as of the June 2014 rent roll compared to 97% at year-end (YE) 2013, 95% at YE 2012, and a low of 67% at YE 2011. Lease rollover risk remains a concern as nearly 7% of the square footage rolls in 2014, 30% in 2015, 22% in 2016, and 4% in 2017. Although Fitch has modeled losses on this loan, Fitch anticipates property cash flow to improve as rolling leases in 2015 and 2016 may be signed at higher rates, many of which were previously signed at below market rates. The sponsor has continued to come out of pocket to cover debt service shortfalls since 2008.
The next largest contributor to Fitch modeled losses is the specially-serviced, Green Oak Village Place asset (4.9%), a 315,094 sf lifestyle center located in Brighton, MI, about 40 miles northwest of Detroit. The loan was first transferred to special servicing in January 2009 for imminent default and subsequently modified in November 2009. The borrower defaulted after the modification and the loan was returned to the special servicer in March 2012. A foreclosure sale occurred in October 2014 and the borrower has a six month redemption period through April 2015. As of the September 2014 rent roll, the property's occupancy was 82% with moderate near-term lease rollover risk as 7% rolls in 2015 and 9% in 2016. Coldwater Creek (2% of the property sf), which closed all of their retail locations, vacated prior to its scheduled lease expiration in July 2014. Old Navy (5% of the property sf), which had a lease that expired in October 2014, will remain in occupancy until January 2015 which will cause occupancy to drop to 77%. The special servicer indicated that they will formulate a workout strategy after the expiration of the redemption period.
The third largest contributor to Fitch modeled losses is the Collier Center loan (11.3%), the largest loan in the pool, which is secured by the leasehold interest in a 24-story, 567,163 sf office tower located in downtown Phoenix, AZ. The property is part of a mixed-use development that consists of office, retail, and restaurants. As of the June 2014 rent roll, the property's occupancy was 78% compared to 66% at YE 2013 and YE 2012, and 80% at YE 2011. The drop in occupancy between 2011 and 2012 was primarily the result of the property's second largest tenant at issuance (13% of property sf) vacating at lease expiration. The property has recently seen some positive leasing momentum as the borrower signed two new tenants during 2014, one for 13% and another for 4% of the property's square footage, both on long term leases. However, lease rollover risk remains a concern as nearly 10% rolls before the end of 2014, 2% in 2015, 6% in 2016, and 9% in 2017. Approximately 6% of the rollover occurring in 2014 is associated with the GSA tenant, which has an upcoming December 2014 lease expiration. The servicer did not provide an update on the status. The sponsor has continued to cover debt service shortfalls out of pocket since 2012.
Rating Outlooks on classes A-3, A-SB, A-4, and A-1A remain Stable due to sufficient credit enhancement and expected continued paydown. The Negative Outlook on class A-M reflects the volatility surrounding the values and future losses on the specially serviced assets. In addition, various loans within the top 15 have stressed loan to values in excess of 100%, which can impact a loan's ability to refinance at maturity. Furthermore, although the Smith Barney Building loan is currently performing and has a strong sponsor, class A-M may be subjected to future downgrade if property-level cash flow does not improve by the loan's maturity. The distressed classes (those rated below 'Bsf') may be subject to further downgrades as additional losses are realized.
Fitch has affirmed the following classes:
--$6.6 million class A-3 at 'AAAsf'; Outlook Stable;
--$25.5 million class A-SB at 'AAAsf'; Outlook Stable;
--$612 million class A-4 at 'AAAsf'; Outlook Stable;
--$179 million class A-1A at 'AAAsf'; Outlook Stable;
--$185.9 million class A-M at 'BBsf'; Outlook Negative;
--$139.4 million class A-J at 'CCsf'; RE 15%;
--$20.9 million class B at 'CCsf'; RE 0%;
--$13.9 million class C at 'CCsf'; RE 0%;
--$20.9 million class D at 'Csf'; RE 0%;
--$18.6 million class E at 'Csf'; RE 0%;
--$11.6 million class F at 'Csf'; RE 0%;
--$18.6 million class G at 'Csf'; RE 0%;
--$20.9 million class H at 'Csf'; RE 0%;
--$1.6 million 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 and A-2 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' (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