CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMSI) commercial mortgage pass-through certificates series 2007-PWR16. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
Fitch modeled losses of 13.3% of the remaining pool; expected losses on the original pool balance total 15%, including $196.5 million (5.9% of the original pool balance) in realized losses to date. Fitch has designated 65 loans (47.9%) as Fitch Loans of Concern, which includes 10 specially serviced assets (5.1%).
As of the November 2014 distribution date, the pool's aggregate principal balance has been reduced by 31.8% to $2.26 billion from $3.31 billion at issuance. Per the servicer reporting, one loan (0.2% of the pool) is defeased. Interest shortfalls are currently affecting classes D through S.
Expected losses are higher than at Fitch's last rating action due to an increase in number of specially serviced assets. Additionally many performing loans exhibited lower debt service coverage ratios (DSCRs) due to full-year financial reporting on loans converting from interest-only status in 2012. The three largest contributors to losses are the same as at Fitch's last rating action in March 2014.
The largest contributor to expected losses remains the Beacon Seattle & DC portfolio (9.1% of the pool). The loan was initially secured by a portfolio consisting of 16 office properties, the pledge of the mortgage and the borrower's ownership interest in one office property, and the pledge of cash flows from three office properties. In aggregate, the initial portfolio of 20 properties comprised approximately 9.8 million square feet (sf) of office space. The loan was transferred to special servicing in April 2010 for imminent default and was modified in December 2010. Key modification terms included a five-year extension of the loan to May 2017, a deleveraging structure that provided for the release of properties over time, and an interest rate reduction. The loan was returned to the master servicer in May 2012 and is performing under the modified terms.
Under the modification, 11 properties have been released to date, including Market Square (Washington, D.C.); Key Center (Bellevue, WA); City Center Bellevue (Bellevue, WA); 1616 North Fort Myer Drive (Arlington, VA); Liberty Place (Washington, D.C.); Army and Navy Building (Washington, D.C.); 1300 North Seventeenth Street (Arlington, VA); Reston Town Center (Reston, VA); Washington Mutual Tower (Seattle, WA); Wells Fargo Center (Seattle, WA); and Plaza Center (Bellevue, WA). Nine properties remain as collateral as of November 2014.
As reported by the servicer as of November 2014, the loan has paid down by $1.57 billion (58% of the original overall loan balance). As of year-end (YE) 2013, the portfolio occupancy of the remaining nine properties has fallen to 77%, down significantly from the 97% occupancy reported at issuance for the same properties. Cash flow at the remaining properties continues to decrease, with the servicer reported net operating income as of year-end 2013 at $66.9 million for the remaining nine properties, down 8% from year-end 2012 and down 16% from year-end 2011. The portfolio continues to be subject to tenant lease rollover risk.
The second largest contributor to expected losses is the specially serviced North Grand Mall loan (1.4%), which is secured by a 297,008 sf regional mall located in Ames, IA. The loan was transferred to the special servicer in June 2014 for imminent default. Anchor tenants at the mall include JCPenney (31.6% NRA), which extended their lease for an additional 7 years through March 2020, and Younkers (16.8% NRA), which expires in 2022. The third largest tenant, a movie theatre, closed since last transaction review. Sears closed its location at the mall in 2008, after which its store was demolished and replaced with Kohl's, TJ Maxx, and Shoe Carnival. The servicer-reported occupancy at the property as of March 2014 is 91%, a decline from the 92.7% reported at year-end 2013. Fitch's analysis of the property's tenant sales report indicates reported sales at the property are below the industry average and calculated in-line tenant sales at approximately $228/sf for the trailing 12 months ending September 2014 and total mall sales of $37 million. The loan commenced principal payments in July 2012, which caused the DSCR to drop to 0.92x at year-end 2012, and a further decline to 0.80x was reported as of year-end 2013. Fitch expects significant losses on the loan.
The third largest contributor to expected losses is also the third largest loan in the pool, The Mall at Prince Georges (6.6%), which is secured by a 920,801 sf regional mall located in Hyattsville, MD. The mall was built in 1959 and renovated in 2004. As of June 2014, the servicer-reported occupancy is 97.4%, compared with the 97% at issuance. Anchor tenants at the mall are Macy's (21.3% NRA), which expires in October 2018; JCPenney (16.12% NRA), which expires July 2016, and Target (15.4% NRA), which expires January 2019. Box tenants include Marshalls (3.8% NRA), expiring September 2016, Ross (3.3% NRA), expiring January 2018, and Old Navy (2.7%), which expires January 2015. The property's June 2014 tenant sales report indicates in-line sales of approximately $375/sf, a decline from the non-anchor reported sales of $427/sf at issuance. Approximately 38% of the leases are scheduled to expire prior to year-end 2018, presenting refinance risk given the potential tenant roll as well as the low tenant sales. The interest-only loan has a servicer-reported DSCR of 1.42x as of year-end 2013.
Rating Outlooks on classes A-2 through A-M remain Stable due to increasing credit enhancement and continued paydown. Downgrades are not expected unless there is a material decline in loan performance or if losses on the specially serviced loans exceed current expectations.
Fitch affirms the following classes:
--$64.6 million class A-2 at 'AAAsf', Outlook Stable;
--$58.2 million class A-3 at 'AAAsf', Outlook Stable;
--$68.5 million class A-AB at 'AAAsf', Outlook Stable;
--$954.4 million class A-4 at 'AAAsf', Outlook Stable;
--$317.2 million class A-1A at 'AAAsf', Outlook Stable;
--$331.4 million class A-M at 'Asf', Outlook Stable;
--$273.4 million class A-J at 'CCCsf', RE 50%;
--$33.1 million class B at 'CCCsf', RE 0%;
--$33.1 million class C at 'CCCsf', RE 0%;
--$33.1 million class D at 'CCsf', RE 0%;
--$20.7 million class E at 'CCsf', RE 0%;
--$24.9 million class F at 'Csf', RE 0%;
--$29 million class G at 'Csf', RE 0%;
--$18.9 million 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%;
--$0 class P at 'Dsf', RE 0%;
--$0 class Q at 'Dsf', RE 0%.
The A-1 class is paid in full. Fitch does not rate the class S 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. 10, 2014 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. 10, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria