NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded two, downgraded one, and affirmed 14 classes of ML-CFC Commercial Mortgage Trust, commercial mortgage pass-through certificates, series 2007-9 (ML-CFC 2007-9). A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades to classes AM and AM-A are due to improved credit enhancement, as well as progress in resolving and disposing of the specially serviced assets with better recoveries than Fitch's modeled expectations. The downgrade to class J reflects actual realized losses. The affirmation of the remaining classes reflects the relatively stable collateral pool performance.
Fitch modeled losses of 17.1% of the remaining pool; expected losses on the original pool balance total 14.6%, including $134.1 million (4.8% of original pool balance) in realized losses incurred to date. Fitch has designated 76 loans (49% of current pool balance) as Fitch Loans of Concern, which includes 13 specially serviced assets (18%).
Since Fitch's last rating action, 12 loans/assets that were previously in special servicing were resolved and liquidated, eight of which were real-estate owned (REO), three were reported as in foreclosure, and one was greater than 90 days delinquent. The remaining collateral pool currently contains five REO assets (9.8% of current pool); down from 15 REO assets at Fitch's last rating action.
As of the October 2015 distribution date, the pool's aggregate principal balance has been reduced by 42.4% to $1.62 billion from $2.81 billion at issuance. According to the servicing report, 11 loans (5.4%) are defeased. Cumulative interest shortfalls totaling $29.3 million are currently affecting classes H through T.
The three largest contributors to Fitch-modeled losses remain the same since the last rating action; all three of which are specially serviced and REO. Since the last rating action, these assets have experienced progress in their workout plans, including underlying asset dispositions within the portfolio. The two largest contributors to Fitch-modeled losses are likely to be disposed of prior to the end of the year.
The largest contributor to Fitch-modeled losses is the DLJ West Coast Hotel Portfolio asset (4.5% of pool). The loan, which was transferred to special servicing in May 2009 for imminent default, was initially secured by a portfolio of six cross-collateralized and cross-defaulted hotel properties totaling 1,159 rooms located in California and Oregon. The hotels operated under the Residence Inn, Hawthorne Suites, Courtyard Marriot, and Hilton Garden Inn flags. All six properties were foreclosed upon between August and September 2011, with five of the six properties having sold between August and October 2012.
The remaining asset, The Hilton Garden Inn Lake Oswego located in Lake Oswego, OR and consisting of 180 keys, was held by the special servicer to implement a value-add strategy. Property performance has improved since the economic downturn. As of year-end (YE) 2014, property occupancy, average daily rate, and revenue per available room was 80%, $125, and $100, respectively, compared to 69%, $114, and $79 at YE 2008. The asset is under contract for sale with an expected closing prior to the end of 2015.
The second largest contributor to Fitch-modeled losses is the St. Louis Flex Office Portfolio asset (2.4%). The loan, which was transferred to special servicing in November 2010 for imminent default, was initially secured by a portfolio of six industrial/flex properties totaling 864,540 square feet (sf) located in the St. Louis, MO metropolitan statistical area. All six properties became REO in May 2012. Since Fitch's last rating action, five of the six underlying properties have been sold between May and July 2015. The remaining asset, Southridge Business Center located in Fenton, MO and consisting of 75,000 sf, was 100% occupied by three tenants as of the September 2015 rent roll. The asset is under contract for sale with an expected closing prior to the end of this month.
The third largest contributor to Fitch-modeled losses is the Morgan 7 RV Park Portfolio asset (2.1%). The loan, which was transferred to special servicing in October 2011 for delinquent payments, was initially secured by a portfolio of seven recreational vehicle (RV) parks totaling 1,586 RV sites located in Maine (3 parks), New York (2), Michigan (1), and New Jersey (1).
All seven properties have been foreclosed upon. The Maine properties were foreclosed upon in March and June 2013; the Michigan property in October 2013, and the New Jersey property in March 2014. Since Fitch's last rating action, the remaining two New York properties were foreclosed upon in July 2015. The two New York properties are the remaining assets in the portfolio. The Michigan and New Jersey properties were sold in September 2014. Since Fitch's last rating action, the Maine properties were sold in July 2015. The remaining New York properties, American Campgrounds (310 pads; located in Gansevoort, NY) and Camp Waubeeka (500 pads; located in Copake, NY), operate seasonally between April through October. The special servicer expects to hold onto these assets and complete capital improvements prior to determining an appropriate workout strategy.
The Stable Rating Outlook on class A-4, AM, and AM-A reflects increasing credit enhancement and expected continued paydown. The distressed classes (those rated below 'Bsf') may be subject to further downgrades as additional losses are realized.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded and revised Rating Outlooks to the following classes:
--$210 million class AM to 'Asf' from 'BBBsf'; Outlook to Stable from Positive;
--$53.5 million class AM-A to 'Asf' from 'BBBsf'; Outlook to Stable from Positive.
Fitch has downgraded the following class:
--$16.9 million class J to 'Dsf' from 'Csf'; RE 0%.
Fitch has affirmed the following classes:
--$928.4 million class A-4 at 'AAAsf'; Outlook Stable;
--$168 million class AJ at 'CCCsf'; RE 70%;
--$56.8 million class AJ-A at 'CCCsf'; RE 70%;
--$31.6 million class B at 'CCsf'; RE 0%;
--$21.1 million class C at 'CCsf'; RE 0%;
--$28.1 million class D at 'Csf'; RE 0%;
--$24.6 million class E at 'Csf'; RE 0%;
--$24.6 million class F at 'Csf'; RE 0%;
--$28.1 million class G at 'Csf'; RE 0%;
--$28.1 million class H at 'Csf'; 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%.
The class A-1, A-2, A-3, A-SB, and A-1A certificates have paid in full. Fitch does not rate the class P, Q, S and T certificates. Fitch previously withdrew the ratings on the interest-only class XP and XC certificates.
Additional information is available at www.fitchratings.com.
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