NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 10 classes of Banc of America Commercial Mortgage, Inc. (BACM) commercial mortgage pass-through certificates series 2005-4. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are the result of adverse selection for the remaining collateral. The transaction has become highly concentrated with only five loans remaining, of which four (71% of the pool) are in special servicing. Fitch has designated all five of the remaining loans as Fitch Loans of Concern (FLOC).
As of the May 2016 distribution date, the pool's aggregate principal balance has been reduced by 97.8% to $35.5 million from $1.59 billion at issuance. Fitch modeled losses of 37.4% of the remaining pool; expected losses on the original pool balance total 7.4%, including $104 million (6.6% of the original pool balance) in realized losses to date. Interest shortfalls are currently affecting classes F through P.
The largest contributor to expected losses is the Gibraltar Portfolio loan (29.1% of the pool), which was originally secured by a portfolio of 10 single tenant retail properties located across six states. After spending nearly four years in special servicing, the loan was modified in September 2014, resulting in a maturity extension and rate reduction, among other terms. Two of the properties were sold in April 2015, and two are currently vacant and being marketed for lease and/or sale. Since returning to the master servicer in December 2014, the loan has remained on the watchlist for low debt service coverage ratio (DSCR) and deferred maintenance. The portfolio was 62.2% occupied as of the December 2015 rent roll and the servicer-reported DSCR was 1.22x as of year-end (YE) 2015.
The second largest contributor to expected losses is the East Norriton Shopping Center loan (36.8%), which is secured by a 121,502 square foot (sf) retail property located in East Norriton, PA. The center is anchored by grocer Weis Markets (49% net rentable area [NRA] through February 2019) and Hockey Giant (20.2% NRA through August 2020). The loan transferred to special servicing in September 2015 due to maturity default. According to the special servicer, the borrower has stipulated to receivership and a foreclosure sale date is anticipated in July or August 2016. The servicer-reported occupancy was 100% as of YE 2015, up from 80% at YE 2014. The improved occupancy is a result of the new lease with Hockey Giant for the space vacated by Staples in early 2014.
The third largest contributor to expected losses is the 25 Lindsley Drive loan (22%) which is secured by a 75,641 sf office property located in Morristown, NJ. Major tenants include C3i, Inc. (20.4% NRA through December 2022) and Vogel, Chait, Collins & Schneider (7.5% NRA through May 2017). The property was 67.5% occupied as of the March 2016 rent roll compared to 59% at YE 2014. The loan transferred to special servicing in July 2015 due to maturity default. The special servicer is negotiating a maturity extension modification and the property is being marketed for sale.
An upgrade of Class E is not likely due to the concentrated nature of the pool, as well as the uncertainty in the resolution of the four specially serviced loans. Class E would be downgraded to 'D' should losses be realized.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed the following classes:
--$14.9 million class E at 'CCsf'; RE 100%;
--$19.8 million class F at 'Dsf'; RE 0%;
--$0.8 million 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 M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%;
--$0 class O at 'Dsf'; RE 0%.
The class A-1 through D certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class XP and XC certificates.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S.
Re-REMIC Criteria (pub. 13 Nov 2015)
Dodd-Frank Rating Information Disclosure Form