CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded two and affirmed 11 classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMS) commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The downgrades are the result of increased expected losses and significant concentration with only 10 loans remaining, two of which (73.4%) are in special servicing. The affirmation of the two senior classes reflects the high credit enhancement and continued expected paydown despite the increase in Fitch expected losses from last year's review.
Fitch modeled losses of 54.2% of the remaining pool and expected losses based on the original pool balance are 7.8%, of which 2.6% are realized losses to date. Of the original 124 loans, 10 remain, of which five have been designated (89.7% of the pool balance) as Fitch Loans of Concern, and includes the two specially serviced loans (73.4%). Three loans (2.6%) are fully defeased. The non-specially serviced loans' final maturity dates are in 2019 (2.0%), 2020 (15.8%), 2023 (6.6%), and 2025 (2.3%). Four loans are currently on the servicer watchlist (18.3%).
The pool's aggregate principal balance has been paid down by 90.5% to $107.4 million from $1.125 billion at issuance. Five of the remaining 10 loans reported partial or full-year 2015 financials. Based on servicer financial statements, the pool's overall net operating income (NOI) decreased 27.6% since issuance and 4.1% over 2014 reported financials.
The largest contributor to expected losses is the real estate owned 375,486 square foot (sf) retail center, Quintard Mall (27.5%), located in Oxford, AL. The property experienced cash flow issues starting in 2012 due to occupancy declines and an increase in expenses associated with renewing a number of large tenants. The property was transferred to the special servicer in May 2013 for payment default and the special servicer completed the foreclosure process in October 2014. The mall's total occupancy is currently 81% which is down from the high of 96% in 2011. The special servicer recently completed its leasing plan and addressed a number of deferred maintenance issues. The special servicer is evaluating disposition options, determining a strategy, and plans to market the asset for sale in 2016.
The second largest contributor to losses is the specially serviced loan, Shops at Boca Park (45.9%), secured by a 247,472-sf anchored retail center located in Las Vegas, NV, approximately 10 miles west of downtown. The subject was built in 1976 and renovated in 2001. The property's occupancy was 93% as of October 2015 with a debt service coverage ratio of 1.23x. The loan was previously modified in November 2012 and the loan was extended through July 2016. The sponsor was unable to attain a lender commitment to refinance the loan prior to extended maturity date of July 2016 due to pending tenant expirations which totals 50% of the net rentable area. The loan was transferred back to the special servicer in February 2016 after the sponsor asked for another loan extension in order to refinance the collateral. The special servicer is currently evaluating the property and its legal options. Fitch continues to monitor the status of any negotiations and/or loan resolution.
The third largest contributor to expected losses is secured by 60,941-sf unanchored retail center located outside of Las Vegas, NV. The property has three major national banks located on outparcels and a number of small local and regional companies occupying the inline suites. The loan transferred to special servicing in January 2015 after a maturity default and the loan was modified and extended under a consensual bankruptcy plan. The loan's modified terms reduced the rate to 5.3% and extended the maturity date to January 2023. As of Dec. 2015, the property's occupancy reached a low since issuance of 80% with a DSCR of 1.01x. The loan is current and was returned to master servicer in March 2016.
Fitch's analysis included conservative loss assumptions on the specially serviced loans. The Negative Outlook to class B and C reflect the possibility of future downgrades if expected losses increase on the specially serviced loans before the class receives significant paydown. Upgrades are unlikely due to adverse selection of the remaining collateral and high percentage of specially serviced loans. Downgrades to the distressed classes are possible if additional loans transfer to special servicing and/or expected losses increase significantly.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has downgraded the following classes as indicated:
--$15.5 million class D to 'CCCsf' from 'Bsf''; RE 50%;
--$11.2 million class F to 'Csf ' from 'CCsf'; RE 0%.
Fitch affirms the following classes and revises Outlooks as indicated:
--$31.6 million class B at 'BBBsf'; Outlook to Negative from Stable;
--$8.4 million class C at 'BBsf''; Outlook to Negative from Stable;
--$11.2 million class E at 'CCsf'; RE 0%;
--$9.8 million class G at 'Csf'; RE 0%.
--$12.7 million class H at 'Csf'; RE 0%;
--$4.2 million class J at 'Csf'; RE 0%;
--$2.7 million 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 P at 'Dsf'; RE 0%.
The classes A-1, A-2, A-AB, A-3, and A-J certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates.
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
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