CHICAGO--(BUSINESS WIRE)--Fitch Ratings has upgraded two classes and affirmed 14 classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMST), series 2005-PWR10 commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The upgrades reflect improvement in credit enhancement (CE) to the classes as a result of paydown and defeasance. In addition, overall loss expectations are lower than previously modeled as a result of better than expected recoveries on disposed loans, including the then-largest loan in the pool, which paid off in full. The majority of class A-J is now covered by defeasance. Despite high CE to class B, upgrades were limited due to concentration, and adverse selection, as only nine non-defeased loans remain.
As of the September 2016 distribution date, the pool's aggregate principal balance has been reduced by 95.5% (including 10.4% in realized losses) to $119.3 million from $2.634 billion at issuance. Cumulative interest shortfalls in the amount of $22 million are currently affecting class C and classes H through S.
Of the original 214 loans, 16 remain, of which seven (55.1%) are defeased and no loans remain in special servicing or are delinquent. The non-defeased loans have maturity dates in 2020 (89.4%) and 2025 (10.6%). Fitch modeled losses of 7.4% of the remaining pool; expected losses of the original pool are 10.7% including losses already incurred to date (10.4%). At Fitch's previous rating action, the largest loan was Crocker Park ($88.5 million and 17.5% of the pool at the time of the review). The loan had been on the watchlist and the borrower had been unable to secure financing at the loan's anticipated repayment date in 2015. Significant losses were assumed based on the property's continued underperformance. However, the loan was repaid in full in July 2016.
The largest loan in the pool, 49 East 52nd Street (14.9%), is collateralized by a 56,338 square foot (sf) office building located in New York, NY and is on the master servicer's watchlist. The property's occupancy dropped in 2013 to 74% from 100% after two tenants vacated the space at their lease expiration. Occupancy improved in late 2015 and cashflow is expected to rebound in 2016 after rent concessions end. As of March 2016, the building's occupancy was 87% and debt service coverage ratio (DSCR) was listed at 0.99x.
The second largest loan on the watchlist, Haymaker Village, is secured by a 102,129-sf retail center (1.7%) located in Monroeville, PA approximately 18 miles west of the Pittsburgh's central business district. The property was transferred back to the master servicer in December 2015 after concerns of an imminent monetary default were resolved. The property's net operating income covered debt service payments through aggressive expense management after several years of a below-1.0x DSCR. As of year-end 2015, the center was 91% occupied with a DSCR of 1.08x. According to servicer commentary, the loan was current as of the August remittance and is scheduled to mature in December 2020.
The third largest loan on the watchlist is Romeo Plank Crossing Shopping Center, a 34,615-sf retail center (1.7%) located in Macomb, MI approximately 35 miles north of the Detroit, MI central business district. The fully amortizing loan has exhibited weak operating performance since the last recession due to occupancy volatility and low renewal rental rates. The loan is schedule to mature in December 2025. The property has struggled to cover debt service since 2008 with a below 1.0x DSCR. As of year-end 2015, the center was 100% occupied with a DSCR of 1.01x, although 50% of the net rentable area is scheduled to expire over the next 18 months.
Fitch's loss assumptions assumed stressed values based on volatility in the properties' performance due to tenancy issues and weak historical performance. The Stable Outlook on class A-J reflects a high percentage of the remaining balance being fully covered by defeased collateral as well as high credit enhancement. The Stable Outlook on class B reflects the sufficient credit enhancement in light of the deal's concentration risk. Additional upgrades may not be warranted due to the deal's increasing concentrations and underperformance of three of the nine remaining non-defeased loans. Downgrades could occur if expected losses increase or maturing loans default at maturity.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded the following classes as indicated:
--$76.1 million class A-J to 'AAAsf' from 'CCCsf'; Outlook Stable assigned;
--$19.8 million class B to 'BBsf' from 'CCsf'; Outlook Stable assigned.
Fitch has affirmed the following classes:
--$23.4 million class C at 'Dsf'; RE 0%;
--$0.0 million class D at 'Dsf'; RE 0%;
--$0.0 million class E at 'Dsf'; RE 0%;
--$0.0 million class F at 'Dsf'; RE 0%;
--$0.0 million class G at 'Dsf'; RE 0%;
--$0.0 million class H at 'Dsf'; RE 0%;
--$0.0 million class J at 'Dsf'; RE 0%;
--$0.0 million class K at 'Dsf'; RE 0%;
--$0.0 million class L at 'Dsf'; RE 0%;
--$0.0 million class M at 'Dsf'; RE 0%;
--$0.0 million class N at 'Dsf'; RE 0%;
--$0.0 million class O at 'Dsf'; RE 0%;
--$0.0 million class P at 'Dsf'; RE 0%;
--$0.0 million class Q at 'Dsf'; RE 0%.
Classes A-1, A-2, A-3, A-AB, A-4, A-1A, and A-M have repaid in full. The ratings on the interest-only classes X-1 and X-2 were withdrawn. Fitch does not rate $0.0 million class S.
Additional information is available at www.fitchratings.com
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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
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