NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of Banc of America Commercial Mortgage Trust, commercial mortgage pass-through certificates series 2007-5 (BACM 2007-5). A full list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The affirmations reflect the overall stable performance of the pool and continued paydown since Fitch's last rating action. Fitch modeled losses of 20.8% of the remaining pool; expected losses on the original pool balance total 18.6%, including $107.8 million (5.8% of the original pool balance) in realized losses incurred to date. Fitch has designated 26 loans (54.6% of the current pool) as Fitch Loans of Concern, which includes six specially serviced assets (11.7%).
As of the September 2015 distribution date, the pool's aggregate principal balance has been reduced by 38.4% to $1.14 billion from $1.86 billion at issuance. According to servicer reporting, seven loans (6.4%) are defeased. Cumulative interest shortfalls totaling $12.6 million are currently affecting classes B through S.
The three largest contributors to Fitch-modeled losses remain the same as Fitch's last rating action.
The largest contributor to Fitch-modeled losses is the Smith Barney Building loan (8.7% of pool), which is secured by a 10-story, 193,456 square foot (sf) office building located in the La Jolla submarket of San Diego, CA. Between 2009 and 2010, property occupancy was significantly impacted when the two largest tenants at issuance vacated at their lease expirations.
Property performance rebounded in 2012 with the execution of a long-term lease with the current largest tenant, Bofl Federal Bank, for 33% of the building square footage through 2020. As of the June 2015 rent roll, property occupancy was 86.6%, representing a decline from 99% one year earlier. The decline was attributable to two tenants which vacated at or prior to their scheduled lease expiration in 2014 and 2015. In addition, the property's second largest tenant, Cassidy Turley, vacated the portion of its lease on 6.6% of the building square footage at its February 2015 lease expiration, while extending the portion of its lease on 12.9% through 2022. The sponsor has continued to come out of pocket to cover debt service shortfalls since 2008.
The next largest contributor to Fitch-modeled losses is the specially-serviced, Green Oak Village Place asset (5.3%), a 315,094 sf lifestyle center located in Brighton, MI, about 40 miles northwest of Detroit.
The loan was first transferred to special servicing in January 2009 for imminent default and was subsequently modified in November 2009. The borrower defaulted after the modification and the loan was returned to the special servicer in March 2012. A foreclosure sale occurred in October 2014 and the borrower had a six month redemption period through April 2015, which was mutually extended to July 2015 to allow for negotiation of a loan modification. The loan was modified again in June 2015. Modification terms include a principal write-off of approximately $2.6 million, which restated the loan balance to $60.3 million. The loan was bifurcated into a $28 million A-1 note and a $32.3 million A-2 note and the maturity was extended to June 2016 with a one-year extension option. The sponsor injected approximately $2 million of new capital for tenant improvement and leasing commissions and funding of reserves and legal/title costs.
As of the June 2015 rent roll, the property was 74% occupied, representing a decline from 84% at year-end (YE) 2014. The decline was attributable to Old Navy and Coldwater Creek vacating, as well as DEB, a junior apparel retailer, closing its store at the property after its announcement of closing all of its Michigan stores. Near-term lease rollover risk includes 3% in 2015 and 13% in 2016. The servicer indicated the borrower has recently executed a 10-year lease with a national retailer, which should help boost occupancy to approximately 81%. The special servicer is monitoring the asset and expects to return the loan to the master servicer in the near term.
The third largest contributor to Fitch modeled losses is the Collier Center loan (12.6%), the largest loan in the pool, which is secured by the leasehold interest in a 24-story, 567,163 sf office tower located in downtown Phoenix, AZ. The property is part of a mixed-use development that consists of office, retail, and restaurants. As of the June 2015 rent roll, the property's occupancy was 85%, representing an improvement from the 78% reported at Fitch's last rating action as of the June 2014 rent roll, 66% at YE 2013 and YE 2012, and 80% at YE 2011. The drop in occupancy between 2011 and 2012 was primarily the result of the second largest tenant at issuance (13% of total sf) vacating at lease expiration.
The property has experienced positive leasing momentum over the past two years with the signing of three new leases totaling 24.5% of the total square footage in 2014 and 2015. In addition, GSA (5.7% of NRA) recently extended its lease for another two years until December 2016. Rollover risk includes 12% in 2016 and 9% in 2017. The sponsor has continued to cover debt service shortfalls out of pocket since 2012.
RATING SENSITIVITIES
The Stable Rating Outlooks on classes A-4 and A-1A reflect sufficient credit enhancement and expected continued paydown. The Rating Outlook on class A-M was revised to Stable from Outlook to reflect the improving performance on many of the top 15 loans, as well as progress in working out the specially serviced assets. Although the Collier Center and Smith Barney Building loans are highly leveraged, Fitch's modelling was conservative as these properties are high quality assets within their respective markets and the loans have strong sponsors. The distressed classes may be subject to further downgrades as additional losses are realized or if losses exceed Fitch's expectations.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has affirmed ratings and revised Outlooks as indicated:
--$521.1 million class A-4 at 'AAAsf'; Outlook Stable;
--$173.9 million class A-1A at 'AAAsf'; Outlook Stable;
--$185.9 million class A-M at 'BBsf'; Outlook to Stable from Negative;
--$139.4 million class A-J at 'CCsf'; RE 0%;
--$20.9 million class B at 'CCsf'; RE 0%;
--$13.9 million class C at 'CCsf'; RE 0%;
--$20.9 million class D at 'Csf'; RE 0%;
--$18.6 million class E at 'Csf'; RE 0%;
--$11.6 million class F at 'Csf'; RE 0%;
--$18.6 million class G at 'Csf'; RE 0%;
--$19.9 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 class A-1, A-2, A-3, and A-SB certificates have paid in full. Fitch does not rate the class S certificates. Fitch previously withdrew the rating on the interest-only class XW certificates.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=991638
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=991638
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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