NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes of commercial mortgage pass-through certificates from TIAA Seasoned Commercial Mortgage Trust, series 2007-C4. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are the result of increasing credit enhancement as a result of loan payoffs and continued pool amortization. The transaction has become highly concentrated with only 20 loans remaining, of which three (39% of the remaining pool) are in special servicing. Fitch ran a higher stress scenario on the largest specially serviced loans to determine ratings. Inclusive of the specially serviced loans, four loans (44%) are considered Fitch Loans of Concern (FLOC).
As of the May 2016 distribution date, the pool's aggregate principal balance has been reduced by 89.1% to $228.5 million from $2.09 billion at issuance, including realized losses of $23.2 million (1.1% of the original pool). Fitch modeled losses of 34% of the remaining pool. Interest shortfalls in the amount of $6.5 million are affecting classes H through T.
The largest contributor to expected losses consists of two crossed loans that are secured by two phases of a shopping center in Algonquin, IL (36% of the pool, collectively). Phase I was built in 2003 and has 418,451 square feet (sf) of rentable space. It is anchored by Dicks Sporting Goods (16% of GLA) with a lease expiring January 2020. Other large tenants include DSW Shoe Warehouse (5.9%) and Old Navy (4.4%). Phase II was built in 2005 and contains 146,339 sf. It is anchored by Art Van Furniture (30.7%) with a lease expiring July 2025 and Ross Dress For Less (21.6%) with a lease expiring January 2022. Both loans defaulted in 2009 and were corrected in 2010; however, the loans returned to special servicing in June 2012, the special servicer initiated litigation against the borrower, which is still ongoing. As of the March 2016 rent roll, Phase I was 84% occupied, compared to 97% at issuance; Phase II was 76.4%% occupied, compared to 100% in June 2015 and 89.8% at issuance. The decline in occupancy at Phase II was due to the vacancy of PetSmart and OfficeMax when their leases expired in January 2016.
The second largest contributor to expected losses is a 132,102 sf office property (3%) located in Jacksonville, FL. The property became a real estate owned (REO) asset in October 2012 due to foreclosure. As of YE 2015, the property was 77.8% occupied, compared to 78.2% at issuance.
RATING SENSITIVITIES
While upgrades are unlikely in the near term given the high concentration of the pool and percentage of loans in special servicing, future upgrades are possible should the Algonquin Commons Phase I and Phase II loans resolve at better than anticipated recoveries or clarity with respect to the litigation becomes available. The distressed classes (rated below 'B') may be subject to further rating actions as losses are 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:
--$60.8 million class A-J at 'AAAsf'; Outlook Stable;
--$10.5 million class B at 'AAAsf'; Outlook Stable;
--$28.8 million class C at 'Asf'; Outlook Stable;
--$18.3 million class D at 'BBBsf'; Outlook Stable;
--$5.2 million class E at 'BBsf'; Outlook Stable;
--$15.7 million class F at 'CCCsf'; RE 100%.
--$20.9 million class G at 'CCCsf'; RE 60%;
--$13.1 million class H at 'CCsf'; RE 0%;
--$23.5 million class J at 'Csf'; RE 0%;
--$7.8 million class K at 'Csf'; RE 0%;
--$7.8 million class L at 'Csf'; RE 0%.
--$7.9 million class M at 'Csf'; RE 0%;
--$2.6 million class N at 'Csf'; RE 0%;
--$5.5 million class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%;
--$0 class S at 'Dsf'; RE 0%.
The class A-1, A-2, A-3 and A-1A certificates have paid in full. Fitch does not rate the class T certificates. Fitch previously withdrew the rating on the interest-only class X certificates.
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1005102
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005102
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.