NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded 17 classes of Credit Suisse Commercial Mortgage Trust (CSMC), series 2007-C1 commercial mortgage pass-through certificates due to further deterioration of performance relative to the previous full transaction review, most of which involves increased projected losses on the specially serviced loans. A detailed list of rating actions follows at the end of this release.
The downgrades reflect an increase in Fitch expected losses across the pool. Fitch modeled losses of 17.2% for the remaining pool; expected losses as a percentage of the original pool balance are at 18%, including losses already incurred to date. Fitch has designated 101 loans (63.4%) as Fitch Loans of Concern, which includes 40 specially serviced loans (37%). (Note: Fitch considers as one loan a multifamily portfolio concentration consisting of three secured and three unsecured notes.) Fitch expects classes C through S may be fully depleted from losses associated with the specially serviced assets.
As of the February 2011 distribution date, the pool's aggregate principal balance has been reduced by approximately 3.2% to $3.26 billion from $3.37 billion at issuance, due to a combination of paydown (1.7%) and realized losses (1.5%). Interest shortfalls totaling $18.7 million are affecting classes A-J through T.
The largest contributor to modeled losses (6.5% of the pool) is secured by a multifamily complex consisting of 1,802 units, located in the Harlem neighborhood of New York, NY. As of the June 2010 rent roll, 67% of the units at the property were rent-stabilized, while approximately 30% of the units were market units (or units that are technically stabilized but produce market-level rents) and the remaining 3% of the units were vacant. The loan transferred to special servicing on July 2, 2010 after the borrower submitted a hardship letter to the master servicer. The property's operating cash flows have proven insufficient to service the debt since issuance. The year-end (YE) 2009 servicer-reported debt service coverage ratio (DSCR) was 0.47 times (x) on a net operating income basis, down from 0.57x as of YE 2008. The borrower has requested a loan modification.
Through the most recent full year of financial reporting -- 2009 -- units were converted at a pace such that the property continued to generate revenues roughly on schedule with those expected by Fitch at issuance; however, expenses remained significantly higher than projected (114%) as of YE 2009. As a result, the reported YE 2009 DSCR of 0.47x fell well shy of Fitch's 1.07x estimated coverage for 2009. The loan remained current as of the February 2011 remittance date.
The second-largest contributor to modeled losses (5.5%) transferred to the special servicer on April 17, 2009 due to default on three related mezzanine loans totaling $68.2 million. At the time of transfer, occupancy across the portfolio was 88% and cash flows generated by the property serviced the debt for several months on an approximately breakeven basis. According to the special servicer, portfolio occupancy was 94.6% as of YE 2010 and coverage had declined somewhat as of mid-year. The loan remained greater than 90 days delinquent with no reserves remaining as of the February 2011 remittance. Fitch was unable to obtain an update as to the status of the mezzanine debt.
The loan is collateralized by 20 multifamily properties comprising 2,990 units, which are located across seven metropolitan areas, including: Atlanta, GA (1); Austin, TX (3); Charleston, SC (2); Denver, CO (2); Orlando, FL (1); Sacramento, CA (2); and Virginia Beach, VA (9).
Collateral for the third-largest contributor to modeled losses (4.8%) consists of four multifamily properties located in Austin, TX (two properties) and Round Rock, TX (two) with a total of 1,417 units. The loans transferred to the special servicer on March 6, 2009 following the borrower's request for transfer due to increased competition in the submarkets. The portfolio-wide occupancy dropped to 64.6% (from 95% at issuance) and the reported DSCR was 0.57x as of the time of the transfer. The borrower filed for bankruptcy protection on April 23, 2009. A plan of reorganization was confirmed on June 25, 2010, and the loans were modified.
Pursuant to their modification agreements, two of the original four individual loans were consolidated into one loan (as the two properties were phases of the same apartment complex). Additionally, the three remaining loans were divided into secured and unsecured components, totaling in the aggregate $140 million and $20 million, respectively. The borrower paid down $4 million on the secured notes, bringing the current balances to $136 million in total (as of the February 2011 remittance). The loans will remain interest-only for the remainder of the loan term and the maturity dates remain unchanged.
Fitch has downgraded and assigned Recovery Ratings (RRs) to the following classes as indicated:
--$125 million class A-MFL to 'BBsf/LS4' from 'Asf/LS4'; Outlook to Stable from Negative;
--$212.1 million class A-M to 'BBsf/LS4' from 'Asf/LS4'; Outlook to Stable from Negative;
--$286.6 million class A-J to 'CCCsf/RR1' from 'B-sf/LS4';
--$25.3 million class B to 'CCsf/RR6' from 'B-sf/LS5';
--$37.9 million class C to 'Csf/RR6' from 'B-sf/LS5';
--$33.7 million class D to 'Csf/RR6' from 'B-sf/LS5';
--$21.1 million class E to 'Csf/RR6' from 'B-sf/LS5';
--$29.5 million class F to 'Csf/RR6' from 'B-sf/LS5';
--$33.7 million class G to 'Csf/RR6' from 'B-sf/LS5';
--$37.9 million class H to 'Csf/RR6' from 'CCCsf/RR6';
--$33.7 million class J to 'Csf/RR6' from 'CCCsf/RR6';
--$37.9 million class K to 'Csf/RR6' from 'CCCsf/RR6';
--$8.4 million class L to 'Csf/RR6' from 'CCCsf/RR6';
--$12.6 million class M to 'Csf/RR6' from 'CCCsf/RR6';
--$8.4 million class N to 'Csf/RR6' from 'CCCsf/RR6';
--$8.4 million class O to 'Csf/RR6' from 'CCCsf/RR6';
--$8.4 million class P to 'Csf/RR6' from 'CCsf/RR6'.
Additionally, Fitch has affirmed the following classes:
--$134.2 million class A-2 at 'AAAsf/LS2'; Outlook Stable;
--$98.3 million class A-AB at 'AAAsf/LS2'; Outlook Stable;
--$758 million class A-3 at 'AAAsf/LS2'; Outlook Stable;
--$1.312 billion class A-1A at 'AAAsf/LS2'; Outlook Stable;
--$130,909 class Q at 'D/RR6'.
Class S, which remains at 'Dsf/RR6', and the unrated class T were reduced to zero due to realized losses. Class A-1 has repaid in full.
Fitch has withdrawn the rating on the interest-only classes A-SP and A-X. (For additional information on the withdrawal of the rating on the interest-only class, see 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities', dated June 23, 2010.)
Additional information on Fitch's amended criteria for analyzing U.S. fixed-rate CMBS transactions is provided in the Nov. 17, 2010 report 'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 13, 2010);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Nov. 17, 2010).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=574208
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.