NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed all classes from Bear Stearns Commercial Mortgage Securities Trust, series 2007-PWR18. In addition, Fitch has revised the Outlooks for classes A-M and AM-A to Stable from Negative as a result of better than projected resolutions of the specially serviced loans since last review. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations are due to stable performance of the collateral pool since Fitch's last rating action. Fitch modeled losses of 11.3% of the remaining pool; expected losses on the original pool balance total 14%, including losses already incurred to date (6%). Fitch has identified 36 loans (36.8%) as Fitch Loans of Concern (LOC), which includes five specially serviced assets (4.8%).
As of the November 2013 distribution date, the pool's aggregate principal balance has been reduced by 30% to $1.75 billion from $2.5 billion at issuance. Interest shortfalls in the amount of $5.1 million are affecting classes E, F, G, H, K, L, N and S.
RATING SENSITIVITY
The ratings on all investment grade classes are expected to remain stable due to sufficient credit enhancement and continued paydown. The distressed classes (rated below 'B') may be subject to further rating actions as losses are realized.
The largest contributor to modeled losses is the DRA/Colonial Office Portfolio loan (12.1% of the pool). The current collateral for the interest-only loan consists of 17 office and retail buildings totaling 4.5 million square feet (sf) and are located across five metropolitan statistical areas (MSAs), primarily in the south and southeast. The loan has a total balance of $635.6 million and is split into three equal pari passu notes. Only the A3 note is securitized in this transaction.
The loan was transferred to special servicing in Aug. 2012 for imminent default due to declining occupancy. The loan was modified in Jan. 2013 and returned to the master servicer in May 2013. The loan modification included an extended interest-only period for an additional 24 months and a new maturity of July 2016. The property continues to struggle as a result of significant concessions given to rolling tenants over the last year. While with the special servicer, two properties were released and sold which paid down this piece of the loan by $35.4 million. The servicer-reported net operating income (NOI) debt service coverage ratio (DSCR) was 1.25x as of second quarter (2Q) 2013 with 83.8% occupancy rate.
The second largest contributor to Fitch expected loss is the Southlake Mall loan (3.8%). The collateral is the 273,997 sf of in-line space of the one-million regional mall located in Morrow, GA, approximately 15-miles from downtown Atlanta. The mall is anchored by Macy's and Sears which are not part of the collateral. The center also contains two dark anchor spaces previously occupied by JC Penney and Macy's, which are also not part of the collateral. Macy's moved to the current location in 2003, and its former space remains unoccupied. JP Penney closed in June 2011.
The loan was initially transferred to the special servicer in April 2009 due to a borrower (GGP) bankruptcy. It was modified and returned to the master servicer in January 2011. The loan was transferred back to the special servicer in June 2012. The property has been real estate owned asset (REO) since February 2013. As of October 2013, the mall was 65.2% occupied and 80.9% leased. The inline space was 80.9% occupied, compared to 95.1% at issuance. The special servicer is currently marketing the property for sale. The most current appraisal value indicates significant losses upon liquidation.
The third largest contributor to modeled losses is the Trumbull Marriott Hotel loan (1.6%). The collateral is a 323-key full-service hotel in Trumbull, CT. Property performance has suffered since 2009 when the loan converted from interest only loan to a principal and interest loan. In addition, as of YE 2012, income was down 25% from issuance estimates due to a decrease in Room Revenue as well as a decrease in F&B revenue, both of which are attributed to the decline in occupancy. The property has undergone some renovations in 2012 and 2013, as well as a management change in 2013; these changes should enhance performance although the market remains soft. Based on the latest STAR report, trailing 12 month (TTM) occupancy rate as of November 2013 was 59.9% with a RevPar of $76.33, compared to 65% occupancy rate and a RevPar of $92.48 at issuance.
Fitch affirms the following classes and revises Outlooks as indicated:
--$165 million class A-3 at 'AAAsf'; Outlook Stable;
--$114.5 million class A-AB at 'AAAsf'; Outlook Stable;
--$710 million class A-4 at 'AAAsf'; Outlook Stable;
--$160.4 million class A-1A at 'AAAsf'; Outlook Stable;
--$211.6 million class A-M at 'AAsf'; Outlook to Stable from Negative;
--$38.9 million class A-MA at 'AAsf'; Outlook to Stable from Negative;
--$182.5 million class A-J at 'CCCsf'; RE 65%;
--$33.6 million class A-JA at 'CCCsf'; RE 65%;
--$25 million class B at 'CCsf'; RE 0%;
--$25 million class C at 'CCsf'; RE 0%;
--$18.9 million class D at 'CCsf'; RE 0%;
--$25 million class E at 'Csf'; RE 0%;
--$18.9 million class F at 'Csf'; RE 0%;
--$21.6 million class G at 'Dsf'; RE 0%.
Classes H through Q have been depleted due to realized losses and remain at 'Dsf' RE 0%. Classes A-1 and A-2 have paid in full. Fitch does not rate class S. Fitch has withdrawn the ratings assigned to the interest only classes X-1 and X-2 at the previous review.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance then CMBS then Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=814119
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.