Fitch Downgrades Three Distressed Commercial Mortgage Certificates


Fitch Ratings downgraded three distressed classes of ML-CFC 2007-5 Commercial Mortgage Trust certificates, with a loan for the Peter Cooper Village/Stuyvesant Town complex one of the main reasons for this reduction.

The $77.3 million class B and $33.1 million class C commercial mortgage pass-through certificates were both downgraded to Csf from CCsf. Fitch said the downgrade reflects a greater certainty of loss expectations of the overall pool, including anticipated losses form the specially serviced loans.

Meanwhile, class H, which is $40.5 million, was lowered to Dsf from Csf.

With the Csf and Dsf rankings, Fitch expects the loans to default. The New York-based ratings agency modeled losses of 17.8% of the remaining pool. Also, expected losses on the original pool balance total 15.7%, including $125.2 million in realized losses to date.

Fitch has designated 74 loans (49.7% of the pool) as loans of concerns, which includes 24 specially serviced assets.

As of the September 2013 distribution date, the pools aggregate principal balance was reduced by 11.7% to $3.92 billion from $4.44 billion at issuance.

The largest contributor to expected losses is the specially serviced Peter Cooper Village/Stuyvesant Town loan, which is 20.4% of the pool. This loan is secured by a 56-building multifamily complex with 11,227 housing units on the East Side of New York.

In November 2009, the loan transferred to special servicing at the borrowers request. Subsequently, in October 2012, Hurricane Sandy caused damage to Peter Cooper Village/Stuyvesant Town. Restoration efforts to repair the complex are ongoing, particularly to its basement and landscaping.

Additionally, in November 2012, CWCapital as special servicer announced a settlement to The Roberts Litigation to address historical overcharges and future rents for over 4,300 units. Final approval for the settlement was received in April and it is anticipated that implementation will take about 18 months.

Currently, the Peter Cooper Village/Stuyvesant Town loan has occupancy of 98%.

Fitch believes the stabilization of the property remains on schedule and expects the property to be marketed for sale in mid-to-late 2014, the ratings agency said in a press release.

Another large contributor to expected losses is the specially serviced Resurgens Plaza loan. The Atlanta office building transferred to special servicing in April 2011 and was subsequently foreclosed upon in December of that same year and is currently REO.

The 393,107 square-foot building is 72% occupied and the majority of the planned renovations such as the lobby are completed. Improvements still need to be finished to the buildings fitness center, Fitch said.

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