TEXT-Fitch downgrades six classes of MLMT 2007-C1
Nov 20 - Fitch Ratings has downgraded six and affirmed 17 classes of Merrill Lynch Mortgage Trust (MLMT), series 2007-C1 (MLMT 2007-C1), commercial pass-through certificates. A detailed list of rating actions follows at the end of this press release. The downgrades reflect both an increase in modeled losses on the specially-serviced loans, as well as continued underperformance of many of the larger loans not in special servicing since Fitch's December 2011 rating action. Fitch modeled losses of 21.8% of the remaining pool; modeled losses are 21.2% of the original pool. The Negative Outlooks on classes A-4 and A-M reflect the possibility for further performance deterioration of the underlying pool. Fitch has designated 88 loans (55.1% of the pool balance) as Fitch Loans of Concern, which includes 20 specially-serviced loans (36.6%). The Negative Outlook on the multifamily-directed class A-1A reflects the possibility for continued underperformance of the multifamily collateral in the pool. The multifamily collateral comprises 30.4% of the pool and includes the two largest loans (21.6%) which are both in special servicing. The loans have recently been modified into A/B notes. Fitch modeled the B-notes to be full losses. As of the October 2012 distribution date, the pool's aggregate principal balance has been reduced by approximately $746 million (18.4%) to $3.304 billion from $4.050 billion at issuance; of which $608 million (15%) were paydowns and $138 million (3.4%) were realized losses. No loans have defeased since issuance. Interest shortfalls totaling $23.3 million are currently affecting classes A-J through Q. The largest two contributors to Fitch modeled losses are the Empirian Portfolio Pool 1 (11.6% of the pool) and Pool 3 (10%) loans. Both loans were transferred to special servicing in November 2010 due to payment default. Pool 1 is secured by 78 multifamily properties (7,964 units) located across eight states. Pool 3 is secured by 79 multifamily properties (6,864 units) located across eight states. The properties within the two portfolios are generally class B and C complexes, many of which were constructed in the 1980s and lack common amenities. All of the properties suffer significant deferred maintenance. During the fourth quarter of 2011, both loans were modified and bifurcated into an A and a B note. As of November, the occupancy for Pool 1 and Pool 3 was 84.2% and 84.6%, respectively, representing a decline from the 93% and 90.9% reported at issuance. Net-operating income (NOI) for the portfolios have continued to decline as expected. For the first 11 months of 2012, NOI has approximately declined by greater than 10% for Pool 1 and greater than 20% for Pool 3 when compared to year-end 2010. The third largest contributor to Fitch modeled losses is a real estate owned (REO) asset (3.5%) consisting of 566,908 square feet (sf) of a 1.28 million sf regional mall located in Duluth, GA. The loan was transferred to special servicing in October 2011 for imminent payment default. As of March 2012, occupancy was 52%, down significantly from 81% at issuance. The property is currently being marketed for sale with other retail assets. The most recent appraisal value indicates significant losses upon liquidation. Fitch has downgraded the following classes: --$405 million class A-M to 'B-sf' from 'BBsf'; Outlook Negative; --$86.1 million class B to 'Csf' from 'CCCsf'; 'RE 0%'; --$40.5 million class C to 'Csf' from 'CCsf'; 'RE 0%'; --$45.6 million class D to 'Csf' from 'CCsf'; 'RE 0%'; --$45.6 million class E to 'Csf' from 'CCsf'; 'RE 0%'; --$50.6 million class F to 'Csf' from 'CCsf'; 'RE 0%'. In addition, Fitch has affirmed and revised Rating Outlooks to the following classes, as indicated: --$1.14 billion class A-1A at 'AAAsf'; Outlook to Negative from Stable; --$60.7 million class A-2 at 'AAAsf'; Outlook Stable; --$40.6 million class A-2FL at 'AAAsf'; Outlook Stable; --$322.2 million class A-3 at 'AAAsf'; Outlook Stable; --$130 million class A-3FL at 'AAAsf'; Outlook Stable; --$86.4 million class A-SB at 'AAAsf'; Outlook Stable; --$442.2 million class A-4 at 'AAAsf'; Outlook Negative; --$134.1 million class AJ at 'CCCsf'; RE 0%'; --$200 million class AJ-FL at 'CCCsf'; RE 0%'; --$40.5 million class G at 'Csf'; 'RE 0%'; --$29.4 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 P at 'Dsf'; 'RE 0%'. Class A-1 has paid in full. Fitch does not rate class Q, which has been reduced to zero due to realized losses. Fitch withdrew the ratings of the interest-only class X. (For additional information, see 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities', dated June 23, 2010.) Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 21, 2011 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'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Global Structured Finance Rating Criteria' (June 6, 2012); --'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Dec. 21, 2011). Applicable Criteria and Related Research: Global Structured Finance Rating Criteria Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
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