Nov 30 - Fitch Ratings has downgraded White Tower 2007-1's class A and E
notes and affirmed all other notes due 2015, as follows:
EUR36.9m class A (XS0300055620): downgraded to 'Asf' from 'AA-sf'; off Rating
Watch Negative; Outlook Stable
EUR19.7m class B (XS0300056198): affirmed at 'Bsf'; Outlook Negative
EUR19.5m class C (XS0300056271): affirmed at 'CCsf'; Recovery Estimate (RE) 10%
EUR19.4m class D (XS0300056354): affirmed at 'CCsf'; RE0%
EUR11.7m class E (XS0300056511): affirmed at 'Csf'; RE0%
The downgrade of the class A notes reflects concerns about the leasing profile
of the collateral supporting the one remaining loan, the Spanish Loan (Heron
City). Although the arbitration between the landlord and Cinesa, the cinema
operator and main tenant, is now complete, resulting in the retention of Cinesa
on the same lease terms and conditions, net operating income for the centre
continues to decline.
The Heron City loan is secured by a single leisure-oriented shopping centre
located on the outskirts of Barcelona. The property's largest tenants are
Cinesa, a large multiplex cinema operator, and Virgin Active, an international
gym operator, which together account for 53.3% of current passing rent. The
asset has not been revalued since December 2011, when the reported loan-to-value
ratio (LTV) increased to 173% from circa 128% (based on a December 2010
valuation), representing a 56% market value decline since loan origination.
The centre targets a young demographic, making it particularly exposed to the
very high levels of youth unemployment in Spain. The level of occupancy has
continued to decline to 84.5% from 86% at the last rating action and rental
arrears also continue to increase, now standing at EUR1.5m.
The Heron City loan passed its scheduled maturity date in December 2011 and the
borrower has negotiated with the special servicer for a six-month renewable
standstill agreement. The standstill periods envisage certain conditions
precedents, designed to enhance the value of the asset. Many of the asset
management requirements relate to the leisure units within the centre, in
particular the bowling alley and cinema space. The completion of the Cinesa
condition precedent for the first standstill period, i.e. maintaining its
position within the centre, has significantly reduced the risk of rental income
decline in the near term. However, uncertainty remains surrounding the
successful conversion and leasing of the bowling alley to a supermarket
operator. The second standstill period, which is planned to start in January
2013, is contingent upon planning authorisations and lease completion.
Fitch is concerned by the Heron City asset's poor prospects of sustained income
generation and, given the recent performance and worsening economic conditions
in Spain, restricting the borrower's ability to refinance or sell the asset by
the October 2015 maturity.
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.
The information used to assess these ratings was sourced from the issuer,
periodic trustee reports, note valuation reports, and the public domain.
Applicable criteria, 'EMEA CMBS Rating Criteria', dated 4 April 2012, are
available at www.fitchratings.com.
Applicable Criteria and Related Research:
EMEA CMBS Rating Criteria