(The following statement was released by the rating agency)
Nov 20 - Fitch Ratings has affirmed the super senior classes of COMM
2006-C7, commercial mortgage pass-through certificates at 'AAA' and downgraded
four classes. A detailed list of rating actions follows at the end of this press
The downgrades reflect an increase in Fitch expected losses largely attributed
to increased loss expectations associated with the specially serviced assets,
particularly the Granite Run Mall. The asset is the fourth largest in the pool;
the most recent valuation is significantly lower than that at Fitch's last
rating action in February 2012. Fitch modeled losses of 15.0% of the remaining
pool; expected losses of the original pool including losses to date are 14.3%.
Fitch designated 40 loans (35.3%) as Fitch Loans of Concern, which includes 16
specially serviced loans (18.8%). Additionally, four of the top 15 loans (12.6%)
are currently in special servicing, two of which (7.1%), are amongst the top
three largest contributors to Fitch modeled losses. Interest shortfalls in the
amount of $19 million are currently affecting classes A-J thru P.
The largest contributor to Fitch expected losses is secured by The Granite Run
Mall, a 1,032,843 square foot (sf) super regional mall located in Media, PA,
approximately 12 miles from the central business district (CBD) of Philadelphia.
The mall is anchored by Sears, Boscov's, JC Penney, and Kohl's. Sears and JC
Penney own their stores but are subject to ground leases. The loan transferred
to special servicing in October 2010 due to imminent default and is currently
real estate owned (REO). The special servicer has installed leasing and
management teams and developed a capital plan and 2012 budget. As of September
2012, the inline occupancy is 67% leased and 48% leased excluding temporary.
Leasing negotiations continue with several junior anchors. The life safety
issues and deferred maintenance issues at the property have all been corrected.
The second largest contributor to loss is secured by an enclosed regional mall
consisting of 554,334 sf. The mall is anchored by Sears, JC Penney, and Macy's,
which is not part of the collateral. The collateral includes a 6,863 sf
outparcel and 255,878 sf of inline space. The property is located in Battle
Creek, MI. The loan was transferred back to special servicing in August 2010 due
to imminent default. General Growth Properties (GGP) and the special servicer
could not agree on terms for a modification. A deed in lieu of foreclosure
occurred in February 2011. The special servicer has engaged third parties for
management and leasing. As of September 2012, inline occupancy at the property
is 78%; excluding temporary tenants occupancy is 68%. The property is currently
being marketed for sale and closing is expected in 2012.
The third largest contributor to loss is secured by a 305,858 sf retail property
built in 1986, renovated in 2004 and located in Westminster, CO, just north of
Denver. The loan was transferred to special servicing in April 2011 for monetary
default. The property was 74% occupied as of January 2012. The loan was
foreclosed upon in October 2011. The special servicer has engaged a leasing
team, which has made some progress. Prior to foreclosure, the receiver
negotiated a new lease with a restaurant tenant and drafted a renewal with an
existing tenant. The special servicer is in the process of reviewing the 2012
budget and determining capital needs for the next 12 months.
Fitch downgrades, revises Outlooks, and assigns or revises Recovery Estimates
(RE) for the following classes as indicated:
--$244.7 million class A-M to 'A' from 'AAA'; Outlook to Negative from Stable;
--$189.7 million class A-J to 'CCC' from 'B'; RE 75%;
--$52 million class B to 'C' from 'CCC'; RE 0%;
--$24.5 million class C to 'C' from 'CC'; RE 0%;
Additionally, Fitch affirms the following classes as indicated:
--$16.2 million class A-3 at 'AAA'; Outlook Stable;
--$68.4 million class A-AB at 'AAA'; Outlook Stable;
--$1,052.7 million class A-4 at 'AAA'; Outlook Stable;
--$262.4 million class A-1A at 'AAA'; Outlook Stable;
--$36.7 million class D at 'C'; RE 0%;
--$21.4 million class E at 'C'; RE 0%;
--$30.6 million class F at 'C'; RE 0%;
--$24.5 million class G at 'C'; RE 0%;
--$30.6 million class H at 'C'; RE 0%;
--$12.2 million class J at 'C', RE 0%;
--$6.1 million class K at 'C', RE 0%;
--$9.2 million class L at 'C', RE 0%;
--$3.1 million class M at 'C', RE 0%;
--$6.1 million class N at 'C', RE 0%;
--$9.2 million class O at 'C', RE 0%.
Fitch had previously withdrawn the rating on the interest-only class X.
Fitch does not rate the $87,148 class P certificates. Classes A-1 and A-2 have
paid in full.
Additional information on Fitch's amended criteria for analyzing U.S. fixed rate
CMBS is available in the Nov. 16, 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,
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
(New York Ratings Team)