Feb 28 - Fitch Ratings has downgraded nine classes and affirmed 13 classes
of COBALT CMBS Commercial Mortgage Trust's (COBALT) commercial mortgage
pass-through certificates series 2007-C2 due to increased loss expectations on
specially serviced loans and further deterioration of loan performance. A
detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
Fitch modeled losses of 12.2% of the remaining pool; expected losses on the
original pool balance total 12.5%, including losses already incurred. The pool
has experienced $61.7 million (2.6% of the original pool balance) in realized
losses to date. Fitch has designated 63 loans (47.8%) as Fitch Loans of Concern,
which includes 12 specially serviced assets (20.4%).
As of the February 2013 distribution date, the pool's aggregate principal
balance has been reduced by 18% to $1.98 billion from $2.42 billion at issuance.
No loans have defeased since issuance. Interest shortfalls are currently
affecting classes F through S.
The largest contributor to expected losses is the specially-serviced Peter
Cooper Village/Stuyvesant Town (PCV/ST) loan (12.6% of the pool), which is
secured by 56 multi-story apartment buildings, situated on 80 acres, and
includes a total of 11,227 units. The special servicer gained control of the
property by acquiring the mezzanine debt of the borrower. The special servicer
reports that as of third-quarter 2012, the property was 99% leased. Performance
has continued to improve which can be somewhat attributed to lower labor costs
and management fees. A settlement has been reached in the Roberts Litigation.
This settlement appears to be a positive in the resolution of the loan as it
addresses amounts due on historical and future rents. However Fitch Ratings
expects the workout will continue for at least the next 18 - 24 months as
finding a new buyer will likely be difficult until appeals and final rulings
occur. The property is also still undergoing some repairs to the basements of
the buildings from Hurricane Sandy. The special servicer reports that all
damages should be recovered through ample insurance proceeds.
The next largest contributor to expected losses is a loan (2.1%), which is
secured by a 15-story, 293-key full-service hotel located in Fort Lauderdale,
FL. The property's performance continues to struggle due to pricing pressures
from new competition entering the market over the last several years. The
servicer reports that occupancy has remained consistent over the last couple of
years at 72% as of year-end 2012. The year-end 2011 DSCR was 1.15x and is
expected to drop further in 2012 as the loan began amortizing in May 2012.
The third largest contributor to expected losses is the specially-serviced real
estate owned (REO) asset (1.2%), which is secured by a 135,285 square foot (sf)
grocery anchor retail center in Ormond Beach, FL. The loan transferred to
special servicing in August 2010 for imminent default due to a large tenant
vacating the property. Foreclosure occurred in March 2012. The special servicer
reported that the property is 88% occupied and is working toward 90-92%
occupancy before listing for sale.
The ratings to the super senior classes are expected to remain stable. The A-M
classes may be subject to a downgrade if there is further deterioration to the
pool's cash flow performance and/or decrease in value of the specially serviced
loans. The distressed classes (those rated below B) are expected to be subject
to further downgrades as losses are realized. The distressed classes are also
subject to further downgrades if losses to specially serviced loans are higher
Fitch downgrades the following classes and assigns or revises Recovery Estimates
(REs) as indicated:
--$102.6 million class A-JFX to 'CCCsf' from 'B-sf', RE 90%;
--$100 million class A-JFL to 'CCCsf' from 'B-sf', RE 90%;
--$21.2 million class B to 'CCsf' from 'CCCsf', RE 0%;
--$27.2 million class C to 'CCsf' from 'CCCsf', RE 0%;
--$21.2 million class D to 'CCsf' from 'CCCsf', RE 0%;
--$15.1 million class E to 'CCsf' from 'CCCsf', RE 0%;
--$18.1 million class F to 'Csf' from 'CCsf', RE 0%;
--$30.2 million class G to 'Csf' from 'CCsf', RE 0%;
--$24.2 million class H to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes and revises Outlooks as indicated:
--$7.8 million class A-AB at 'AAAsf', Outlook Stable;
--$857.5 million class A-3 at 'AAAsf', Outlook Stable;
--$454 million class A-1A at 'AAAsf', Outlook Stable;
--$221.9 million class A-MFX at 'AAAsf', Outlook to Negative from Stable;
--$20 million class A-MFL at 'AAAsf', Outlook to Negative from Stable;
--$24.2 million class J at 'Csf', RE 0%;
--$30.2 million class K at 'Csf', RE 0%;
--$7.9 million class L at 'Dsf', RE 0%;
--$0 class M at 'Dsf', RE 0%;
--$0 class N at 'Dsf', RE 0%;
--$0 class O at 'Dsf', RE 0%;
--$0 class P at 'Dsf', RE 0%;
--$0 class Q at 'Dsf', RE 0%.
The class A-1 and A-2 certificates have paid in full. Fitch does not rate the
class S certificates. Fitch previously withdrew the rating on the interest-only
class X certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions
is available in the Dec. 18, 2012 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 >> 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);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec.
Applicable Criteria and Related Research
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria