Fitch Takes Various Actions on CD 2007-CD5
KEY RATING DRIVERS
The upgrades reflect increased credit enhancement to the senior classes due to paydown and defeasance. The downgrade reflects greater certainty of losses due to the disposition of six previously specially serviced assets since Fitch's last rating action. Fitch modeled losses of 6.5% of the remaining pool; expected losses on the original pool balance total 10.7%, including $109.9 million (5.2% of the original pool balance) in realized losses to date. Fitch has designated 47 loans (28.5%) as Fitch Loans of Concern, which includes eight specially serviced assets (7.3%). All of the loans in the pool will reach their scheduled maturities within the next year.
As of the August 2016 distribution date, the pool's aggregate principal balance has been reduced by 37.1% to $1.32 billion from $2.09 billion at issuance. Per the servicer reporting, 10 loans (27.4% of the pool) are defeased including the two largest loans in the pool. Interest shortfalls are currently affecting classes J through S.
The largest contributor to expected losses is the Copper Beech Townhomes - Statesboro, GA loan (2.2% of the pool), which is secured by a 246-unit student housing property located near Georgia State University. The property has had historically strong performance; however, occupancy began to suffer in 2013, falling to 77%, as a result of new competition in the market. As of March 2016, occupancy has rebounded to 94% but net operating income (NOI) has suffered due to significant rental rate concessions.
The next largest contributor to expected losses is the specially-serviced Parkway Plaza loan (2%), which is secured by a 262,583 square foot (sf) power retail center located Norman, OK. The subject is anchored by Toys R Us, Ross Dress for Less, Bed Bath & Beyond, Barnes and Noble, and PetSmart and is currently 73% physically occupied. The lender is dual tracking foreclosure while discussing a possible workout with the borrower.
The third largest contributor to expected losses is the specially-serviced Versar Center Office Building loan (2%), which is secured by two office properties totalling 217,396 sf located in Springfield, VA. The loan transferred to the special servicer in October 2014 due to imminent default. The property has struggled with occupancy issues since the economic downturn and the borrower has indicated that it can no longer fund shortfalls. Additionally, the parent company of the borrower has been working to restructure its debt and divest certain holdings. The special servicer is pursuing foreclosure while discussions with the borrower are ongoing. The property is 65% occupied.
The Rating Outlooks for all non-distressed classes are Stable due to increasing credit enhancement and continued paydown. Further upgrades to the A-J classes are possible with continued paydown or defeasance. Downgrades to the distressed classes will occur as losses are realized. Other rating changes are not anticipated unless a material economic or asset-level event changes the transaction's portfolio-level metrics.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch downgrades the following class as indicated:
--$23.6 million class H to 'Csf' from 'CCsf'; RE 0%.
Fitch upgrades the following classes and assigns or revises Rating Outlooks as indicated:
--$111.8 million class AJ to 'Asf' from 'BBBsf'; Outlook to Stable from Positive;
--$27 million class A-JA to 'Asf' from 'BBBsf'; Outlook to Stable from Positive.
Fitch affirms the following classes but assigns or revises REs as indicated:
--$18.3 million class F at 'CCCsf'; RE 100%;
--$20.9 million class G at 'CCsf'; RE 20%.
Fitch affirms the following classes as indicated:
--$672.8 million class A-4 at 'AAAsf'; Outlook Stable;
--$126.6 million class A-1A at 'AAAsf'; Outlook Stable;
--$168.7 million class AM at 'AAAsf'; Outlook Stable;
--$40.7 million class A-MA at 'AAAsf'; Outlook Stable;
--$20.9 million class C at 'BBsf'; Outlook Stable;
--$20.9 million class B at 'BBBsf'; Outlook Stable;
--$20.9 million class D at 'BBsf'; Outlook Stable;
--$18.3 million class E at 'Bsf'; Outlook Stable;
--$23.6 million class J at 'Csf'; RE 0%;
--$2.5 million 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 O at 'Dsf'; RE 0%;
--$0 class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%.
Classes A-1, A-2, A-3 and A-AB have paid in full. Fitch does not rate the class S certificates. Fitch previously withdrew the ratings on the interest-only class XP and XS certificates.