Fitch Affirms ASC 1997-D4
KEY RATING DRIVERS
The affirmation is due to sufficient credit enhancement of the Fitch-rated class and expected full repayment of the bond. There are two loans remaining out of the original 121 loans, one of which (12%) is in special servicing.
As of the February 2015 distribution date, the pool's aggregate principal balance has been reduced by 97% to \$42.2 million from \$1.4 billion at issuance. Interest shortfalls are currently affecting classes B-5 through B-6.
The largest loan in the pool is the K-Mart Distribution Center Portfolio (88% of the pool), which is secured by two industrial properties totaling 2.8 million square feet, located in Brighton, CO and Greensboro, NC. The properties are occupied by K-Mart and serve as regional distribution hubs for the retailer. In January 2015, Sears Holdings announced the closing of the 1.5 million square foot (sf) Greensboro facility which will take place in April 2015 and displace approximately 130 employees. The loan is amortizing and matures in April 2017.
The specially serviced loan is a 175,679 sf retail shopping center (12%) in Lincoln Park, MI, a suburb of Detroit. The asset suffers from occupancy issues due to the vacancy of several anchor tenants. As of September 2014, the property was 47% occupied. According to Reis' December 2014 report, the South Detroit/Downriver submarket of Detroit has a vacancy rate of 21.4%. In addition to being located in a soft market, the property has an irregular configuration which contributes to leasing challenges. Fitch anticipates significant losses upon disposition of the asset.
Based on sufficient credit support from the subordinate non-rated classes and amortization, the class is expected to remain stable and be paid in full this year. Although credit enhancement remains high relative to the rating category, upgrades have been limited due to the distressed credit rating of the single tenant in the largest loan in the pool coupled with concerns related to performance and resolution of the remaining assets.
Fitch affirms the following class:
--\$0.5 million class B-3 at 'Asf', Outlook Stable.
Classes A-1A, A-CS1, A-1B, A-1C, A-1D, A-1E, A-2, A-3, A-4, A-5, A-6, A-7, A-8, B-1 and B-2 have paid in full. Fitch does not rate the class B-4, B-5, B-6, B-7 and B-7H certificates. Fitch previously withdrew the rating on the interest-only class PS-1 certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 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