Fitch Upgrades 6 Classes of BSCMSI 2005-TOP18
KEY RATING DRIVERS
The upgrades reflect significant paydown since Fitch's last rating action including full payoffs of underperforming loans that matured in 2015. Fitch modeled losses of 5.8% of the remaining pool; expected losses on the original pool balance total 2.4%, including $24.1 million (2.2% of the original pool balance) in realized losses to date. Fitch has designated four (19.5%) of the remaining 19 loans as Fitch Loans of Concern, which includes one specially serviced asset (2.6%). One loan is defeased (3.2% of the pool).
As of the October 2015 distribution date, the pool's aggregate principal balance has been reduced by 94.9% to $57.6 million from $1.12 billion at issuance. Interest shortfalls are currently affecting classes J through P.
The largest contributor to expected losses is the specially-serviced asset (2.6% of the pool), which is secured by a 14,063 square foot (sf) retail property located in Indianapolis, IN. The subject was transferred to special servicing in October 2014 for imminent payment default. A receiver was appointed by the court in July 2015 and the servicer is continuing to pursue foreclosure. The asset is also being marketed for sale in conjunction with an online auction that will occur in mid-November. According to the year-end (YE) 2014 rent roll, the property is 52% occupied.
The largest loan in the pool (18.5%) is secured by a portfolio of two properties: a 160,120 sf industrial property in Allen, TX and a 91,868 sf office property in Sunnyvale, CA. The properties are 100% occupied by a publicly traded communications company. Leases at both properties expire in February 2020. As of YE 2014, the debt service coverage ratio (DSCR) was reported to be 2.37x.
The second largest loan in the pool (14.8%) is secured by a 91,609 sf mixed-use property located Akron, OH. The office component, which accounts for 98% of the net rentable area, is leased to one tenant through November 2016. There is also ground level retail space that is leased through July 2017. The DSCR was reported to be 1.20x as of YE 2014 which is in-line with the 1.18x reported at YE 2013.
The ratings of classes C, D and E remain Stable due to high levels of credit enhancement and continued paydown. Additional paydown is expected in the first quarter of 2016 when approximately 15% of the remaining pool matures. Stable Outlooks have been assigned to classes F and G as the transaction continues to deleverand the classes benefit from increasing credit enhancement. Further upgrades may be warranted based on the performance of the remaining loans. Downgrades are not expected unless a material economic or asset level event negatively impacts the transaction's metrics.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch upgrades the following classes and assigns or revises Rating Outlooks and REs as indicated:
--$3.1 million class C to 'AAAsf' from 'Asf'; Outlook Stable;
--$12.6 million class D to 'AAAsf' from 'BBBsf'; Outlook Stable;
--$11.2 million class E to 'Asf' from 'BBsf'; Outlook Stable;
--$9.8 million class F to 'BBBsf' from 'CCCsf'; Outlook Stable Assigned;
--$9.8 million class G to 'BBsf' from 'CCsf'; Outlook Stable Assigned;
--$8.4 million class H to 'CCCsf' from 'Csf'; RE 90%.
Fitch affirms the following classes as indicated:
--$2.7 million class J at 'Dsf'; RE 0%;
--$0 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%.
The class A-1, A-2, A-3, A-AB, A-4, A-4FL, A-J and B certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class X certificates.