Fitch Upgrades 1 Class and Downgrades 1 Distressed Class of CSMC 2008-C1
KEY RATING DRIVERS
Fitch's upgrade is based on better than anticipated recovery on the liquidation of 1100 Executive Tower and the relatively stable performance of the underlying collateral pool. The downgrade to the already distressed class is due to a greater certainty of losses and erosion of credit enhancement.
Fitch modeled losses of 5.1% of the remaining pool; expected losses on the original pool balance total 11.4%, including \\$74.4 million (8.4% of the original pool balance) in realized losses to date. Fitch has designated 11 loans (8%) as Fitch Loans of Concern, which includes two specially serviced assets (0.8%).
As of the January 2016 distribution date, there are 40 loans remaining from the original 62 loans and the pool's aggregate principal balance has been reduced by 41.2% to \\$521.6 million from \\$887.2 million at issuance. Interest shortfalls are currently affecting classes F through S.
The largest contributor to expected losses is the Killeen Mall loan (15.7% of the pool), which is secured by 387,000 square feet (sf) of a 558,000 sf regional mall located in Killeen, Texas, home to Fort Hood, the nation's largest armed forces training and development facility. The mall is anchored by Dillards, JC Penny, Sears, and Burlington Coat Factory. Occupancy at the property has increased significantly from 70% in December 2010 to 89% as of year-end 2015. The property has lease rollover risk for only 6% of the mall's NRA through year-end 2016. The NOI of the property has been stable to increasing with a servicer-reported NOI DSCR of 1.34x at September 2015 and 1.32x at year-end 2014.
The next largest contributor to expected losses is the Waikiki Beach Walk Retail loan (25%), which is secured by a roughly 88,000 sf of retail space in the Waikiki Beach Walk, a master-planned project that includes hotels, condominiums, time shares, entertainment venues, and shopping, located in Honolulu, HI. In 2014, servicer-reported net operating income (NOI) from the property was down by 5.5% compared with the issuer's underwriting, but NOI has increased each year since 2010. While the property has continued to have strong occupancy of 99% as of January 2016, the \\$130.3 million interest-only loan remains highly leveraged.
The Outlooks for all classes are expected to remain Stable unless additional loans transfer to special servicing coupled with an increase in expected losses. Further upgrades are possible when loans begin to repay in 2017 and 71% of the pool matures. Downgrades, although not expected, are possible should larger loans incur greater-than-modeled losses. Distressed classes (those rated below 'Bsf') may be subject to further downgrades as additional losses are realized.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch downgrades the following class:
--\\$10 million class E to 'CCsf' from 'CCCsf'; RE 0%.
Fitch upgrades the following class:
--\\$8.9 million class B to 'Bsf' from 'CCCsf'; Outlook to Stable Assigned;
Fitch affirms the following classes:
--\\$9.2 million class A-2 at 'AAAsf'; Outlook Stable;
--\\$5.7 million class A-AB at 'AAAsf'; Outlook Stable;
--\\$258 million class A-3 at 'AAAsf'; Outlook Stable;
--\\$52.1 million class A-1-A at 'AAAsf'; Outlook Stable;
--\\$4.8 million class A-2FL at 'AAAsf'; Outlook Stable;
--\\$57.7 million class A-J at 'Bsf'; Outlook Stable;
--\\$88.7 million class A-M at 'Asf'; Outlook Stable;
--\\$8.9 million class C at 'CCCsf'; RE 100%;
--\\$12.2 million class D at 'CCCsf'; RE 55%;
--\\$5.4 million class F at 'Dsf'; RE 0%;
--\\$0 class G at 'Dsf'; RE 0%;
--\\$0 class H at 'Dsf'; RE 0%;
--\\$0 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%;
--\\$0 class P at 'Dsf'; RE 0%;
--\\$0 class Q at 'Dsf'; RE 0%.