Fitch Upgrades NationsLink Funding Corp 1999-LTL-1
1999-LTL-1 commercial loan pass-through certificates. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The upgrade reflects the high credit enhancement, paydown and the expectation that the class will pay in full.
As of the January 2016 distribution date, the pool's certificate balance has been reduced by 87.1% to \\$63.7 million from \\$492.5 million at issuance. Of the original 128 loans, 67 remain. Losses incurred to date are \\$1.25 million (0.3%).
There are no delinquent or specially serviced loans. However, one loan (4.2%) is collateralized by a vacant property.
Of the remaining 67 loans, 59 (82.3% of the pool) are credit tenant lease (CTL) loans backed by properties with leases guaranteed by one of more than 15 different credit tenants. Approximately 45.4% of the loans in the pool have investment grade-rated tenants. The CTL loans fully amortize and the majority of the underlying leases are co-terminus with loan maturities or longer than the loan terms. While financial reporting and lease details on the collateral are limited, the transaction receives approximately \\$1.4 million in scheduled principal per month. The majority of loans mature in 2017 and 2018.
The top three tenants in the pool are Royal Ahold N.V. (30.8%; rated investment grade), Rite Aid Corporation (20.4% of the pool; rated 'B', Rating Watch Positive as of October 2015), and Walgreens Boots Alliance Inc. (8.6%; rated investment grade). There are eight traditional conduit loans, which comprise 28.9% of the pool. No loans are currently defeased.
The largest loan of the pool is collateralized by Broadway at the Beach (10.1% of the pool). The subject is a 511,396 square foot (sf) retail outdoor mall located in Myrtle Beach, SC. Occupancy has increased to 98% from 93% at issuance. Several leases including Carmike Cinemas, Starbucks, and Rodeo Bar & Grill are scheduled to expire within the next 18 months. The rollover risk is mitigated by the low leverage and fully amortizing structure of the loan. The loan is scheduled to mature in August 2018.
The second largest conduit loan is collateralized by, Plaza Galleria (2.0%), a 15,846 sf retail center located in the Old Town Plaza area of Santa Fe, NM. The center was redeveloped in 1995 and has been kept in fair condition by the sponsor. The area draws the majority of its economic activity from the seasonal tourist visitors that frequent the historic submarket. Occupancy has decreased to 72%, as of Sept. 2015, from 100% at issuance. The center continues to experience occupancy challenges with 45% of the NRA leased by short term tenants. The trade area is beginning to stabilize and the sponsor recently secured 4 new tenants and expanded the leased space of two existing. The loan is current and the sponsor continues to work to release the vacant space. The loan is scheduled to mature in June 2018.
No further rating actions are expected due to the low leverage of the remaining pool and substantial principal paydown that is received through loan amortization; Class C is expected to pay in full within 12 months.
DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch upgrades the following class:
--\\$15.7 million class C to 'AAAsf' from 'Asf'; Outlook Stable.
Classes A-1, A-2, A-3, and B have repaid in full. Classes D, E, F, and G are not rated by Fitch. The rating for Class X was previously withdrawn.