Fitch Takes Various Actions on BSCMS 2004-PWR4
KEY RATING DRIVERS
The upgrades to class E through class J are the result of increased credit enhancement (CE) due to loan maturities and continued amortization since the prior review as well as the defeasance of the largest loan in the pool (75% of the current balance). The affirmations for classes D, K and L are based on the stable performance of non-specially serviced loans and sufficient CE. The downgrade to the already distressed class M is the result of modeled losses being realized and the resulting erosion of credit enhancement.
Fitch modeled losses of 8.1% of the remaining pool; expected losses on the original pool balance total 1.9%, including \\$13.4 million (1.4% of the original pool balance) in realized losses to date. Fitch has designated four loans (24.1%) as Fitch Loans of Concern, which includes two specially serviced assets (11.2%). Interest shortfalls are currently affecting classes N and Q.
As of the January 2016 distribution date, the pool's aggregate principal balance has been reduced by 93.2% to \\$65.2 million from \\$954.9 million at issuance.
The largest contributor to modeled losses is a real estate owned (REO) office complex (8.8%), containing three industrial flex buildings totalling 117,798 square feet (sf). The complex, located in Buffalo Grove, IL, transferred to the special servicer in May 2014 due to imminent default relating to its June 2014 maturity date. The property has been REO since August 2015. Per the servicer, only one of the three buildings is occupied. Siemens (rated 'A'/Stable Outlook as of Jan. 19, 2016), the sole tenant, recently agreed to renew their lease at the property till October 2021. The servicer plans to include the complex in an upcoming auction.
The second largest contributor to modeled losses is a specially serviced loan (2.4%) secured by an 18,064 sf unanchored retail strip center located in Honolulu, HI. The loan transferred to the special servicer in March 2014 due to imminent default relating to its April 2014 maturity date. According to the servicer, the borrower was unable to renegotiate the ground lease in place, which resets at a much higher rate in August of this year. Occupancy dropped to 82% as of year-end (YE) 2015 from 100% as of YE 2013. The servicer has initiated the foreclosure process.
The largest Fitch Loan of Concern (7.7%) is secured by a 27,876 sf single-tenant retail property located in Hastings-on-Hudson, NY. The property was 100% occupied by The Food Emporium, which is fully owned by The Great Atlantic & Pacific Tea Company (A&P). A&P filed for Chapter 11 bankruptcy in July 2015. Several media outlets have confirmed that the store has closed down causing the store to "go dark"; however, the loan remains current. The servicer reported net operating income (NOI) debt service coverage ratio (DSCR) increased to 1.69x as of YE 2014 from 1.56x as of YE 2013. The Food Emporium lease extends to February 2024, five years after the loan's maturity in June 2019. Fitch will continue to monitor performance and leasing activity at the property.
The Rating Outlooks on classes D through J remain Stable as credit enhancement is high and downgrades are not expected. Additional upgrades were not considered due to the pool concentration, high percentage of Fitch Loans of Concern, which includes the two specially serviced loans, and the long dated maturities of the remaining non-specially serviced loans. Downgrades to the distressed classes K through M are possible should additional losses be realized.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch upgrades the following classes as indicated:
--\\$9.5 million class E to 'AAAsf' from 'Asf'; Outlook Stable;
--\\$9.5 million class F to 'AAAsf' from 'BBBsf'; Outlook Stable;
--\\$8.4 million class G to 'AAAsf' from 'BBsf'; Outlook Stable;
--\\$10.7 million class H to 'AAAsf' from 'Bsf'; Outlook Stable;
--\\$3.6 million class J to 'BBBsf' from 'Bsf'; Outlook Stable.
Fitch affirms the following classes as indicated:
--\\$9.3 million class D at 'AAAsf'; Outlook Stable;
--\\$4.8 million class K at 'CCCsf'; RE 100%;
--\\$4.8 million class L at 'CCsf'; RE 85%.
--\\$2.2 million class N at 'Dsf'; RE 0%;
--\\$0 class P at 'Dsf'; RE 0%.
Fitch downgrades the following class as indicated:
--\\$2.4 million class M to 'Csf' from 'CCsf'; RE 0%.
The class A-1, A-2, A-3, B and C certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the rating on the interest-only class X certificates.Disclosures page. The endorsement status of all International ratings is provided within the entity summary page for each rated entity and in the transaction detail pages for all structured finance transactions on the Fitch website. These disclosures are updated on a daily basis.