Fitch Ratings has taken various rating actions on 14 classes of COMM Mortgage Trust 2006-C8, commercial mortgage pass-through certificates. In addition, Fitch has assigned Rating Outlooks, as applicable. A detailed list of rating actions follows at the end of this press release.
The downgrades are the result of Fitch's loss expectations on specially serviced loans as well as prospective views regarding commercial real estate market value and cash flow declines. Fitch forecasts potential losses of 10.5% for this transaction, should market conditions not recover. Today's rating actions are based on losses of 8.3% including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Given the significant term to maturity, Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized.
Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end (YE) 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for loans representing 67.4% of the pool and, in certain cases, revised based on additional information and/or property characteristics. The remaining loans represent 15.2% of potential losses.
Approximately 23.2% of the mortgages are scheduled to mature within the next five years, with 15.4% maturing in 2011 and 6.61% maturing in 2013. In 2016, 67.5% of the pool is scheduled to mature.
Fitch identified 53 Loans of Concern (40%) within the pool, 15 of which (10.6%) are specially serviced. Two of the specially serviced loans (4.0%) are within the transaction's top 15 loans, which comprises 43.4% of the total pool's unpaid principal balance.
Twelve of the top 15 loans (33.8% of the pool) are expected to default during the term or at maturity, with loss severities ranging from approximately 2% to 33%. Of the top 15 loans, the largest contributors (by loan balance) to term losses are as follows: EZ Storage Portfolio (4% of the pool balance), Sierra Vista Mall (2.1%) and the JPIM Self Storage Portfolio (1.8%).
The EZ Storage Portfolio is secured by a 48 self storage facilities located in various states. The most recent servicer reported combined occupancy is a combined 66.4%, compared to 76.8% at issuance. As of August 2009, $1.7 million remains in the debt service reserve with no releases remaining until the property achieves a trailing six month debt service coverage ratio (DSCR) of 1.20 times (x). The servicer reported YE 2008 DSCR was 1.09x. At issuance, the loan was underwritten to a stabilized cash flow based on increased occupancy at market rent providing for potential upside in future cash flows, however, the property is behind the stabilization schedule. Based on current performance and anticipated declines in performance, losses are expected prior to the loan's maturity in 2016.
Sierra Vista Mall is collateralized by approximately 405,000 square feet (sf) of a 689,601 sf regional mall located in Clovis, CA. Total occupancy as of June 2009 was 62.7% compared to 87.9% at issuance. Per a review of the recent rent roll, approximately 14.8% of the leases are scheduled to expire prior to YE 2011. Major tenants remaining at the property include Target and Sears. In the past year, the property has lost Mervyn's and Gottschalk's, together consisting of 27.3% of the net rentable area (NRA), to bankruptcy filings and subsequent closure of all stores. Mervyn's continues to pay rent. The borrower has been working with prospective tenants on leasing the vacant space. Based on current and anticipated declines in performance, losses are expected prior to the loan's maturity in 2016.
The JPIM Self Storage Portfolio transferred to special servicing in April 2009 for payment default. The asset consists of 14 self storage facilities located in eight states. At issuance, the loan was underwritten to a stabilized cash flow based on increased occupancy at market rent providing for potential upside in future cash flows, however, the property is significantly behind the stabilization schedule. The reported combined YE 2008 DSCR was 0.71x.
The largest specially serviced asset in the pool is Victoria Ward Industrial, Gateway & Village (2.3%), which consists of over 250,000 sf of retail space located in Honolulu, HI. The sponsor is General Growth Properties, Inc. (GGP) which filed for bankruptcy in April 2009 and included this asset in the parent company filing. The loan is current as of the August 2009 distribution date. The reported occupancy as of December 2008 was 96.3% compared to 94.7% at issuance with a YE 2008 DSCR of 1.35x.
Fitch downgrades, removes from Rating Watch Negative, and assigns Loss Severity (LS) ratings and Negative Outlooks to the following classes:
--$302.1 million class A-J to 'BB/LS-4' from 'AAA';
--$28.3 million class B to 'BB/LS-5' from 'AA+';
--$42.5 million class C to 'BB/LS-5' from 'AA';
--$37.8 million class D to 'B/LS-5' from 'AA-';
--$23.6 million class E to 'B/LS-5' from 'A+';
--$28.3 million class F to 'B-/LS-5' from 'A';
--$51.9 million class G to 'B-/LS-5' from 'A-';
--$37.8 million class H to 'B-/LS-5' from 'BBB+';
--$42.5 million class J to 'B-/LS-5' from 'BBB-';
--$42.5 million class K to 'B-/LS-5' from 'BB+'.
Fitch downgrades, removes from Rating Watch Negative, and assigns recovery ratings (RR) to the following classes:
--$18.9 million class L to 'CCC/RR6' from 'BB';
--$18.9 million class M to 'CCC/RR6' from 'B+';
--$4.7 million class N to 'CCC/RR6' from 'B';
--$9.4 million class O to 'CCC/RR6' from 'B-'.
Additionally, Fitch affirms the following classes and assigns LS rating and Stable Outlooks:
--$11.2 million class A-1 at 'AAA/LS-2';
--$100 million class A-2A at 'AAA/LS-2';
--$366 million class A-2B at 'AAA/LS-2';
--$244.5 million class A-3 at 'AAA/LS-2';
--$92.5 million class A-AB at 'AAA/LS-2';
--$1.1 billion class A-4 at 'AAA/LS-2';
--$666.5 million class A-1A at 'AAA/LS-2';
--Interest-only class X-P at 'AAA';
--Interest-only class X-S at 'AAA'.
Fitch affirms the following class, assigns a Loss Severity Rating and revises its Rating Outlook:
--$377.6 million class A-M at 'AAA/LS-3'; Outlook to Negative from Stable.
The $14.2 million class P, $9.4 million class Q, and $35.9 million class S are not rated by Fitch.
Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the July 8, 2009 report, 'Surveillance Methodology for Recent Vintage U.S. CMBS,' which is available at www.fitchratings.com under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Fitch will release a report titled 'COMM 2006-C8 Commercial Mortgage Trust' that will contain a graph of revised loss expectations for the transaction at www.fitchratings.com under the following headers:
Structured Finance >> CMBS >> Special Reports
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts:
Fitch Ratings, New York
Jeffrey Diliberto, +1-212-908-9173
Adam
Fox, +1-212-908-0869
or
Sandro Scenga, +1-212-908-0278 (Media
Relations)
sandro.scenga@fitchratings.com