Fitch Ratings has affirmed all classes of Prudential Securities Secured Financing Corp.'s (Prudential) commercial mortgage pass-through certificates, series 1999-NRF1. A detailed list of the ratings follows at the end of this press release.
As of the June 2012 distribution date, the pool's certificate balance has been reduced 97.69% (which includes 3.10% in realized losses) to $21.44 million from $928.92 million at issuance. There are 11 of the original 257 loans remaining in the transaction. There are no defeased loans. Interest shortfalls are affecting the unrated classes K, L and M.
The affirmations reflect Fitch expected losses across the pool, as well as adverse selection among the 11 remaining loans. Fitch modeled losses of 3.19% of the remaining pool; expected losses of the original pool are at 3.17%, including losses realized to date. Fitch has identified six loans as Loans of Concern (64.88% of pool balance), which include two loans currently in special servicing (18.44%).
The largest loan in special servicing is secured by a 128,419 square foot (sf) retail center in Batavia, NY (11.58% of the pool). The subject property is anchored by a Value Home Center (29% net rentable area [NRA]). The loan, which matured in August 2010, had transferred to special servicing in July 2010 for impending maturity default. The loan is paid through the February 2012 payment date. The Special Servicer continues to discuss with trust counsel what options are available to the Noteholder, while trying to get the Borrower to pay off the loan immediately.
The second loan in special servicing is secured by a 104 unit multifamily property in Centerline, MI. The loan had transferred to special servicing in September 2010 for maturity default. A modification of the loan has been negotiated with the Borrower with approval to be recommended by the Special Servicer pending Borrower's delivery of requested certification of the property and guarantor information. The March 2012 rent roll reported occupancy at 95%, with year end December 2011 debt service coverage ratio (DSCR) at 0.95 times (x).
Fitch stressed the cash flow of the non-specially serviced loans by applying a minimum 5% reduction to most recent fiscal year-end 2011 net operating income and applying an adjusted market cap rate between 8% and 11% to determine value.
Similar to Fitch's prospective analysis of recent vintage CMBS, the non-specially serviced loans also underwent a refinance test by applying an 8% interest rate and 30-year amortization schedule based on the stressed cash flow. Based on this refinance methodology, three of the non-specially serviced loans (37.21%) would not pay off at maturity, and could not refinance to a DSCR above 1.25x.
Fitch has affirmed the following classes:
--$3.8 million class H at 'Asf'; Outlook Stable;
--$9.3 million class J at 'B-sf'; Outlook Negative.
Classes K, L and M are not rated by Fitch. Due to realized losses, classes L and M have been reduced to zero and class K has been reduced to $8.37 million from $15.8 million at issuance. Classes A-1, A-2, B, C, D, E, F and G have paid in full.
Fitch had previously withdrawn the rating on the interest only class A-EC.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 21, 2011 report, 'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Dec. 21, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=662869
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