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Fitch Downgrades 10 Classes of BSCMST 2007-PWR16; Affirms Super Senior AAA Classes

Thursday, April 19, 2012 12:21 PM

Fitch Ratings has downgraded 10 classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMST), series 2007-PWR16 commercial mortgage pass-through certificates. Fitch has also revised the Outlook for class A-M to Negative from Stable due to increased total expected pool losses but with consideration given to anticipated upcoming payoff and disposition proceeds. A detailed list of rating actions follows at the end of this release.

The downgrades reflect an increase in Fitch expected losses primarily due to increased loss expectations on the specially serviced loans. Fitch modeled losses of 12.9% for the remaining pool; expected losses as a percentage of the original pool balance are at 12.9%, including losses already incurred to date (1.4%). Fitch has designated 58 loans (39.8%) as Fitch Loans of Concern, including 16 specially serviced loans (18%). Fitch expects that classes G through Q may be fully depleted from losses associated with the specially serviced assets. Class F may also be impaired.

As of the April 2011 distribution date, the pool's aggregate principal balance has been reduced by approximately 10.6% to $2.96 billion from $3.31 billion at issuance. Interest shortfalls totaling $10.8 million are affecting classes E through S.

The largest contributor to expected losses is the specially serviced Beacon Seattle & DC Portfolio (11.4% of the pool), which was initially secured by 16 properties, the pledge of the mortgage and the borrower's ownership interest in one property, as well as the pledge of cash flows from three properties. In aggregate, the 20 properties comprise approximately 9.8 million square feet (sf) of space. The loan transferred to special servicing in April 2010 and remained current as the borrower was negotiating a modification, which closed in December 2010. Key modification terms included a five-year extension of the loan to May 2017, a deleveraging structure that provides for the release of properties over time, and an interest rate reduction.

Under the modification plan, six properties have been released as of the February 2012 remittance, which includes Market Square (Washington, D.C.), Key Center (Bellevue, WA), 1616 North Fort Myer Drive (Arlington, VA), Liberty Place (Washington, D.C.), 1300 North Seventeenth Street (Arlington, VA), and Reston Town Center (Reston, VA). Gross proceeds from the releases totaled $819 million, which have paid down the trust loan balance by 30%, repaid prior interest shortfalls, and built up the Master Reserve Account to $92 million.


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