Fitch Ratings has downgraded one distressed class, upgraded one class, and affirmed 18 classes of Credit Suisse Commercial Mortgage Trust (CSMC) commercial mortgage pass-through certificates series 2006-C4. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrade to class A-J is due to increased credit enhancement as a result of significantly higher than expected recovery on the Harwood Center loan which paid in full and improved servicer-reported performance on The Ritz Carlton South Beach, the third largest loan (5.7%).
Fitch modeled losses of 8.6% of the remaining pool; expected losses on the original pool balance total 13.8%, including $317.3 million (7.4% of the original pool balance) in realized losses to date. Fitch has designated 74 loans (30.9%) as Fitch Loans of Concern, which includes 15 specially serviced assets (7.2%).
As of the December 2014 distribution date, the pool's aggregate principal balance has been reduced by 26.1% to $3.16 billion from $4.27 billion at issuance. Per the servicer reporting, nine loans (2.6% of the pool) are defeased. Interest shortfalls are currently affecting classes D through S.
The largest contributor to expected losses is the 280 Park Avenue loan (9.4% of the pool), which is secured by a 1.2 million square foot office tower located in New York, NY. Following significant tenant rollover experienced in early 2012, the property has since maintained occupancy at or near 60%. As of September 2014, occupancy was 57.9%. The servicer-reported debt service coverage ratio (DSCR) was 0.62x as of year to date (YTD) September 2014 and 0.72x at year-end (YE) 2013.
The next largest contributor to expected losses is The Edge at Avenue North loan (1.7%), which is secured by a 799-unit (1,207-bed) student housing complex located in Philadelphia, PA. Revenue decreased significantly (approximately 45%) due to increased competition from newer housing developments. The borrower is currently evaluating solutions to address the property's decline in performance. The servicer-reported DSCR declined to 0.59x at YE June 2014 from 1.61x YE June 2013.
The third largest contributor to expected losses is the Carlton Hotel on Madison loan (3%), which is secured by a 316-room full service hotel located in New York, NY. The property is underperforming relative to the market. While the servicer-reported DSCR remains well below 1.00x, it has continued to improve with a YTD September 2014 DSCR of 0.72x, compared to 0.55x and 0.17x as of YE 2012 and YE 2011, respectively.
RATING SENSITIVITY
Rating Outlooks on classes A-3 through A-1A remain Stable due to continued expected paydown. Upgrades were limited due to significant maturity concentration in 2016 (80%). The distressed classes are subject to further downgrades should additional losses be realized.
Fitch downgrades the following class:
--$45.9 million class F to 'Dsf' from 'Csf'; RE 0%.
Fitch upgrades the following class:
--$427.3 million class A-M to 'Asf' from 'BBB-sf'; Outlook to Stable from Negative.
Fitch affirms the following classes:
--$1.5 billion class A-3 at 'AAAsf'; Outlook Stable;
--$150 million class A-4FL at 'AAAsf'; Outlook Stable;
--$543.2 million class A-1A at 'AAAsf'; Outlook Stable;
--$341.8 million class A-J at 'CCCsf'; RE 80%.
--$26.7 million class B at 'CCsf'; RE 0%;
--$64.1 million class C at 'CCsf'; RE 0%;
--$37.4 million class D at 'Csf'; RE 0%;
--$21.4 million class E at 'Csf'; RE 0%;
--$0 class G at 'Dsf'; RE 0%;
--$0 class H at 'Dsf'; RE 0%;
--$0 class J at 'Dsf'; RE 0%;
--$0 class K at 'Dsf'; RE 0%;
--$0 class L at 'Dsf'; RE 0%;
--$0 class M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%;
--$0 class O at 'Dsf'; RE 0%;
--$0 class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%.
Fitch does not rate the class S certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=965755
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