S&P: Various Rating Actions Taken On Banc Of America Commercial Mortgage Trust 2008-1
Our rating actions on the certificates follow our analysis of the transaction, primarily using our criteria for rating U. S. and Canadian CMBS transactions, which included a review of the credit characteristics and performance of the remaining assets in the pool, the transaction's structure, and the liquidity available to the trust.
We raised our ratings on classes A-4, A-1A, A-M, and A-J to reflect our expectation of the available credit enhancement for these classes, which we believe is greater than our most recent estimate of necessary credit enhancement for the respective rating levels. The upgrades also follow our views regarding the collateral's current and future performance and available liquidity support. The upgrades also reflect the lower trust balance.
We lowered our rating on class F to 'D (sf)' because we expect this class to experience ongoing interest shortfalls as well as credit erosion from the specially serviced assets in the transaction.
According to the Aug. 10, 2016, trustee remittance report, the current monthlyinterest shortfalls totaled $167,874 and resulted primarily from:
Appraisal subordinate entitlement reduction amounts totaling $80,507;
Modified interest rate reductions totaling $56,131;
Workout fees totaling $10,642; and
Special servicing fees totaling $10,105.
The current interest shortfalls affected classes subordinate to and including class F.
The affirmations of the principal and interest certificates reflect our expectation that the available credit enhancement for these classes will be within our estimate of the necessary credit enhancement required for the current ratings. The affirmations also reflect our views regarding the collateral's current and future performance, the transaction structure, and liquidity support available to the classes.
We affirmed our 'AAA (sf)' ratings on the class X-W interest-only (IO) certificates based on our criteria for rating IO securities.
TRANSACTION SUMMARY
As of the Aug. 10, 2016, trustee remittance report, the collateral pool balance was $789.5 million, which is 62.2% of the pool balance at issuance. The pool currently includes 83 loans and two real estate owned (REO) assets (reflecting crossed loans), down from 108 loans at issuance. Five of these assets ($50.5 million, 6.4%) are with the special servicer, five ($48.6 million, 6.2%) are defeased, and 28 ($143.9 million, 18.2%) are on the master servicer's watchlist. The master servicer, KeyBank Real Estate Capital, reported financial information for 97.7% of the nondefeased loans in the pool, of which 93.6% was partial-year 2016 or year-end 2015 data, and the remainder was partial-year 2015 or year-end 2014 data.
We calculated a 1.31x S&P Global Ratings weighted average debt service coverage (DSC) and an 82.0% S&P Global Ratings weighted average loan-to-value (LTV) ratio using a 7.59% S&P Global Ratings weighted average capitalization rate. The DSC, LTV, and capitalization rate calculations exclude the five specially serviced assets, five defeased loans, and two subordinate B hope notes ($10.3 million, 1.3%). The top 10 nondefeased loans have an aggregate outstanding pool trust balance of $392.5 million (49.7%). Using servicer-reported numbers, we calculated an S&P Global Ratings weighted average DSC and LTV of 1.24x and 89.7%, respectively, for nine of the top 10 nondefeased loans. The remaining loan is specially serviced and discussed below.
To date, the transaction has experienced $89.8 million in principal losses, or7.1% of the original pool trust balance. We expect losses to reach approximately 9.3% of the original pool trust balance in the near term, based on losses incurred to date and additional losses we expect upon the eventual resolution of the five specially serviced assets.
CREDIT CONSIDERATIONS
As of the Aug. 10, 2016, trustee remittance report, five assets ($50.5 million, 6.4%) in the pool were with the special servicer, CWCapital Asset Management LLC (CWCapital). Details of the two largest specially serviced assets, one of which is a top 10 nondefeased loan, are as follows:
The Galleria at Sugarloaf – A and B Notes loan (aggregate balance of $18.4million, 2.3%) is the ninth-largest nondefeased loan in the pool and has atotal reported exposure of $18.4 million. The loan is secured by a 145,136-sq.-ft. retail property in Duluth, Ga. The loan was transferred tothe special servicer on May 19, 2016, because of an imminent capital event. CWCapital stated that the borrower intends to pay off the loan pursuant to the waterfall described in the 2014 loan modification. The reported DSC and occupancy as of year-end 2015 were 0.95x and 78.0%, respectively. We expect a moderate loss upon this loan's eventual resolution.
The 357 South Gulph and 444 Oxford Valley REO asset ($17.2 million, 2.2%) has a total reported exposure of $20.8 million. The loan was originally secured by two office properties, of which one has been sold. The remaining asset is a 48,100-sq.-ft. property located in King of Prussia, Pa. The loan was transferred to the special servicer on June 6, 2012, because of imminent monetary default, and the asset became REO Jan. 29, 2014. CWCapital indicated that it plans to stabilize the asset for future disposition. The reported DSC and occupancy as of year-end 2015 were 0.06xand 77.2%, respectively. An appraisal reduction amount of $14.0 million isin effect against this loan. We expect a significant loss upon this asset's eventual resolution.
The four remaining assets with the special servicer each have individual balances that represent less than 1.0% of the total pool trust balance. We estimated losses for the five specially serviced assets, arriving at a weighted average loss severity of 55.0%.
With respect to the specially serviced assets noted above, a moderate loss is 26%-59% and a significant loss is 60% or greater.
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