Fitch Affirms Wachovia 2005-C22
KEY RATING DRIVERS
The affirmations are due to stable collateral performance and modeled losses consistent with Fitch's rating action. Fitch modeled losses of 11.8% of the remaining pool; expected losses on the original pool balance total 13.8%, including \$137.9 million (5.4% of the original pool balance) in realized losses to date. Fitch has designated 22 loans (23.9%) as Fitch Loans of Concern, which includes six specially serviced assets (19.7%).
As of the February 2015 distribution date, the pool's aggregate principal balance has been reduced by 29.4% to \$1.79 billion from \$2.53 billion at issuance. Per the servicer reporting, the pool has had a significant increase in defeased loans since last review, with 16 loans (13.6% of the pool) defeased compared to two loans (0.5% of the pool) at last review. The defeased loans include four of the top 15 loans (8.9% of the pool). Interest shortfalls are currently affecting classes E through Q; 94.3% of the pool balance matures in 2015.
The largest contributor to expected losses remains the specially serviced Westin Casuarina Hotel & Spa loan (7.6% of the pool), which is secured by an 826-room full-service hotel located a quarter of a mile east of the Las Vegas Strip. The loan was transferred to special servicing in March 2010 for imminent default. Property performance declined as a result of decreased tourism and travel in the Las Vegas market. A receiver was appointed in October 2011. Servicer reported trailing 12-month (TTM) occupancy as of January 2015 was 86.2%, up from 82.4% the prior year, with an average daily rate (ADR) of \$97.88, up from \$91.21 the prior year, and revenue per room (RevPAR) of \$84.38, up from \$75.13 the prior year.
While improving year-over-year, the property remains challenged against its competitive set and cash flow is below break-even. A new Westin license agreement was executed in 2014 with Starwood for a new 20-year term expiring March 31, 2034. As a part of the new license, approximately \$5 million of property improvement plan (PIP) work must be completed by May 2015. The special servicer reports that the majority of the PIP work has been completed.
The next largest contributor to expected losses is the specially serviced Britannia Business Center III loan (1.8%), which is secured by three class B flex buildings totaling approximately 191,000 square feet (sf) located in Pleasanton, CA. The loan was transferred to special servicing in December 2010 for payment default. A receiver was granted in April 2011 and the foreclosure was completed in July 2011. Since taking title to the property, occupancy has increased from approximately 45% to 79%. The special servicer is marketing the property for sale.
The third largest contributor to expected losses is the Warner Atrium (0.9%) which is secured by 126,416 sf office property located in Woodland Hills, CA. The property was built in 1981 and renovated in 1995. The loan was previously in special servicing and was modified in 2010 with a temporary rate reduction. According to the September 30, 2014 servicer reporting, the debt service coverage ratio (DSCR) is 0.89x with an occupancy rate of 75.31% compared to year-end 2013 DSCR of 0.68x with occupancy rate of 68.50%. Class B/C properties within the submarket remain challenged, with Reis reporting vacancy of 19.5%, asking rents of \$23.87/per sf, and 2% annual rent growth. The in-place rents at the subject are at the low end of the market's asking rents.
RATING SENSITIVITIES
Rating Outlooks on classes A-4 through A-M remain Stable due to increasing credit enhancement, continued paydown and defeasance. No rating changes are expected to classes A-4 through A-M as they are likely to be paid in full within the next year. The Rating Outlook on class A-J remains Negative and downgrades could occur if loans do not refinance at maturity or if losses on the specially serviced loans are greater than anticipated.
Fitch affirms the following classes as indicated:
--\$845.5 million class A-4 at 'AAAsf', Outlook Stable;
--\$321.1 million class A-1A at 'AAAsf', Outlook Stable;
--\$253.4 million class A-M at 'Asf', Outlook Stable;
--\$152 million class A-J at 'Bsf', Outlook Negative;
--\$22.2 million class B at 'CCCsf', RE 30%;
--\$31.7 million class C at 'CCsf', RE 0%;
--\$25.3 million class D at 'Csf', RE 0%;
--\$47.5 million class E at 'Csf', RE 0%;
--\$31.7 million class F at 'Csf', RE 0%;
--\$28.5 million class G at 'Csf', RE 0%;
--\$28.5 million class H at 'Csf', RE 0%;
--\$1.9 million 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%.
The class A-1, A-2, A-3, and A-PB certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the rating on the interest-only class IO 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
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