Fitch Downgrades Two Distressed Classes of BSCMS 2007-PWR18.
KEY RATING DRIVERS
Specially Serviced Loans and High Expected Losses: Five loans totaling $84 million or 36% of the pool are specially serviced. The downgrades of classes C and D are due to higher certainty of losses from the specially serviced loans. Although the senior classes benefit from high and increasing credit enhancement due to amortization and loan payoffs and dispositions since Fitch's last rating action, credit enhancement is expected to erode as defaulted loans are disposed. In addition, most of the non-specially serviced loans mature in December 2017 and more defaults are possible. The affirmations of AJ and A-JA reflect the continued risk of credit enhancement erosion.
As of the November 2017 distribution date, the transaction has paid down 91% since issuance, to $233.7 million from $2.5 billion. Interest shortfalls totaling $9.6 million are currently affecting classes B through S.
Concentrated Pool: The pool is highly concentrated with only 19 loans remaining. Due to the concentrated nature of the pool, Fitch performed a sensitivity analysis which grouped the remaining loans based on loan structural features, collateral quality and performance which ranked them by their perceived likelihood of repayment. This includes defeased loans, fully amortizing loans, balloon loans, and Fitch loans of concern. The ratings reflect this sensitivity analysis.
Largest Loan is Specially Serviced: The largest loan in the transaction, The Marriot Houston Westchase ($72.3 million, 31% of the pool) is in special servicing having transferred in July 2017 due to potential maturity default. The loan matured Nov. 1, 2017. The property, located in west Houston, had been underperforming prior to the transfer. The servicer reported net-operating income (NOI) DSCR as of trailing 12 month (TTM) March 2017 was 0.71x and occupancy was 60%. The borrower had stated that the underperformance was due to local market conditions. Per the servicer, the property did not have any major damage as a result of Hurricane Harvey.
Maturity Schedule: All but two of the remaining loans mature by early December 2017, including the specially serviced loans, totaling 87% of the pool. The largest loan matured November 2017 and is in special servicing. Two loans totaling 13% mature in 2018.
Future upgrades are unlikely given the transaction concentration, including the high number of specially serviced loans and high expected losses. Downgrades are possible if expected losses increase and/or additional loans transfer to special servicing.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.
Fitch has downgraded the following classes:
--$25 million class C to 'Csf' from 'CCsf'; RE0%;
--$18.8 million class D to 'Csf' from 'CCsf'; RE0%.
Fitch has affirmed the following classes:
--$149.4 million class A-J at 'CCCsf'; RE80%;
--$8.0 million class A-JA at 'CCCsf'; RE80%;
--$25 million class B at' CCsf'; RE0%;
--$7.4 million class E at 'Dsf'; RE0%.
Classes F through Q have been depleted due to realized losses and are affirmed at 'Dsf' RE 0%. Classes A-1, A-2, A-3, A-AB, A-4, A-1A, A-M and A-MA have paid in full. Fitch does not rate class S. Fitch has withdrawn the ratings assigned to the interest only classes X-1 and X-2 at the previous review.