NEW YORK - (Business Wire) Fitch has downgraded and removed from Rating Watch Negative the following class of Merrill Lynch Floating Trust, commercial mortgage pass-through certificates as follows:
--$48.2 million class M downgraded to 'BB' from 'BBB-'.
Additionally, Fitch affirms the following classes:
--$650.3 million class A-1 at 'AAA';
--$527.7 million class A-2 at 'AAA';
--Interest-only class X-1A at 'AAA';
--Interest-only class X-1B at 'AAA';
--Interest-only class X-3A at 'AAA';
--Interest-only class X-3B at 'AAA';
--Interest-only class X-3C at 'AAA';
--$55.4 million class B at 'AAA';
--$48.9 million class C at 'AAA';
--$32.6 million class D at 'AA+';
--$75.3 million class E at 'AA';
--$46.7 million class F at 'AA-';
--$44.3 million class G at 'A+';
--$40.6 million class H at 'A'.
--$35.9 million class J at 'A-';
--$36.3 million class K at 'BBB+'; and
--$31.1 million class L at 'BBB'.
Class A-1A and class X-2 have paid in full. Fitch does not rate classes TM, X-1TM, or X-2TM.
The downgrade of Class M is due to low leasing activity and the upcoming maturity of the pool's third-largest loan, The Portals III (4.4%). The Portals III loan is secured by a 506,608 sf office building located in Washington, D.C. that was 100% vacant when completed in 2006. Currently the building is 21% occupied. At issuance, it was anticipated that the building would be 60% occupied by December 2007. According to the master servicer, several potential tenants are in negotiation. The building that serves as the loan's collateral is part of The Portals mixed-use development that also contains two other office buildings, a hotel, and retail space. The two other office buildings in The Portals development are 95.8% and 99.8% occupied. The loan's initial maturity date was extended from July 11, 2008 to January 10, 2009. There are no extension options after the January maturity.
As of the June 2008 distribution date, the transaction has paid down by 30.3% since issuance. Five of the original 15 loans have paid in full and two loans, have had partial releases of collateral. There have been no losses to date, and there are no delinquent or specially serviced loans. The three largest loans are the Trizec Portfolio (45.5%), Lord & Taylor Portfolio (36.4%), and The Portals III (4.4%). All loans, with the exception of The Portals III maintain investment-grade shadow ratings.
The Lord & Taylor Portfolio loan is secured by 36 Lord & Taylor retail stores across nine states and a 587,364 square foot ("sf") distribution center. The Sponsor, NRDC Equity Partners, is in the process of re-positioning the stores by rebalancing their merchandise, implementing a more modern advertising campaign, and improving public area layout and design. The loan's initial maturity date is October 11, 2008, and there are three 1-year extension options. The portfolio continues to demonstrate stable performance, with cash flow as of YE 2007 increasing 1.6% over Fitch's analysis from issuance.
The Trizec Portfolio loan's collateral consists of 20 office properties with a total of 8 million sf located across five states. Two properties have been released since issuance. The portfolio's three largest tenants are the Pension Benefit Guaranty Corp. (4.8%), Kellogg, Brown & Root (3.7%), and Continental Airlines (2.9%). The loan's initial maturity date is October 11, 2008, and there are three 1-year extension options. Occupancy as of YE 2007 is reported to be 82.4% on a portfolio basis, as compared to 84.6% at issuance.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Chris Bushart, +1-212-908-0606 (New York)
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