Fitch Ratings has upgraded three classes and affirmed the remaining classes of UBS Commercial Mortgage Trust, series 2007-FL1. The transaction has paid down by 94% since issuance. All of the remaining loans have been modified and extended, but will reach their final maturity dates within the next 18 months. One asset is real estate owned (REO). A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The upgrades reflect increased credit enhancement as a result of paydown of approximately 56% since Fitch's last rating action. The paydown was the result of the payment in full of a large land loan which had uncertain recovery prospects. There are three remaining assets in the pool, two are hotels (86.7%) and one is an undeveloped land parcel (13.3%). The land asset is REO. The other two loans were previously modified and extended. One of the modified loans will reach its final extended maturity date in mid-2015 with the remaining loan maturing in July 2016. Fitch remains concerned about the ability of the modified loans to refinance at the final modified maturity date as lending standards have changed from the time these loans were originated the borrowers have not been able to successfully execute their initial business plans.
The affirmation of class O-MD reflects stabilizing performance of the underlying Marriott Washington DC loan.
RATING SENSITIVITIES
The Stable Outlooks reflect the high credit enhancement of the deal. No rating changes to the pooled classes are expected throughout the remaining life of the deal as additional payoffs will be offset by an increasingly concentrated pool. Downgrades to class O-MD are possible if the performance of the underlying collateral is not able to maintain the current positive momentum.
The Hilton Long Beach loan is collateralized by a 393-room full-service hotel in downtown Long Beach, CA. The loan transferred to the special servicer in June 2012 due to imminent maturity default. The loan reached its final extended maturity in July 2012. The loan was subsequently modified and extended and the previous mezzanine lender acquired ownership of the borrower. The new borrower is required to extend the current franchise agreement and complete a property improvement plan (PIP) of approximately $11 million. The new final maturity date is July 2016. The loan is expected to be transferred back to the master servicer in the next few months.
The Washington DC Marriott is secured by a 471-room full-service hotel located in Washington, DC. The property was built in 1981 and remodeled and expanded in 2007. Property performance has been lower than underwritten expectations. The loan transferred to the special servicer in February 2012 due to imminent maturity default. A modification was executed effective June 25, 2012 which extended the final maturity date to May 9, 2015 among other provisions. As of year-end (YE) 2013, net operating income (NOI) improved by approximately 10% compared to YE 2012 but remains below both YE 2010 and YE 2011 figures.
The RexCorp Land portfolio consists of 205 acres of commercial development land located in Morris County, New Jersey. The loan defaulted at maturity in February 2010 and has been in special servicing since that time. Modification discussions were not successful and the special servicer foreclosed on the property in September 2012. The special servicer is marketing the property for sale.
Fitch has upgraded the following classes and assigned Rating Outlooks as indicated:
--$17.5 million class H to 'A' from 'CCsf'; Assigns Outlook Stable;
--$27.2 million class J to 'BBB' from 'Csf'; Assigns Outlook Stable;
--$27.2 million class K to 'B' from 'Csf'; Assigns Outlook Stable.
Fitch has affirmed the following class as indicated:
--$1.7 million class O-MD at 'BBsf'; Outlook Negative.
Classes A-1 through G, O-WC, O-BH and O-HW have paid in full. Fitch does not rate classes O-SA and O-HA. Classes L, M-MP, N-MP and O-MP all remain at 'D' RE 0% due to realized losses. Fitch withdrew the rating of the interest-only class X.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 2014);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (September 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=772328
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=965675
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