Fitch Downgrades BSCMSI 2004-PWR3

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded two classes and affirmed eight classes of Bear Stearns Commercial Mortgage Securities Trust's commercial mortgage pass-through certificates series 2004-PWR3 (BSCMSI 2004-PWR3). A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The downgrades to classes J and L reflect the pool's high concentration of specially serviced assets (64.4%) and uncertain recoveries on the remaining loans. Fitch modeled losses of 31.1% of the remaining pool; expected losses on the original pool balance total 3.4%, including $14.9 million (1.3% of the original pool balance) in realized losses to date. As of the May 2015 distribution date, the pool's aggregate principal balance has been reduced by 93.4% to $72.8 million from $1.11 billion at issuance. There are eleven loans remaining in the transaction, three of which are defeased (8.2%). Fitch has designated three (68.5%) Fitch Loans of Concern, which includes two specially serviced assets. Interest shortfalls are currently affecting classes N through Q.

The largest contributor to expected losses (46.8% of the pool) is a specially-serviced asset secured by a 504,746 square foot (sf) portion of a shopping center located in Clay, NY. The mall is anchored by Macy's, Sears, and BJ's Wholesale Club, which are not part of the collateral. The loan transferred back to special servicing on Nov. 6, 2014 due to the imminent default. It had previously been returned to the master servicer following a March 2014 loan modification which extended the maturity date to Jan. 1, 2015 from Dec. 1, 2013. The servicer- reported debt service coverage ratio (DSCR) and occupancy were 1.41x and 84.0%, respectively as of year-end (YE) 2014. A deed in lieu action is in process. All cash flow is currently being captured by lockbox.

The next largest contributor to expected losses (4.1% of the pool) is secured by a 21,071 sf retail property located in Lombard, IL. Occupancy declined to 51.0% as of YE 2014 from 100% at YE 2012 as the largest tenant (Pier 1; 50% of NRA) vacated upon its July 2013 lease expiration. The servicer reported DSCR was 0.89x as of YE 2014 compared to 2.16x at YE 2012. While 27.0% in lease rollover is scheduled for later this year, the servicer has advised lease renewal negotiations are in process. Fitch will continue to monitor the loan as update leasing updates are received.

The third largest contributor to expected losses (17.6% of the pool) is a specially-serviced asset secured by a 370,120 sf community retail strip center located in Natrona Heights, PA. The loan transferred to special servicing on Jan. 16, 2014 due to the Borrower's failure to pay the loan off at maturity on Jan. 1, 2014. A foreclosure complaint was filed Dec. 2014. The servicer- reported debt service coverage ratio (DSCR) and occupancy were 1.03x and 64.0%, respectively as of year-end (YE) 2014.

RATING SENSITIVITIES

Classes E and F have Stable Outlooks as no rating changes are expected. Although credit enhancement has increased due to amortization, loan pay-offs and defeasance, further upgrades to these classes are limited due the pool's high concentration with only 11 loans remaining.

The Negative Outlooks for Classes G and H and downgrades to class J and L reflect the uncertain resolution surrounding the specially serviced loans and the possibility of increased losses.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following classes:

--$8.8 million class E at 'A+sf'; Outlook Stable;

--$15.2 million class F at 'A-sf'; Outlook Stable;

--$11.1 million class G at 'BBB-sf'; Outlook Negative;

--$13.9 million class H at 'Bsf'; Outlook Negative;

--$5.5 million class K at 'CCCsf'; RE 0%.

--$5.5 million class M at 'CCsf'; RE 0%;

--$2.8 million class N at 'Csf'; RE 0%;

--$338,728 class P at 'Dsf'; RE 0%.

Fitch has downgraded the following classes:

--$2.8 million class J to 'CCCsf' from 'Bsf'; RE 70%;

--$6.9 million class L to 'CCsf' from 'CCCsf'; RE 0%.

Fitch does not rate class Q and classes A-1 through D have paid in full. Fitch has previously withdrawn the rating on the interest-only class X-1 and X-2.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 31 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985882

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150604006207/en/

Fitch Ratings
Tiffany Pierce, +1-212-908-9107
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
[email protected]

Source: Fitch Ratings

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