Fitch Takes Various Actions on MLMT 2008-C1

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded six and affirmed 16 classes of Merrill Lynch Mortgage Trust (MLMT) series 2008-C1, commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The downgrades to classes E through K reflect an increase in loss expectations since Fitch's last rating action, influenced by a greater uncertainty of performance on Fitch Loans of Concern, including ongoing concerns with the specially serviced assets in the pool. Fitch modeled losses of 11.6% of the remaining pool; expected losses on the original pool balance total 9.1%, including $28.2 million (3% of the original pool balance) in realized losses to date. Fitch has designated 21 Fitch Loans of Concern (34.5%), which includes three specially serviced assets (2.4%).

As of the November 2015 distribution date, the pool's aggregate principal balance has been reduced by 46.9% to $503.2 million from $948.8 million at issuance. Per the servicer reporting, three loans (1.6% of the pool) are defeased. Interest shortfalls are currently affecting classes M through T.

The largest contributor to expected losses is the Fort Office Portfolio loan (9.6% of the pool), which is secured by three office buildings with an aggregate 340,708 sf located in Phoenix, Houston and Omaha. As per the September rent rolls, the portfolio's occupancy declined to 84% from 100% after the second largest tenant vacated the Houston property in August 2014. The portfolio's lease rollovers for 2016 and 2017 are 37.9% and 19.3%, respectively. There is growing concern that tenant renewals for expiring spaces will be affected by business consolidations in the portfolio's Midwest region. ConAgra (26% NRA), who's lease matures in December 2016, announced they are moving their executive office from Omaha to Chicago.

The next largest contributor to expected losses is the Landmark Towers loan (3.2%), which is secured by a 25-story, 212,959-sf office building located in St. Paul, MN. The property has been underperforming expectations since 2009 due to a decline in income, combined with an increase in expenses. In 2010, Green Tree Servicing LLC (125,701 sf or 59% GLA) was engaged in litigation with the borrower, the resolution of which resulted in a lease amendment that reduced Green Tree's rental rate. This lease expires December 2017. According to news reports, the parent of Green Tree has announced plans to move 800 employees from this location. The property was 93% occupied as of June 2015.

The third largest contributor to expected losses is the Heritage Financial Center loan (2.1%), which is secured by a 61,163 sf office building located in Agoura Hills, CA, in northwest Los Angeles County. The loan was previously with the special servicer for monetary default in 2012. The loan was brought current on payments and a modification was approved for a 12-month extension of interest-only payments that expired in June 2013. The servicer-reported occupancy was 87% as of September 2015 and the DSCR declined to 0.84x from 1.15x from year-end 2013.

The fourth largest contributor to expected losses is the Townley Business Park loan (1.9%), which is secured by a 121,725 sf suburban office building located in Phoenix, AZ. The property has been suffering from poor performance over the last several years as the occupancy has declined to 45% as of September 2015, from 74% as of year-end 2011. In December 2011 the loan converted from interest-only to amortizing; the servicer-reported DSCR declined to 0.75x as of year-end 2014 from 1.69x as of year-end 2011.

RATING SENSITIVITIES

Further downgrades to Classes C and below are possible with increased loss expectations. Additionally, the high leverage, tenant rollover and volatility of certain loans within the top 15 increases the potential for future loan transfers to special servicing as the transaction approaches its 10 year balloon period.

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

Fitch has downgraded the following classes and revised Outlooks and assigned Recovery Estimates as indicated:

--$8.3 million class E to 'BBsf' from 'BBB-sf'; Outlook to Negative from Stable;

--$9.5 million class F to 'Bsf' from 'BBsf'; Outlook to Negative from Stable;

--$9.5 million class G to 'CCCsf' from 'BBsf'; RE 40%;

--$10.7 million class H to 'CCCsf' from 'Bsf'; RE 0%;

--$11.9 million class J to 'CCsf' from 'CCCsf'; RE 0%;

--$10.7 million class K to 'Csf' from 'CCsf'; RE 0%.

Fitch has affirmed the following classes and revised Outlooks as indicated:

--$232.4 million class A4 at 'AAAsf'; Outlook Stable;

--$39.9 million class A-1A at 'AAAsf'; Outlook Stable;

--$71.2 million class AM at 'AAAsf'; Outlook Stable;

--$6.3 million class AM-A at 'AAAsf'; Outlook Stable;

--$41.8 million class AJ at 'AAsf'; Outlook Stable;

--$3.7 million class AJ-A at 'AAsf'; Outlook Stable;

--$2.2 million class AJ-AF at 'AAsf'; Outlook Stable;

--$10.7 million class B at 'Asf'; Outlook Stable;

--$11.9 million class C at 'Asf'; Outlook to Negative from Stable;

--$8.3 million class D at 'BBBsf'; Outlook to Negative from Stable;

--$8.3 million class L at 'Csf'; RE 0%;

--$3.6 million class M at 'Csf'; RE 0%;

--$2.7 million class N at 'Dsf'; RE 0%;

--$0 class P at 'Dsf'; RE 0%;

--$0 class Q at 'Dsf'; RE 0%;

--$0 class S at 'Dsf'; RE 0%.

The class A-1, A-2, A-3, A-SB, A-1AF and AM-AF certificates have paid in full. Fitch does not rate the class T certificates. Fitch previously withdrew the rating on the interest-only class X certificates

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996367

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996367

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/20151209006498/en/

Fitch Ratings
Primary Analyst
Catherine Barbieri
Associate Director
+1-212-908-0638
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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