Fitch Upgrades BACM 2004-1

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded one class and affirmed eight classes of Banc of America Commercial Mortgage Inc. (BACM 2004-1) commercial mortgage pass-through certificates series 2004-1. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The upgrade to class F is warranted based on the high level of credit enhancement and amortization. The affirmations reflect the stable performance of the pool since Fitch's last rating action including relatively stable loss expectations of the asset in special servicing. While the largest loan, Mercantile East Shopping Center, accounts for 67.9% of the total balance, it demonstrates strong performance metrics.

Fitch modeled losses of 12.6% of the remaining pool; expected losses on the original pool balance total 4.4%, including $50.7 million (3.8% of the original pool balance) in realized losses to date. Fitch has designated one Fitch Loan of Concern (17.4%), which is also specially serviced.

As of the November 2015 distribution date, the pool's aggregate principal balance has been reduced by 96.8% to $42.7 million from $1.33 billion at issuance. According to the servicer, one loan (1.7% of the pool) has defeased. Interest shortfalls are currently affecting classes H through K.

The largest contributor to expected losses is a 74,031 square foot (sf) office property (17.4% of the pool) located in Federal Way, WA. The asset is real estate owned (REO) as of November 2013. Since the property became REO, occupancy has declined from 76% to 50% at present, with several tenants vacating upon lease expiration. The Servicer has managed to stabilize occupancy with many tenants renewing their leases during 2015. The servicer has performed various building renovations and is in active lease negotiations with a potential tenant that would increase occupancy to 66%. For the six month period ended June 30, 2015, the debt service coverage ratio (DSCR) was 0.43x.

The largest loan in the pool, Mercantile East Shopping Center, (67.9%) is a 261,260 sf retail center located in Ladera Ranch, CA, 53 miles southwest of Los Angeles. The property is anchored by Kohl's, Dick's Sporting Goods, and HomeGoods. Other notable tenants include BevMo, Staples, and Starbucks. The property exhibits strong performance with 2014 DSCR of 2.01x and occupancy of 97.9%. In comparison, underwritten DSCR and occupancy at issuance were 1.48x and 80%, respectively.

RATING SENSITIVITIES

The Rating Outlooks remains Stable given the stable performance of the pool. Further upgrades to the classes were limited by the uncertainty related to resolution of the remaining asset in special servicing and the concentration of the pool. The Distressed classes (those rated below 'B') may be subject to further downgrades as additional losses are realized or if losses exceed Fitch's expectations.

DUE DILIGENCE USAGE

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

Fitch upgrades the following class:

--$3.8 million class F to 'AAAsf' from 'Asf'; Outlook Stable;

Fitch affirms the following classes:

--$11.6 million class G at 'BBsf'; Outlook Stable;

--$19.9 million class H at 'CCCsf'; RE 100%.

--$6.6 million class J at 'Csf'; RE 40%.

--$739,632 class K at 'Dsf'; RE 0%;

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

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

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

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

Classes A-1, A-1A, A-2, A-3, A-4, B, C, D, E and XP certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class XC certificate.

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 Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=996509

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996509

Endorsement Policyhttps://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/20151210006493/en/

Fitch Ratings
Primary Analyst:
David Ro, +1-312-368-3132
Director
Fitch Ratings, Inc.
70 West Madison Street
Chicago, IL 60602
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
[email protected]

Source: Fitch Ratings

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