Fitch Ratings has affirmed all classes of New York Liberty Development Corporation, Liberty Revenue Refunding Bonds, series 2012 (7 World Trade Center Project) and 7 WTC Depositor, LLC Trust 2012-WTC as follows:
--$18,475,000 class 1 maturing on Sept. 15, 2028 at 'AAAsf'; Outlook Stable;
--$19,410,000 class 1 maturing on Sept. 15, 2029 at 'AAAsf'; Outlook Stable;
--$20,390,000 class 1 maturing on Sept. 15, 2030 at 'AAAsf'; Outlook Stable;
--$21,425,000 class 1 maturing on Sept. 15, 2031 at 'AAAsf'; Outlook Stable;
--$22,510,000 class 1 maturing on Sept. 15, 2032 at 'AAAsf'; Outlook Stable;
--$73,670,000 class 1 maturing on Sept. 15, 2035 at 'AAAsf'; Outlook Stable;
--$137,220,000 class 1 maturing on Sept. 15, 2040 at 'AAAsf'; Outlook Stable;
--$108,000,000 class 2 at 'Asf'; Outlook Stable;
--$29,190,000 class 3 at 'BBBsf'; Outlook Stable;
--$78,026,667 class A at 'BBB-sf'; Outlook Stable;
--$10,515,000 class B at 'BB+sf'; Outlook Stable.
KEY RATING DRIVERS
The affirmations and Stable Outlooks are the result of stable collateral performance since issuance. As of the nine months ending Sept. 30, 2014, the servicer-reported net cash flow debt service coverage ratio was 1.29x compared to 1.23x underwritten at issuance. As of the September 2014 rent roll, the property was 98% occupied compared to 95% at issuance. The top three tenants, combining for 66% of the total property square footage, all have lease expirations in 2022 and beyond, as well as additional lease renewal options.
The transaction represents a securitization of the beneficial leasehold mortgage interest in 7 World Trade Center, a 52-story, class A office building, totaling approximately 1.7 million square feet and located on the north end of the World Trade Center site in Downtown Manhattan. Loan proceeds were used to refinance the prior liberty bonds, pay closing costs, and return preferred equity investment to the sponsor, Larry A. Silverstein.
The liberty bonds and the commercial mortgage-backed security (CMBS) certificates follow a sequential pay structure and are administered pursuant to a traditional CMBS servicing agreement. Both loans are cross-defaulted and the liberty bonds have a priority in payment over the CMBS certificates. The liberty bonds and CMBS certificates are scheduled to amortize fully by their respective maturity dates following an initial interest-only period. The liberty bonds are interest-only for 16 years followed by full amortization by 2044. The CMBS bonds are interest-only for the first year followed by six-year full amortization.
The current loan, totaling $538.8 million, includes a senior portion consisting of a $450.3 million tax-exempt liberty bond financing and a junior portion consisting of an $88.5 million CMBS loan. As of the December 2014 distribution date, the CMBS portion has amortized to $88.5 million from $125 million at issuance. The one-year interest-only period for the CMBS bonds ended Apr. 5, 2014.
RATING SENSITIVITIES
All classes maintain Stable Outlooks. No rating actions are expected unless there are material changes in property occupancy or cash flow. Property performance remains consistent with issuance.
At issuance, terrorism coverage was provided by the federal government under the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), in addition to the captive insurance company, SPI Captive Insurance Company. On Jan. 12, 2015, TRIPRA, which had previously expired Dec. 31, 2014, was reauthorized for an additional six years through Dec. 31, 2020. The program was not retroactive to the date of expiry, but rather became effective as of Jan. 12, 2015. While TRIPRA is currently back in place, it remains uncertain whether there are any consequences resulting from the gap in coverage. Fitch has submitted questions to the servicer.
Initial key rating drivers and rating sensitivity is further described in the new issue report titled 'Liberty Revenue Refunding Bonds, Series 2012 (7 World Trade Center Project) and 7 WTC Depositor, LLC Trust 2012-WTC' (May 25, 2012)', which is available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (Sept. 19, 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=971235
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