Fitch cuts 5 classes of BSCMST 2005

Global rating agency Fitch downgrades five classes, removing one from Rating Watch Negative, and affirms 13 classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMST), series 2005-PWR10 commercial mortgage pass-through certificates.

The downgrades reflect an increase in Fitch expected losses across the pool most of which is due to higher loss expectations on the specially serviced loans.

Fitch modeled losses of 12.9% for the remaining pool; expected losses as a percentage of the original pool balance are at 13.5%, including losses already incurred to date (3%). Fitch has designated 49 loans (29.8%) as Fitch Loans of Concern, which includes the five specially serviced loans (7.4%). Fitch expects that classes B through S may be fully depleted from realized and expected losses. The Negative Outlook on class AM reflects the possibility of continued downward ratings migration. An increase in expected losses on the specially serviced loans or deterioration in performance of the top 15 loans, several of which have high leverage, would lead to additional downgrades.

As of the February 2013 distribution date, the pool’s aggregate principal balance has been reduced by approximately 18.6% to $2.1 billion from $2.6 billion at issuance. Interest shortfalls total $14.3 million and are affecting classes C through S.

The largest contributor to modeled losses is the World Market Center loan (8.7% of the pool), which is secured by a 10story, approximately 1.1 mil- lion-square foot (sf) furniture mart approximately five miles north of the center of the Las Vegas Strip.

The loan was modified in 2011 into A/B note structure after the recapitalization by a joint venture between Bain & Oaktree Capital. The modification included writing down the loan by $10.7 million, splitting the loan into a $94.3 million interest-only A note and a $105.9 million B note with no payment. The property was returned to the master servicer in March 2012 and continues to perform according the terms of the modification.

The second-largest contributor, Oasis Net Leased Portfolio (4.9%), is the largest specially serviced loan and second largest loan in the pool. The portfolio consists of eight suburban office properties and two research and development/flex properties totaling 769,507 sf.