NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed 11 and downgraded 11 classes of Banc of America Commercial Mortgage Trust, series 2007-4 (BACM 2007-4). A detailed list of rating actions follows at the end of this release.
The downgrades reflect an increase in Fitch expected losses largely attributed to loans in special servicing. Fitch modeled losses of 11.8% for the remaining pool; expected losses of the original pool are at 13.7%, including losses already incurred to date. The Outlook Negative on class A-M reflects the possibility for further performance deterioration on the Hines Office Portfolio, the La Jolla Executive Tower, and the Scottsdale Spectrum properties.

Fitch has designated 32 loans (31.7%) as Fitch Loans of Concern, which includes 11 specially serviced loans (15.3%). Classes O through S and a portion of class N have been fully depleted from realized losses associated with loan dispositions. Fitch expects classes L through N may be fully depleted and class K to be impacted from losses associated with the specially serviced assets.

As of the December 2011 distribution date, the pool's aggregate principal balance has been reduced by approximately 6.5% to $2.09 billion from $2.23 billion at issuance. Since Fitch's last rating action, the transaction has paid down by $57.1 million (2.6% of the original transaction balance); however, realized losses have been $54.6 million (2.4%).

The largest contributors to modeled losses are three cross collateralized and cross defaulted interest-only loans (11.4% of the pool) secured by five office properties totaling 1.16 million square feet located in the Sacramento, CA metropolitan area. These loans are currently in special servicing and were transferred in May 2011 due to imminent default. Portfolio occupancy fell to 75% as of year end (YE) 2010, down from 78% at YE 2009 and 92% at issuance. The servicer-reported net operating income debt service coverage ratio (NOI DSCR) declined to 1.14 times (x) as of YE 2010, down from 1.26x at YE 2009 and 1.79x underwritten at issuance. This decrease is attributable to lower base rents and expense reimbursements as a result of declining occupancy at all of the properties in the portfolio.

The next largest contributor to modeled losses is a partial interest-only loan (5.1%) secured by a 231,512 square foot (sf) office property located in La Jolla, CA. The property has been underperforming since issuance. For the trailing 12 month (TTM) period ended June 30, 2011, the NOI DSCR was 0.07x, down significantly from 1.29x reported at issuance. Approximately 74.8% of the NRA rolls before the loan's October 2017 maturity date. The property is located in the UTC Submarket of San Diego, which reported a market vacancy of 19.5% according to CoStar as of third quarter 2011. Although the property is underperforming, the loan remains current as the borrower continues to cover debt service shortfalls.

The third largest contributor to modeled losses is an interest-only loan (3.1%) secured by a 256,670 sf office property located in Scottsdale, AZ. Although the occupancy has increased to 94.5% as of December 2011 due to multiple new leases signed during 2011, the six-month year-to-date period ended June 30, 2011 NOI DSCR remains low at 0.94x, which is down from 1.10x at YE 2010 and 1.50x underwritten at issuance. Approximately 83% of the NRA rolls before the loan's July 2017 maturity date. The property is located in the Central Scottsdale submarket of Phoenix, which reported a market vacancy of 26.6% according to CoStar as of third quarter 2011.

Fitch has downgraded, revised Rating Outlooks, and assigned Recovery Estimates (REs) on the following classes as indicated:

--$223.1 million class A-M to 'AAsf' from 'AAAsf'; Outlook to Negative from Stable;
--$178.5 million class A-J to 'CCCsf'' from 'Bsf'; RE 80%;
--$22.3 million class B to 'CCCsf'' from 'B-sf'; RE 0%;
--$19.5 million class C to 'CCCsf'' from 'B-sf'; RE 0%;
--$22.3 million class D to 'CCCsf'' from 'B-sf'; RE 0%;
--$22.3 million class E to 'CCsf'' from 'B-sf'; RE 0%;
--$13.9 million class F to 'CCsf' from 'CCCsf'; RE to 0% from 100%;
--$16.7 million class G to 'CCsf' from 'CCCsf'; RE to 0% from 100%;
--$27.9 million class H to 'CCsf' from 'CCCsf'; RE to 0% from 100%;
--$22.3 million class J to 'Csf' from 'CCCsf'; RE to 0% from 100%;
--$19.5 million class K to 'Csf' from 'CCsf'; RE to 0% from 60%.

Fitch has affirmed the following classes as indicated:

--$267.6 million class A-1A at 'AAAsf'; Outlook Stable;
--$30.9 million class A-2 at 'AAAsf'; Outlook Stable;
--$287.5 million class A-3 at 'AAAsf'; Outlook Stable;
--$73.7 million class A-SB at 'AAAsf'; Outlook Stable;
--$817.6 million class A-4 at 'AAAsf'; Outlook Stable;
--$13.9 million class L at 'Csf'; RE 0%;
--$5.6 million class M at 'Csf'; RE 0%;
--$1.5 million class N at 'Dsf'; RE 0%;
--$0 class O at 'Dsf'; RE 0%;
--$0 class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%.

Class A-1 has paid in full. Fitch does not rate class S.

Fitch has previously withdrawn the rating on the interest-only class XW. (For additional information on the withdrawal of the rating on the interest-only classes, see 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities', dated June 23, 2010.)

Additional information on Fitch's amended criteria for analyzing recent vintage U.S. CMBS is available in the Dec, 21, 2011 report, 'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance >> CMBS >> Criteria Reports

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Dec. 21, 2011).

Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=662869

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