NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded five classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMSI), 2005-PWR7 commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this release.

The upgrades are a result of increased credit enhancement from paydown since Fitch's last formal review due to scheduled amortization, as well as proceeds from the liquidation of the Garden State Pavilion loan in June 2011. The upgrades also reflect a decrease in Fitch expected losses as a result of improved performance of the remaining pool and updated valuations on specially serviced loans.

As of the August 2011 distribution date, the pool's aggregate principal balance has been paid down by approximately 14.6% to $960 million from $1.1 billion at issuance. Three loans (3.3%) are currently defeased. Interest shortfalls are affecting classes H through Q.

Fitch modeled losses of 4.5% of the remaining pool. Fitch designated 27 loans (32% of the pool balance) as Fitch Loans of Concern, including five specially serviced loans (7.9%). Fitch expects classes L through Q may be fully depleted from losses associated with the specially serviced assets.

The largest contributor to loss is the Shops at Boca Park loan (5.2% of pool balance), which was originally secured by 140,415 square feet (sf) of retail space and a 139,000sf ground lease anchor pad within a lifestyle center located in Summerlin, NV, northwest of Las Vegas. The property is shadow anchored by Target Greatland and Vons. The loan transferred to special servicing in October 2009 due to imminent default. The borrower initially discussed modification and forbearance options with the special servicer, but filed for Chapter 11 bankruptcy protection on June 17, 2010. A cash collateral order is in place as of August 2010 that requires the borrower to make monthly payments. The special servicer continues to work through the bankruptcy with the borrower and pursing the guaranty for bankruptcy carve-outs. The ground lease pad was recently sold in June 2011 for $4.4 million, with proceeds applied towards the outstanding principal balance.

The next largest contributor to losses is the Quintard Mall loan (3.5%) which is secured by 375,486sf of a 621,752sf regional mall located in Oxford, AL, approximately 60 miles east of Birmingham. The property is anchored by JC Penny (32% of the net rentable area [NRA]) with a lease expiring in 2014, with three five-year extension options remaining. Non-collateral anchors include Dillards (126,000sf) and Sears (120,266sf), which have operating agreements in place that expire in 2015 and 2020. The property experienced cash flow issues in 2009 due to base rental revenue declines from decreased rents and reduced percentage income resulting in a year end (YE) December 2009 debt service coverage ratio (DSCR) of 0.98 times (x). Due to a 17.8% reduction in expenses, the year end 2010 DSCR increased to 1.11x; however, year to date (YTD) June 2011 DSCR was 0.90x due to continued declining rental revenues despite 94% occupancy. The loan is current as of the August 2011 distribution date.

The third largest contributor to losses (1.3%) is secured by a 304 unit multifamily property in Winterpark, FL, approximately nine miles northeast of Orlando. The property experienced cash flow issues due to occupancy declines, which the servicer reported stemmed from evictions of 15% of the tenant base. The February 2011 rent roll reported occupancy at 75%, compared to 84% in December 2009. The YE December 2010 DSCR reported is 0.73x, compared to 0.95x in 2009. The loan transferred to special servicing in February 2011 due to monetary default and is scheduled to mature in January 2012. The special servicer is working with the borrower to cure the default which may include a modification and extension.

Fitch upgrades the following classes and revises Outlooks as indicated:

--$85.7 million class AJ to 'AAsf' from 'Asf'; Outlook Stable;
--$33.7 million class B to 'BBBsf' from 'BBsf'; Outlook Stable;
--$8.4 million class C to 'BBB-sf' from 'BBsf'; Outlook Stable;
--$15.5 million class D to 'BBsf' from 'Bsf'; Outlook Stable;
--$11.2 million class E to 'Bsf' from 'B-sf'; Outlook to Stable from Negative.

Fitch also affirms the following classes and revises Outlooks as indicated:

--$149.7 million class A-2 at 'AAAsf'; Outlook Stable;
--$73.5 million class A-AB at 'AAAsf'; Outlook Stable;
--$527.7 million class A-3 at 'AAAsf'; Outlook Stable;
--$11.2 million class F at 'B-sf'; Outlook to Stable from Negative;
--$9.8 million class G at 'CCCsf/RR1';
--$12.7 million class H at 'CCCsf/RR1';
--$4.2 million class J at 'CCsf/RR6';
--$4.2 million class K at 'Csf/RR6';
--$5.6 million class L at 'Csf/RR6';
--$4.2 million class M at 'Csf/RR6';
--$1.4 million class N at 'Csf/RR6'.

Class P will remain at 'Dsf/RR6' due to realized losses.

Fitch does not rate class Q, which has been reduced to zero due to realized losses. Class A-1 has paid in full.

On Oct. 27, 2010 Fitch withdrew the rating on the interest-only classes X-1 and X-2. (For additional information on the withdrawal of the rating on class X, see 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities', dated June 23, 2010.)

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Nov. 17, 2010 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.

Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Nov. 17, 2010).

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=574208

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