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Rating Action:

Moody's Upgrades Two, Affirms One and Downgrades Two Classes of MLCFC 2007-7

28 Sep 2017

Approximately $219 Million of Structured Securities Affected

New York, September 28, 2017 -- Moody's Investors Service, ("Moody's") has upgraded the ratings on two classes, affirmed the rating on one class and downgraded the ratings on two classes ML-CFC Commercial Mortgage Trust 2007-7, Commercial Mortgage Pass-Through Certificates, Series 2007-7 as follows:

Cl. AM, Upgraded to B1 (sf); previously on Sep 29, 2016 Affirmed B2 (sf)

Cl. AM-FL, Upgraded to B1 (sf); previously on Sep 29, 2016 Affirmed B2 (sf)

Cl. AJ, Downgraded to C (sf); previously on Sep 29, 2016 Affirmed Ca (sf)

Cl. AJ-FL, Downgraded to C (sf); previously on Sep 29, 2016 Affirmed Ca (sf)

Cl. X, Affirmed C (sf); previously on Jun 9, 2017 Downgraded to C (sf)

RATINGS RATIONALE

The ratings on the P&I Classes AM and AM-FL were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 86% since Moody's last review.

The ratings on the P&I Classes AJ and AJ-FL were downgraded due to anticipated losses and realized losses from specially serviced and troubled loans that were higher than Moody's had previously expected.

The rating on the IO Class X was affirmed based on the credit quality of the referenced classes.

Moody's rating action reflects a base expected loss of 49.4% of the current pooled balance, compared to 7.1% at Moody's last review. Moody's base expected loss plus realized losses is now 18.0% of the original pooled balance, compared to 16.7% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The methodologies used in these ratings were "Approach to Rating US and Canadian Conduit/Fusion CMBS" published in July 2017, and "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in July 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

Additionally, the methodology used in rating Cl. X was "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" methodology published in June 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Moody's analysis incorporated a loss and recovery approach in rating the P&I classes in this deal since 87% of the pool is in special servicing and Moody's has identified an additional troubled loan representing 4% of the pool. In this approach, Moody's determines a probability of default for each specially serviced and troubled loan that it expects will generate a loss and estimates a loss given default based on a review of broker's opinions of value (if available), other information from the special servicer, available market data and Moody's internal data. The loss given default for each loan also takes into consideration repayment of servicer advances to date, estimated future advances and closing costs. Translating the probability of default and loss given default into an expected loss estimate, Moody's then applies the aggregate loss from specially serviced and troubled loans to the most junior classes and the recovery as a pay down of principal to the most senior classes.

DEAL PERFORMANCE

As of the September 14, 2017 distribution date, the transaction's aggregate certificate balance has decreased by 86% to $219 million from $2.79 billion at securitization. The certificates are collateralized by 30 mortgage loans ranging in size from less than 1% to 17% of the pool, with the top ten loans (excluding defeasance) constituting 69% of the pool.

Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 13, compared to 70 at Moody's last review.

Five loans, constituting 11% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

Eighty-two loans have been liquidated from the pool, resulting in an aggregate realized loss of $393.8 million (for an average loss severity of 61%). Twenty-one loans, constituting 87% of the pool, are currently in special servicing. The largest specially serviced loan is the Scottsdale Center loan ($38.0 million -- 17.3% of the pool), which is secured by an 201,565 squarefoot (SF) anchored community shopping center located in Rogers, Arkansas, the northwest portion of the state in the Fayetteville-Springdale-Rogers Metropolitan Area. The property consists of five buildings situated on 24 acres. Major tenants at the property include Belk, Ross Dress for Less, Barnes & Noble, and Staples. Belk currently makes up 57% of the property's net rentable area, occupying their space on two ground leases until March 2022.

The second largest specially serviced loan is the Renaissance III Retail - A note ($30.0 million -- 13.7% of the pool), which is secured by a 225,973 SF class B+ grocery-anchored retail center located in central Las Vegas, Nevada, four miles east of the Vegas strip. The anchor space is currently leased to Ralph's Grocery, however the space is unoccupied. Current tenants at the property include the State of Nevada Welfare Division, Planet Fitness, Ace Hardware, Chase Bank, and Sonic. The loan first transferred to special servicing in March 2010 and received a modification in April 2011. The original note was split into a $30 million A-Note and a $10 million B-Note. The loan transferred back to special servicing for imminent default following the borrower's inability to pay the loan in full at maturity in May 2017.

The third largest specially serviced loan is the Gristmill Village loan ($12.9 million -- 5.9% of the pool), which is secured by a 91,845 SF mixed-use property located in Concord, Ohio, thirty miles northeast of the Clevelend CBD. The retail component of the property makes up 59,891 SF (65% by NRA) and is anchored by Reider's Market, an independent, owner operated grocery store. Other retail tenants are a mix of small restraunts and local businesses. The office component makes up 33,264 sf (35% by NRA). It is primarily leased to a mix of medical offices. The loan transferred to special servicing after it was not paid at maturity in April 2017.

The remaining 18 specially serviced loans are secured by a mix of property types. Moody's has also assumed a high default probability for one other poorly performing loan, constituting 3.8% of the pool. Moody's estimates an aggregate $107.7 million loss for the specially serviced and troubled loans (54% expected loss on average).

Moody's received full year 2016 operating results for 64% of the pool (excluding specially serviced and defeased loans). Moody's weighted average conduit LTV is 87%, compared to 102% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 22% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.2%.

Moody's actual and stressed conduit DSCRs are 1.26X and 2.48X, respectively, compared to 1.37X and 1.12X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance.

The top two conduit loans represent 6.6% of the pool balance. The largest loan is the Montgomery Trace Shopping Center Loan ($7.4 million -- 3.4% of the pool), which is secured by a grocery anchored shopping center located in Montgomery, Texas directly off of Highway 105 and fifty miles north of the Houston CBD. The anchor, Brookshire Brothers, is currently under lease until 2022. Per the Master Servicer, the property sustained only minor damage from Hurricane Harvey; three tenants reported minor roof leaks in need of ceiling tile replacements. Moody's LTV and stressed DSCR are 123% and 0.81X, respectively, compared to 126% and 0.80X at the last review.

The second largest loan is the Villa La Jolla Building Loan ($7.1 million -- 3.3% of the pool), which is secured by a medical office buillding located in La Jolla, California, roughly ten miles north of the San Diego CBD. The loan matured in May 2017, however the borrower reached a six-month extension agreement; the loan now matures on November 1, 2017. UC San Diego Health rents the entire space into April 2018. Due to the upcoming lease maturity of the sole tenant, Moody's employed a lit-dark analysis during this review. Moody's LTV and stressed DSCR are 102% and 1.09X, respectively.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

The analysis includes an assessment of collateral characteristics and performance to determine the expected collateral loss or a range of expected collateral losses or cash flows to the rated instruments. As a second step, Moody's estimates expected collateral losses or cash flows using a quantitative tool that takes into account credit enhancement, loss allocation and other structural features, to derive the expected loss for each rated instrument.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Rhett Terrell
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Keith Banhazl
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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