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Rating Action:

Moody's affirms five classes and downgrades three classes of BACM 2007-1

25 Jan 2019

Approximately $404 million of structured securities affected

New York, January 25, 2019 -- Moody's Investors Service, ("Moody's") has affirmed the ratings on five classes and downgraded the ratings on three classes of Banc of America Commercial Mortgage Trust 2007-1, Commercial Mortgage Pass-Through Certificates, Series 2007-1 as follows:

Cl. A-MFL, Downgraded to B1 (sf); previously on Aug 2, 2018 Affirmed Ba1 (sf)

Cl. A-MFX, Downgraded to B1 (sf); previously on Aug 2, 2018 Affirmed Ba1 (sf)

Cl. A-MFX2, Downgraded to B1 (sf); previously on Aug 2, 2018 Affirmed Ba1 (sf)

Cl. A-J, Affirmed C (sf); previously on Aug 2, 2018 Affirmed C (sf)

Cl. B, Affirmed C (sf); previously on Aug 2, 2018 Affirmed C (sf)

Cl. C, Affirmed C (sf); previously on Aug 2, 2018 Affirmed C (sf)

Cl. D, Affirmed C (sf); previously on Aug 2, 2018 Affirmed C (sf)

Cl. XW*, Affirmed C (sf); previously on Aug 2, 2018 Affirmed C (sf)

* Reflects interest-only classes

RATINGS RATIONALE

The ratings on three P&I classes, Cl. A-MFX, Cl. A-MFX2 and Cl. A-MFL, were downgraded due to the current and potential future interest shortfalls caused by the specially serviced and modified loans.

The ratings on four P&I classes, Cl. A-J, Cl. B, Cl. C and Cl. D, were affirmed because the ratings are consistent with Moody's expected loss.

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

Moody's rating action reflects a base expected loss of 66.8% of the current pooled balance, compared to 68.8% at Moody's last review. Moody's base expected loss plus realized losses is now 17.9% of the original pooled balance, compared to 18.4% 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 principal methodology used in rating all classes except interest-only classes was "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in July 2017. The methodologies used in rating interest-only classes were "Moody's Approach to Rating Large Loan and Single Asset/Single Borrower CMBS" published in July 2017 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in June 2017. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.

The Credit Rating for Banc of America Commercial Mortgage Trust 2007-1, Cl. XW was assigned in accordance with Moody's existing Methodology entitled "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" dated June 2017. Please note that on November 14, 2018, Moody's released a Request for Comment, in which it has requested market feedback on potential revisions to its Methodology for rating structured finance interest-only (IO) securities. If the revised Methodology is implemented as proposed, the Credit Rating on Banc of America Commercial Mortgage Trust 2007-1, Cl. XW may be positively affected. Please refer to Moody's Request for Comment, titled "Proposed Update to Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" for further details regarding the implications of the proposed Methodology revisions on certain Credit Ratings.

Moody's analysis incorporated a loss and recovery approach in rating the P&I classes in this deal since 83% of the pool is in special servicing and Moody's has identified additional troubled loans representing 2.5% 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 January 15, 2019 distribution date, the transaction's aggregate certificate balance has decreased by 87% to $404 million from $3.1 billion at securitization. The certificates are collateralized by 12 mortgage loans ranging in size from less than 1% to 35% of the pool. The transaction is under-collateralized as the aggregate certificate balance is $3.4 million greater than the pooled loan balance.

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 4, the same as at Moody's last review.

One loan, constituting 3.6% of the pool, is 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.

Thirty-one loans have been liquidated from the pool, resulting in an aggregate realized loss of $296 million (for an average loss severity of 39%). The largest loan in special serving is the Skyline Portfolio ($140 million A-note -- 34.7% of the pool and a $131 million B-note -- 32.5% of the pool), which represents a portion of an aggregate $678.0 million mortgage loan (including both the A and B notes). The loan is secured by eight cross-collateralized and cross-defaulted office properties totaling 2.6 million (SF) which are located outside of Washington, DC in Falls Church, Virginia. A modification closed effective October 30, 2013 that created the A / B note split. Post-modification, the loan returned to the master servicer in February 2014. In April 2016 the loan transferred to special servicing again for imminent monetary default. In December 2016 the loan became REO. The portfolio's total occupancy as of December 2018 was 44%. The special servicer has indicated an acceptable bid was not received on One Skyline Tower when offered for sale in late 2018 and they intend to market the property for sale again in the first quarter of 2019. Additionally, leasing stabilization efforts on the remainder of properties are ongoing.

The second largest specially serviced loan is the former Marsh Office 886 ($18.5 million -- 4.6% of the pool), which is secured by an approximately 176,000 square foot (SF) office property located in Fishers, Indiana, a northeastern suburb of Indianapolis. Marsh Supermarkets was the sole tenant at securitization, using the property as their corporate headquarters. However, Marsh filed for Chapter 11 bankruptcy in May 2017 and vacated the property. The property is currently 31% occupied by two month-to-month tenants. The loan transferred to special servicing in December 2016 due to maturity default. The special servicer indicated foreclosure was filed in February 2017 and a receiver was appointed in March 2017. Moody's anticipates a significant loss on this specially serviced loan.

The third largest specially serviced loan is the University Commons - Lexington ($16.9 million -- 4.2% of the pool), which is secured by 3-story garden apartment community located in Lexington, Kentucky. The property is operated as a student housing community comprising of 182 units and 676 beds. The loan transferred to special servicing in November 2016 due to maturity default and the property's occupancy has declined from 77% in December 2017 to 72% as of May 2018.

The remaining four specially serviced loans are secured by a mix of property types. Moody's has also assumed a high default probability for one poorly performing loan, constituting 2.5% of the pool. Moody's estimates an aggregate $256 million loss for the specially serviced and troubled loans (74% expected loss on average). Additionally, Moody's is currently treating the under-collateralization as a loss of principal to the trust.

As of the January 15, 2019 remittance statement cumulative interest shortfalls were $80.8 million and have periodically impacted Cl. A-MFX, Cl. A-MFX2 and Cl. A-MFL. As of the January 2019 remittance statement, Cl. A-MFX, CL. A-MFX2 and CL. A-MFL have received partial monthly interest shortfalls in four out of the past five months. Moody's anticipates interest shortfalls will continue because of the exposure to specially serviced loans and/or modified loans. Interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal entitlement reductions (ASERs), loan modifications and extraordinary trust expenses.

The top three performing loans represent 13.6% of the pool balance. The largest performing loan is the BMW Financial Services Building Loan ($28.3 million -- 7.1% of the pool), which is secured by a single tenant suburban office building in Hilliard, Ohio approximately 16 miles northeast of Columbus. The property was 100% leased to BMW Financial Services as of December 2018. The loan is coterminous with the lease expiration which occurs in February 2021. Due to the single tenant exposure, Moody's incorporated a Lit/Dark analysis for the loan. Moody's LTV and stressed DSCR are 138% and 0.70X, respectively.

The second largest loan is the Merrymeeting Plaza A Note Loan ($14.3 million -- 3.6% of the pool), which is secured by a 157,980-SF grocery-anchored retail property located in Brunswick, Maine. A loan modification was executed in December 2015 splitting the loan into two notes, a $14.3 million A Note and a $10.1 million B-Note. The loan returned from special servicing effective May 2016 as a corrected mortgage. The property is anchored by a Shaw's Supermarket and includes national tenants Bed Bath & Beyond and PetSmart. As of November 2018 the property was 80% leased compared to 74% leased in July 2017. Moody's LTV and stressed DSCR on the A Note are 127% and 0.74X, respectively. The B-Note was identified as a troubled loan.

The third largest loan is the CAE, Inc. Loan ($12.1 million -- 3.0% of the pool), which is secured by a a single tenant suburban office building located in Whippany, New Jersey. The property was 100% leased to CAE SimuFlite Inc as of December 2018. CAE SimuFlite Inc uses the property as its Northeast Training Center, providing pilot, technical, and flight crew training to business aircraft operators. Due to the single tenant concentration, Moody's incorporated a Lit/Dark analysis for the loan. Moody's LTV and stressed DSCR are 121% and 0.89X, 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 Lead 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

Matthew Halpern
Vice President - Senior Analyst
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.
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