Fitch Downgrades One Class of PCMT 2003-PWR1

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has downgraded one class and affirmed eight classes of Prudential Commercial Mortgage Trust 2003-PWR1 (PCMT 2003-PWR1) commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The downgrade to class F is based on losses that could be higher than expected on recent valuations of the largest loan in the pool. The affirmation to class E is the result of sufficient credit enhancement that offsets the expected losses from the remaining underlying collateral.

There are two assets remaining in the pool, both of which are specially serviced. Fitch modeled losses of 59.4% of the remaining pool; expected losses on the original pool balance total 7.1%, including $43.4 million (4.5% of the original pool balance) in realized losses to date. As of the January 2015 distribution date, the pool's aggregate principal balance has been reduced by 95.6% to $42.5 million from $960 million at issuance. Interest shortfalls are currently affecting classes G through P.

The largest loan in the pool is the Brandywine Office Building & Garage loan (68.4% of the pool), which is secured by a 405,844 square foot (sf) office building with a 660-parking space garage located in Wilmington, DE. The loan transferred to special servicing in April 2014 for the second time. The loan previously underwent a modification in June 2011, which included a $15.1 million write-off of principal; an interest rate reduction with periodic rate increases until December 2015; and interest-only payments until maturity May 2020. The property's performance has continued to suffer due to declining occupancy and deteriorating cash flows. The special servicer reported the property's occupancy has remained unchanged at 34.3% as of the third-quarter 2014 from third-quarter 2013. Additionally, the special servicer is in negotiations with the borrower for a potential discounted payoff.

The other remaining specially-serviced asset, The Landings (31.6%), was sold in early January 2015 and is expected to be liquidated with a loss at the February remittance.

RATING SENSITIVITIES

The Rating Outlook on class E is revised to Stable due to expected full recovery after liquidation proceeds are applied from The Landing sale. Although full recovery is likely for class F, future deterioration in asset value may result in some loss at liquidation of the remaining loan.

Fitch takes the following rating actions, and revises Outlooks and assigns REs as indicated:

--$10.8 million class F downgraded to 'CCCsf' from 'Bsf'; RE 100%.

--$5.4 million class E at 'BBB-sf'; Outlook to Stable from Negative;

--$12 million class G affirmed at 'Csf'; RE 5%;

--$14.2 million class H affirmed at 'Dsf'; RE 0%;

--$0 class J affirmed at 'Dsf'; RE 0%;

--$0 class K affirmed at 'Dsf'; RE 0%;

--$0 class L affirmed at 'Dsf'; RE 0%;

--$0 class M affirmed at 'Dsf'; RE 0%;

--$0 class N affirmed at 'Dsf'; RE 0%.

The class A-1, A-2, B, C, D and X-2 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class X-1 certificates.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', 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, 2014);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978803

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