Manhattan House In-Fighting Leads to Fitch Downgrade

June 19, 2007 03:55 PM Eastern Daylight Time
Fitch Downgrades 2 Classes of CSFB 2005-CND2

CHICAGO--(BUSINESS WIRE)--Fitch Ratings downgrades and removes from Rating Watch Negative the following classes of Credit Suisse First Boston's (CSFB) commercial mortgage pass-through certificates, series 2005-CND2:

--$23 million class M to 'BB' from 'BBB-';

--$18.8 million class N to 'BB-' from 'BBB-'.

In addition, Fitch affirms the following classes:

--$375.4 million class A-2 at 'AAA';

--Interest-only class A-X-1 at 'AAA';

--Interest-only class A-X-2 at 'AAA';

--Interest-only class A-X-3 at 'AAA';

--Interest-only class A-X-4 at 'AAA';

--Interest-only class A-X-5 at 'AAA';

--Interest-only class A-Y at 'AAA';

--$64 million class B at 'AAA';

--$63 million class C at 'AA';

--$39 million class D at 'AA';

--$36 million class E at 'AA-';

--$35 million class F at 'A+';

--$37 million class G at 'A';

--$33 million class H at 'A-';

--$36 million class J at BBB+';

--$32 million class K at 'BBB';

--$32 million class L at 'BBB-'.

Classes A-1, A-1S, and A-1J have been paid in full.

As of the June 2007 remittance date, the transaction's principal balance had decreased by 58.6% to $824.3 million from $2 billion at issuance due to the payment in full of twelve loans. Eight loans remain in the transaction. Five are secured by multifamily rental properties that are undergoing conversion to individual condominiums. Three loans are secured by multifamily properties with cancelled condominium conversions. All loans are current, and none are specially-serviced. There have been no losses to the trust.

The downgrades are due to several Fitch concerns about the transaction's remaining loans; upcoming 2007 maturity dates, geographic concentration (all of the remaining loans are secured by properties in either New York or Florida), concentration by size (the five largest loans comprise 90.1% of the transaction), oversupply in various Florida condominium markets, and delays at the largest loan in the transaction - Manhattan House (54.6%). All of the loans mature in 2007.

Four (17.8%) of the eight remaining loans are in Florida. Three of the loans in Florida are secured by multifamily properties that are no longer being converted to condos: Mizner Court (7%), Spring Harbor (4.6%) and Spring Landing (3.8%). All three are being re-leased as rental properties. Fitch is concerned that they do not generate sufficient cash flows as rentals to support their current debt levels, and as a result the loans no longer maintain investment-grade credit assessments.

The Manhattan House loan is secured by a 583-unit multifamily rental building located on the Upper East Side of Manhattan, New York. As of the June 2007 remittance, there had been no sales or contracts signed for any of the units. Fitch is monitoring the ongoing status of litigation between the partners and its impact on the loan's performance.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.