Fitch Affirms BSCMS 2006-PWR11; Outlook Revised

Fitch Ratings has affirmed all classes of commercial mortgage pass-through certificates from Bear Stearns Commercial Mortgage Securities Trust, series 2006-PWR11 and revises the Rating Outlooks on the class A-J to Negative from Stable. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmations are due to sufficient credit enhancement as a result of continued principal paydown since Fitch's last rating action. Since Fitch's last review, the pool has paid down 6.4%. Fitch modeled losses of 9.9% of the remaining pool; expected losses on the original pool balance total 10.9%, including losses already incurred to date (3.5%). Fitch has identified 23 loans (27.7%) as Fitch Loans of Concern (LOC), five of which are among the top 15 loans. Two of the LOCs are in special servicing, including one real estate owned (REO) asset (0.6%).

As of the October 2014 distribution date, the pool's aggregate principal balance has been reduced by 24.3% to $1.4 billion from $1.61 billion at issuance. Nine loans have defeased (3.8% of the pool). Interest shortfalls in the amount of $3.3 million are affecting classes H, L, O and P.

The largest contributors to modeled losses are the Investcorp Retail Portfolio 1 loan (6.8% of the remaining pool balance) and the Investcorp Retail Portfolio 2 loan (6.3%), which are cross-collateralized and cross-defaulted retail portfolios. The collateral consists of eight retail properties totaling approximately 1.6 million square feet (sf), seven of which are located in Ohio and one in Indiana. Anchor tenants are Wal-Mart, Sam's Club, Kohl's, Hobby Lobby and Regal Cinema. Hobby Lobby, which leases a total of 127,205 sf at two of the properties, vacated one space in September 2012 but is still paying rent. The lease for the dark space expires in December 2014.

The combined occupancy as of June 30, 2014 for Investcorp Retail Portfolio I was 84%, slightly down from 86% at year-end (YE) 2013. The second quarter 2014 (2Q'14) servicer reported debt service coverage ratio (DSCR) was 1.08x, compared to 1.13x at YE2013, 1.14x at YE2012 and 1.03x at YE2011. The combined occupancy for Investcorp Retail Portfolio 2 was 92% at 2Q'14, unchanged since YE2013. The 2Q'14 servicer reported DSCR was 1.17x, the same level as YE2013 but down from 1.22x at YE2012 and 1.15x at YE2011. The interest-only loans are sponsored by Investcorp and Casto.

The next largest contributor to modeled losses (1.6%) is secured by a 144,147 sf retail property in Athens, GA. The loan transferred to special servicing in December 2013 due to payment default. A pre-negotiation agreement has been executed and the borrower continues to remit cash flow. The special servicer is evaluating resolution alternatives. As of August 2014, the property was 67.4% occupied, compared to 71% at 3Q'13 and 85% at YE2012. The property was 87.5% occupied at issuance. Current major tenants at the property include Bed, Bath & Beyond, Barnes & Noble, which has extended its lease by six years until February 2020, and Party City with a lease expiring September 2015.

Fitch also modeled losses on the Hickory Point Mall loan (2%), which is collateralized by 424,700 sf of an 824,102 sf regional mall in Forsyth, IL, 180 miles southwest of Chicago. JC Penney, which was formerly part of the loan collateral (representing 12% of total mall space), closed their store in May 2014, approximately 17 months prior to lease expiration in October 2015. The other four anchors, including Bergner's, Sears, Kohl's, and Von Maur, own their own pads. Per the servicer, the borrower has negotiated a lease for approximately half of JC Penney's space starting at the beginning of 2015. Although Sears is not part of the collateral, Fitch considered in its analysis the impact of a store closure and the go-dark/co-tenancy clauses that may be triggered, any of which would negatively affect mall performance and cash flow. As of June 2014, the servicer reported a DSCR of 1.14x with 81% occupancy rate, compared to a DSCR of 1.36x with 91.5% occupancy rate at issuance.

In addition, Fitch is concerned with the SBC - Hoffman Estates loan (5%), which is collateralized by a 1.69 million sf office campus located in Hoffman Estates, IL. The whole loan consists of two pari passu A-notes. Only the A-2 note is included in this transaction. The property is 100% leased on a triple-net basis to SBC Services, Inc. until Aug. 14, 2016. The single tenant has indicated they will not renew their lease upon expiration. Fitch performed sensitivity analysis to evaluate the rating impact of a loan default, in the event the loan has difficulty reaching its maturity and/or refinancing. Under various loan loss scenarios, credit enhancement for all 'AAA' ratings passes the respective rating hurdles.

RATING SENSITIVITIES

The ratings on the 'AAA' rated classes are expected to remain stable. Future downgrades on classes A-J and B are possible should the collateral performance continue to deteriorate, considering the high concentration of Fitch LOC's. The distressed classes (rated below 'B') may be subject to further rating actions as losses are realized.

Fitch has affirmed the following classes as indicated:

--$821.7 billion class A-4 at 'AAAsf'; Outlook Stable;

--$92.1 million class A-1A at 'AAAsf'; Outlook Stable;

--$185.9 million class A-M at 'AAAsf'; Outlook Stable;

--$146.4 million class A-J at 'BB/sf'; Outlook to Negative from Stable;

--$37.2 million class B at 'B/sf'; Outlook Negative;

--$23.2 million class C at 'CCCsf'; RE 50%;

--$27.9 million class D at 'CCsf'; RE0%;

--$18.9 million class E at 'CCsf'; RE0%;

--$20.9 million class F at 'Csf'; RE0%';

--$18.9 million class G at 'Csf''; RE0%;

--$14.3 million class H at 'Dsf'; RE0%.

Classes J through O have been depleted due to realized losses and are affirmed at 'Dsf'; RE 0%. Class A-1, A-2, A-3 and A-AB have paid in full. Class P is not rated by Fitch. Fitch has previously withdrawn the ratings of the interest-only class X.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).

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=724961

Additional Disclosure

Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=913374

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