Feb 21 (The following statement was released by the rating agency)
Fitch Ratings has downgraded two classes of LB-UBS
Commercial Mortgage Securities Trust (LBUBS) commercial mortgage pass-through
certificates series 2006-C1. A detailed list of rating actions follows at the
end of this press release.
KEY RATING DRIVERS
Fitch modeled losses of 7.8% of the remaining pool; expected losses on the
original pool balance total 10.9%, including $124.4 million (5% of the original
pool balance) in realized losses to date. Fitch has designated 34 loans (16.6%)
as Fitch Loans of Concern, which includes eight specially serviced assets
As of the January 2014 distribution date, the pool's aggregate principal balance
has been reduced by 23.7% to $1.89 billion from $2.48 billion at issuance. Per
the servicer reporting, 11 loans (2.3% of the pool) are defeased. Interest
shortfalls are currently affecting classes G through T.
The largest contributor to expected losses is the DHL Center loan (3% of the
pool), which is secured by an approximate 490,000 square foot (sf) distribution
facility located in Breinigsville, PA. The facility was operated and 100%
occupied by DHL Express (USA), Inc . DHL ceased shipping operations within the
United States in January 2009 and has vacated the building. DHL is current on
rent payments and maintains on site security and maintenance. The 20 year lease
commenced in 2006, has a termination option at year 15 in 2021, and is
guaranteed by Deutsche Post AG (Fitch rated 'BBB+'). The loan is current on
payments through the January 2014 remittance date and matures in January 2016.
The next largest contributor to expected losses is the River Valley Mall loan
(2.5%), which is secured by an approximate 578,000 sf regional mall located in
Lancaster, OH. Current tenants include Dick's Sporting Goods (expires 2021),
Sears (expires 2016), JC Penney (expires 2017), and Elder Beerman (expires
2018). Regal Cinemas vacated at the expiration of their lease in December 2013.
The servicer-reported DSCR was 1.14x at year end 2012, down from 1.61x at
origination. The loan has been on the servicer watchlist since February 2009
and remains current on payments through the January 2014 remittance date.
The third largest contributor to expected losses is the Sterling Portfolio
(2.5%), which is secured by four office buildings totaling approximately 401,000
sf located in Nassau County and Suffolk County, NY. The servicer-reported DSCR
dropped to 0.77x at year end 2012, down from 1.44x at year end 2010.
Consolidated occupancy across the properties remained at 82%, unchanged from the
previous year end. The property has been under cash management since June 2013.
The loan has been on the servicer watchlist since September 2011 and remains
current on payments through the January 2014 remittance date.
Rating Outlooks on classes A-3 through A-M remain Stable due to increasing
credit enhancement and continued paydown. The Rating Outlook on class A-J is
Negative due to increasing risk of adverse selection as 95% of the pool is
scheduled to mature in the next two years. The Rating Outlook remains Stable on
rake classes IUU-1 and IUU-2 due to increasing credit enhancement from
amortization on the associated senior notes.
Fitch downgrades the following classes and assigns or revises Recovery Estimates
(REs) as indicated:
--$221 million class A-J to 'Bsf' from 'BBsf', Outlook Negative;
--$15.4 million class B to 'CCCsf' from 'Bsf', RE 55%;
Fitch affirms the following classes as indicated:
--$90.9 million class A-3 at 'AAAsf', Outlook Stable;
--$22 million class A-AB at 'AAAsf', Outlook Stable;
--$1.1 billion class A-4 at 'AAAsf', Outlook Stable;
--$245.6 million class A-M at 'AAAsf', Outlook Stable;
--$27.6 million class C at 'CCCsf', RE 0%;
--$24.6 million class D at 'CCsf', RE 0%;
--$18.4 million class E at 'CCsf', RE 0%;
--$21.5 million class F at 'Csf', RE 0%;
--$21.5 million class G at 'Csf', RE 0%;
--$16.7 million class H at 'Dsf', RE 0%;
--$0 class J at 'Dsf', RE 0%;
--$0 class K at 'Dsf', RE 0%;
--$0 class L at 'Dsf', RE 0%;
--$0 class M at 'Dsf', RE 0%;
--$0 class N at 'Dsf', RE 0%;
--$5.9 million class IUU-1 at 'BBsf', Outlook to Stable from Negative;
--$2.6 million class IUU-2 at 'Bsf', Outlook to Stable from Negative;
--$3.6 million class IUU-3 at 'Bsf', Outlook Negative;
--$1.9 million class IUU-4 at 'CCsf';
--$1.3 million class IUU-5 at 'CCsf';
--$908,999 class IUU-6 at 'CCsf';
--$960,210 class IUU-7 at 'CCsf';
--$1 million class IUU-8 at 'CCsf';
--$1.1 million class IUU-9 at 'CCsf'.
The class A-1 and A-2 certificates have paid in full. Fitch does not rate the
class P, Q, S, T and IUU-10 certificates. Fitch previously withdrew the ratings
on the interest-only class X-CP and X-CL certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions
is available in the Dec. 11, 2013 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