Fitch Takes Various Rating Actions on COMM 2006- FL12

NEW YORK--(BUSINESS WIRE)--Fitch Ratings downgrades the following rake classes of COMM 2006-FL2 commercial mortgage pass-through certificates:

--$2.9 million class TC-1 to 'BB+' from 'BBB';

--$2.4 million class TC-2 to 'BB+' from 'BBB-'.

Fitch also places the following rake classes on Rating Watch Negative:

--$3.3 million class MSH-1 at 'BBB+';

--$2.9 million class MSH-2 at 'BBB';

--$4.8 million class MSH-3 at 'BBB-';

--$4.0 million class MSH-4 at 'BB+';

Additionally, Fitch affirms the following classes:

--$885.3 million class A-2 at AAA;

--$507.0 million class A-J at AAA';

--$96.1 million class B at 'AA+';

--$67.5 million class C at 'AA+'

--$74.4 million class D at 'AA',

--$55.4 million class E at 'AA-';

--$55.4 million class F at 'A+;

--$52.8 million class G at 'A+';

--$32.9 million class H at 'A';

--$37.5 million class J at 'A-';

--Interest Only classes X-1, X-2, X-3-BC, X-3-DB, X-3-SG, X-4, X-5-BC, X-5-DB, and X-5-SG at AAA.

Class A-1 has paid in full.

Fitch also affirms the rake classes as follows:

--$12.8 million class CN-1 at 'BBB';

--$8.7 million class CN-2 at 'BBB';

--$8.7 million class CN-3 at 'BBB-';

--$74.4 million class KR-1 at 'BBB+';

--$23.2 million class KR-2 at 'BBB';

--$65.5 million class KR-3 at 'BBB-';

--$6.8 million class IP-1 at 'BBB+';

--$11.2 million class IP-2 at 'BBB';

--$11.0 million class IP-3 at 'BBB-';

--$5.0 million class HDC-1 at 'BBB+';

--$6.5 million class FSH-1 at 'BBB+';

--$8.7 million class FSH-2 at 'BBB';

--$9.2 million class FSH-3 at 'BBB-';

--$1.1 million class CA-2 at 'BBB';

--$1.3 million class CA-3 at 'BBB-';

--$1.4 million class CA-4 at 'BBB-';

--$6.3 million class AN-3 at 'BBB-';

--$5.0 million class AN-4 at 'BBB-';

--$5.9 million class FG-1 at 'AA';

--$6.1 million class FG-2 at 'A+';

--$4.3 million class FG-3 at 'A-';

--$5.5 million class FG-4 at 'BBB';

--$7.2 million class FG-5 at 'BBB-';

--$2.5 million class LS-1 at 'BBB+';

--$2.7 million class LS-2 at 'BBB';

--$2.6 million class LS-3 at 'BBB-';

--$2.3 million class LB-1 at 'BBB+';

--$1.6 million class LB-2 at 'BBB';

--$1.6 million class LB-3 at 'BBB-';

--$1.8 million class ES-1 at 'BBB+';

--$1.7 million class ES-2 at 'BBB';

--$1.5 million class ES-3 at 'BBB-';

--$1.3 million class AH-1 at 'BBB+';

--$1.3 million class AH-2 at 'BBB';

--$1.5 million class AH-3 at 'BBB-';

--$1.9 million class AH-4 at 'BB+';

--$1.3 million class CM-1 at 'A-' and

--$2.5 million class CM-2 at 'BBB-'.

Rake class SR-1 has paid in full. Fitch does not rate classes CA-1, AN-1 and AN-2.

The downgrade of classes TC-1 and TC-2 is due to declining performance at The Avenue at Tower City, located in Cleveland, Ohio. The property's anchor tenant is Tower City Cinema. Despite an increase of occupancy to 95.1% at year end (YE) 2007 compared to 91.3% at YE06, inline sales per square foot (psf) have declined from $279 to $266 for YE06 and YE07, respectively.

The placement of classes MSH-1, MSH-2, MSH-3, and MSH-4 on Rating Watch Negative is due to slower than expected recovery from ongoing renovations. The loan is secured by three hotels; Sheraton Suites San Diego (San Diego, CA), Sheraton Framington (Framington, MA) and Westin Embassy Row (Washington, DC). The borrower did not meet YE07 budget targets due to the expectation that renovations would be complete and the properties would be fully operational. As a result, banquets, catering and transient business was turned away. Fitch will continue to monitor the performance of the loan as renovations are approaching completion.

As of the May 2008 distribution date, the total collateral balance has been reduced by 26.49% to $2.2 billion from $3.0 billion at issuance. Credit enhancement, however, has increased only marginally because of the transaction's modified sequential pay structure. The structure provides that, for all but one loan, 85% of any principal proceeds are allocated to the class A and A-J notes, with the remainder allocated to the remaining collateral classes B through J.

Since issuance in October 2006, the Strategic Hotel Portfolio loan has paid in full, along with its accompanying rake class. In addition, the balance of the Carr National Portfolio, the largest loan at issuance, was reduced by 68.8% through paydown, and the Carr America Portfolio, the fifth largest loan at issuance, was paid down by 73.7%. The Four Seasons Hualalai (Kailua-Kona, Hawaii) loan has paid down 12.8% through the sale of residences in the resort-home portion of that collateral.

The four largest loans make up 67.1% of the transaction, and all except one loan in the deal (3.0%) have subordinate debt outside the transaction. In addition, three loans, including the two Carr Portfolio loans and the Kerzner International Portfolio, have debt that is pari passu with the debt obligations in other commercial mortgage backed securities transactions.

The remaining collateral consists of sixteen loans listed below in order of size. The collateral includes loans on hotels (60.8%), office (17.1%), multifamily (11.9%) and retail (10.2%) properties.

The loans are: Kerzner International Portfolio (31.8%); Independence Plaza (11.9%); Hotel del Coronado (11.7%); Carr America National Pool 3 (11. 6%); Four Seasons Hualalai (8.0%); Albertson's (Newkirk) Portfolio (5.2%); MSREF Hotel Portfolio (3.1%); Superstition Springs Center (3.1%); Ft. Lauderdale Marina Marriott (3.0%); Legacy So Cal Portfolio (2.5%); The Avenue at Tower City (1.9%); Legacy Bayside (1.6%); Carr America Pool 2 (1.4%); Embassy Suites Lake Buena Vista (1.3%); Algonquin Hotel (1.3%); and Charleston Marriott (0.63%).

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.