NEW YORK--()--Fitch Ratings has affirmed LB-UBS Commercial Mortgage Trust (LB-UBS) commercial mortgage pass-through certificates series 2007-C7. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations reflect sufficient credit enhancement to offset Fitch modeled losses across the pool. Fitch modeled losses of 8.5% of the remaining pool; expected losses on the original pool balance total 11.7%, including losses already incurred. The Negative Outlook on classes A-M and A-J reflect performance concerns and the overall high leverage on several loans in the top 15. The allocation of the loan pool is highly concentrated with the top 15 loans representing 79% of the pool balance; the top three loans combined represent 39% of the pool balance with their individual loan balances each representing greater than 10% of the pool.
Fitch has designated 19 loans (27%) as Fitch Loans of Concern, which includes 11 specially serviced assets (8.7%). The specially serviced loans include two loans in foreclosure (5.84%), six loans greater than 90 days delinquent (1.71%), one loan greater than 60 days delinquent (0.56%), and two loans greater than 30 days delinquent (0.55%).
As of the February 2013 distribution date, the pool's aggregate principal balance has been reduced by 15.5% to $2.68 billion from $3.17 billion at issuance, of which 11% was due to paydowns and 4.5% was due to realized losses. Per the servicer reporting, one loan is partially defeased (0.1% of the pool). Interest shortfalls are currently affecting classes F through T.
The largest contributor to expected losses is the District at Tustin Legacy loan (7.7% of the pool), which is secured by 521,694 square feet (sf) of a 979,883 sf retail center in Tustin, CA. Major tenants include Target, Whole Foods, TJ Maxx, and an AMC Theater. Non-collateral anchors are Costco and Lowes. Best Buy, which leases 30,000 sf of the collateral (or 5.8% of the net rentable area [NRA]) through January 2016, had vacated the property in 2012; the space remains dark and Best Buy continues to pay rent. The December 2012 rent roll reported the property 98.5% leased (which includes the vacant Best Buy space). Despite the high occupancy since issuance, the property's net operating income (NOI) has performed lower than expected as rental rates and reimbursements remain below underwritten levels. The NOI debt service coverage ratio (DSCR) reported at 0.90 times (x) and 0.92x for year-to-date (YTD) September 2012 and year end (YE) December 2012, respectively. The loan remains current as of the February 2013 remittance.
The next largest contributor to expected losses is the Ritz Carlton Bachelor Gulch loan (2.3%), which is secured by a 117-room, full service resort hotel in Avon, CO located in Colorado's Vail Valley on Beaver Creek Mountain. The loan had previously transferred to special servicing in October 2010 due to payment default. The property had experienced cash flow issues in 2009 from declining occupancy and RevPAR stemming from the recent economic recession. The loan was modified while in special servicing and returned to the master servicer in June 2012; modified terms include a reduced pay rate and a deferred accrual rate. As of February 2013, the loan is current under its modified terms. The trailing 12 month (TTM) December 2012 occupancy reported at 55%, ADR at $393.41, and RevPAR at $216.35, an increase of 2%, 2.5%, and 4.6%, respectively, over the prior year.
The third largest contributor to expected losses is the specially-serviced The Legends at Village West loan (5.1%), which is secured by a 680,157 sf retail center in Kansas City, KS. The open-air life style center, built in 2006, features several restaurants as well as 'premium brand' outlet tenants including Saks Fifth Avenue, Tommy Hilfiger, Polo Ralph Lauren, Nike, and BCBG. The property had experienced cash flow issues due to an increase in expenses since underwriting. The borrower had requested a restructure of the loan, and the loan transferred to special servicing in November 2011 due to payment default.
After transferring to special servicing, the borrower continued to aggressively lease up the property. Current occupancy is 93%, a significant improvement from June 2011 at 79%. A foreclosure auction occurred in January 2013, and the special servicer approved the sale which is expected to close by early March 2013.
Fitch affirms the following classes as indicated:
--$1.2 million class A-2 at 'AAAsf', Outlook Stable;
--$69.4 million class A-AB at 'AAAsf', Outlook Stable;
--$1.7 billion class A-3 at 'AAAsf', Outlook Stable;
--$132.7 million class A-1A at 'AAAsf', Outlook Stable;
--$317 million class A-M at 'AAAsf', Outlook Negative;
--$269.5 million class A-J at 'B-sf', Outlook Negative;
--$47.6 million class B at 'CCCsf', RE 20%;
--$35.7 million class C at 'CCsf', RE 0%;
--$23.8 million class D at 'CCsf', RE 0%;
--$27.7 million class E at 'CCsf', RE 0%;
--$15.9 million class F at 'Csf', RE 0%;
--$31.7 million class G at 'Csf', RE 0%;
--$27.7 million class H at 'Csf', RE 0%;
--$11.5 million class J at 'Dsf', RE 0%;
--Class K at 'Dsf', RE 0%;
--Class L at 'Dsf', RE 0%;
--Class M at 'Dsf', RE 0%;
--Class N at 'Dsf', RE 0%;
--Class P at 'Dsf', RE 0%;
--Class Q at 'Dsf', RE 0%;
--Class S at 'Dsf', RE 0%.
The balances for classes K, L, M, N, P, Q, and S have been reduced to zero due to realized losses. The class A-1 certificate has paid in full. Fitch does not rate the class T certificates. Fitch previously withdrew the ratings on the interest-only class X-CP, X-CL and X-W certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 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'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria