NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 17 classes of Deutsche Bank Securities (DBUBS) commercial mortgage pass-through certificates series 2011-LC3. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The rating affirmations are based on the stable performance of the underlying collateral since issuance. Expected losses are in-line with issuance. The transaction continues to be highly concentrated with the top five and 10 largest loans accounting for 50% and 70%, respectively. Additionally, the transaction has a large hotel concentration of 19% with the second and fourth largest loans being secured by hotels.
There have been no delinquent or specially serviced loans in the pool since issuance. One loan (0.5% of the pool) is defeased. Fitch has designated two Fitch Loans of Concern (15.5%).
As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 4.4% to $1.58 billion from $1.65 billion at issuance. Interest shortfalls are currently affecting class G.
The largest Fitch loan of concern, Quadrus Office Park loan (8.3% of the pool), is secured by an eight-building office campus consisting of 216,605 sf, located on Sand Hill Road in Menlo Park, CA. The property is located two miles from the Stanford University Campus. Major tenants include The Henry J. Kaiser Family Foundation (10%), lease expiration June 2021; Samsung SemiConductor (7%), expiration May 2016; and Mayfield Fund, LLC (5%), expiration July 2023. There is approximately 18% tenant rollover in 2015 and 24% in 2016. As of March 2014, the property is 73.7% occupied with above- market-average rent of $87.13 per sf. Per REIS, as of 2Q'14, the San Francisco Metro office market vacancy is 12.6% with asking rent $45.38 per sf. The South San Mateo office submarket vacancy is 16% with asking rent $45.95 per sf. The loan remains current; however, Fitch continues to monitor the below-market occupancy at the property.
The next largest Fitch Loan of Concern (7.2%) is secured by a portfolio of eight full-service hotels located across eight states consisting of 2,342 rooms. The portfolio includes six Marriott hotels, one Doubletree, and one Hilton. As of December 2013 the portfolio was 62.5% occupied with revenue per available room (RevPAR) of $141, respectively, compared to 60% and $89 for the prior year. The portfolio is on the master servicer's watchlist due to borrower notification that the Hilton Boston Woburn sustained damage due to Hurricane Irene. Per the master servicer, the restoration is approximately 90% complete. The year end (YE) 2013 debt service coverage ratio improved to 5.42x from 4.97x at YE 2012 and remains above that at issuance.
Rating Outlooks on classes A-1 through P-M5 remain Stable due to sufficient credit enhancement and continued paydown and overall stable pool performance.
Fitch affirms the following classes as indicated:
--$34 million class A-1 at 'AAAsf', Outlook Stable;
--$671.8 million class A-2 at 'AAAsf', Outlook Stable;
--$97.3 million class A-3 at 'AAAsf', Outlook Stable;
--$112.1 million class A-4 at 'AAAsf', Outlook Stable;
--$127.6 million class A-M at 'AAAsf', Outlook Stable;
--Interest-only class X-A at 'AAAsf'; Outlook Stable;
--$75.2 million class B at 'AAsf', Outlook Stable;
--$54.2 million class C at 'Asf', Outlook Stable;
--$73.4 million class D at 'BBB-sf', Outlook Stable;
--$19.2 million class E at 'BBsf', Outlook Stable;
--$19.2 million class F at 'Bsf', Outlook Stable;
--$131.7 million class PM-1 at 'AAAsf', Outlook Stable;
--Interest-only class PM-X at 'AAAsf'; Outlook Stable;
--$32.9 million class PM-2 at 'AAsf', Outlook Stable;
--$28.9 million class PM-3 at 'Asf', Outlook Stable;
--$26.5 million class PM-4 at 'BBBsf', Outlook Stable;
--$20.9 million class PM-5 at 'BBB-sf', Outlook Stable.
Fitch does not rate the interest-only class X-B or the class G 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 then CMBS then Criteria Reports
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:
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
Global Structured Finance Rating Criteria