NEW YORK--(BUSINESS WIRE)--Fitch Ratings has upgraded one class and affirmed 22 classes of LB-UBS Commercial Mortgage Trust (LBUBS) commercial mortgage pass-through certificates series 2005-C7. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrade reflects an increase in credit enhancement as a result of paydowns, defeasance, and stable performance of the underlying collateral since Fitch's last rating action. Fitch modeled losses of 5.7% of the remaining pool; expected losses on the original pool balance total 6.7%, including $94.6 million (3.9% of the original pool balance) in realized losses to date. Fitch has designated 21 loans (12.6%) as Fitch Loans of Concern, which includes six specially serviced assets (6.7%).
As of the March 2015 distribution date, the pool's aggregate principal balance has been reduced by 49.3% to $1.22 billion from $2.41 billion at issuance. Per the servicer reporting, 12 loans (12.1% of the pool) are defeased. Interest shortfalls are currently affecting classes G through T.
The largest contributor to expected losses is the specially-serviced Reckson Portfolio II loan (2.4% of the pool), which is secured by three office properties totaling 330,000 square feet (sf) located in Melville, NY. The property has experienced significant cash flow issues due to recent occupancy declines. Occupancy fell to 11% as of September 2014, compared to 64% in December 2013. According to the servicer, the borrower is unable to obtain refinancing due to the low occupancy. The loan transferred to special servicing in August 2014 for imminent maturity default, and subsequently matured in October 2014 without repayment. The servicer issued a notice of default to the borrower in October 2014, and filed for foreclosure in January 2015. According to the special servicer, no formal request for modification has been made by the borrower to date.
The next largest contributor to expected losses is the specially-serviced Sarasota Main Plaza (3.05%). The loan is secured by a 253,504 sf mixed use (office/retail) building located in the downtown sector of Sarasota, FL. The original $36 million loan on this property had transferred to the special servicer in December 2008 for imminent default. The loan was modified while in special servicing, and returned back to the master servicer in 2013. Terms of the modification included an extension of the interest only payment period, and bifurcation of the loan into a senior ($21.3 million) and junior ($14.6 million) component. Any recovery to the B-note is contingent upon full recovery to the A-note proceeds at the loan's maturity in September 2015. Unless collateral performance improves, recovery to the B-note component is unlikely. The loans recently transferred back to the special servicer in October 2014 after the borrower's request for a waiver under the modification agreement to allow for an expedited sale of the property. The potential sale did not occur, and the borrower continues efforts to market and sell the property. The loan remains current under the modified terms, and is paid through the March 2015 payment date.
The ratings on the super senior and mezzanine 'AAA' rated classes are expected to remain stable due to sufficient credit enhancement, stable performance and continued paydown. The Positive Outlooks on classes A-J, B, and C reflects the possibility for future upgrades due to an expected increase in credit enhancement as maturing loans pay off this year (90% of the pool matures prior to the end of 2015). Downgrades may be possible should actual losses be higher than expected, or if loans fail to repay at their expected maturities.
Fitch upgrades the following class:
--$195.9 million class A-J to 'AAsf' from 'Asf'; Outlook Positive.
Fitch affirms the following classes:
--$460.6 million class A-4 at 'AAAsf'; Outlook Stable;
--$78.1 million class A-1A at 'AAAsf'; Outlook Stable;
--$233.9 million class A-M at 'AAAsf'; Outlook Stable;
--$14.2 million class B at 'BBBsf'; Outlook Positive;
--$35.2 million class C at 'BBB-sf'; Outlook Positive;
--$29.3 million class D at 'BBsf'; Outlook Stable;
--$23.5 million class E at 'Bsf'; Outlook Stable;
--$23.5 million class F at 'CCCsf'; RE 100%;
--$26.4 million class G at 'CCsf'; RE 15%;
--$17.5 million class H at 'CCsf'; RE 0%;
--$10.6 million 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%;
--$0 class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%;
--$0 class S at 'Dsf'; RE 0%;
--$1 million class CM-1 at 'AAsf'; Outlook Stable;
--$5 million class CM-2 at 'Asf'; Outlook Stable;
--$956,000 class CM-3 at 'A-sf'; Outlook Stable;
--$3 million class CM-4 at 'BBBsf'; Outlook Stable.
The class A-1, A-2, A-3 and A-AB certificates have paid in full. Fitch does not rate the class T certificate. Fitch previously withdrew the ratings on the interest-only class X-CP and X-CL certificates.
The CM rake classes represent the $10 million B-note for the Cherryvale Mall. The $67.7 million A-note is included in the pooled portion of the trust. Fitch does not rate the SP-1 through SP-7 rake classes, which are specific to the Station Place I $63 million B-note. A $3 million A-note for Station Place I is included in the pooled portion of the trust.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 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'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria