NEW YORK--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on LSTAR Commercial Mortgage Securities Trust 2015-3 Commercial Mortgage Pass-Through Certificates.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$22,564,000 class A-1 'AAAsf'; Outlook Stable;
--$83,766,000 class A-2 'AAAsf'; Outlook Stable;
--$25,994,000 class A-3 'AAAsf'; Outlook Stable.
The expected ratings are based on information provided by the issuer as of May 19, 2015. Fitch does not expect to rate the $50,678,000 class A-S, $244,950,289 interest-only class X-A, $244,950,289 interest-only class X-B, $243,533,000 interest-only class X-C, $17,596,000 class B, $18,300,000 class C, $24,635,000 class D, $8,447,000 class E, $7,742,000 class F, and $21,819,931 class G certificates.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 62 loans secured by 65 commercial properties having an aggregate principal balance of approximately $281.5 million as of the cut-off date. The loans were contributed to the trust by LStar Capital Finance.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 62.0% of the properties by balance, cash flow analysis of 90.6% and asset summary reviews on 90.6% of the pool.
KEY RATING DRIVERS
High Fitch Leverage: The pool's Fitch DSCR of 0.78x is significantly below both the YTD 2015 average of 1.18x and the 2014 average of 1.19x. The pool's Fitch LTV of 124.8% is significantly above both the YTD 2015 average of 110.4% and the 2014 average of 106.2%. The lower DSCR is partially attributed to Fitch's application of the 'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' for the larger sub-pool, given the loan concentrations. The pool's Fitch debt yield of 7.6% is also below the YTD 2015 average of 8.7% and the 2014 average of 9.2% for conduit transactions.
Loan Concentration: The pool is significantly more concentrated than other recent transactions. The largest loan, 101 Redwood Shores Parkway, represents 13.1% of the pool, and the top 10 loans represent 79.8%. The average top 10 concentration for the YTD 2015 and 2014 conduit transactions was 48.5% and 50.5%, respectively.}
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 14.9% below the most recent net operating income (NOI; for properties for which a recent NOI was provided, excluding properties that were stabilizing during this period). Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans, and could result in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to LSTAR 2015-3 certificates and found that the transaction displays slightly above-average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BBBsf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the senior 'AAAsf' certificates to 'BB+sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 10 - 11.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
Additional information is available at 'www.fitchratings.com'.
LSTAR Commercial Mortgage Securities Trust 2015-3
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866342
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions (pub. 20 Mar 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=862818
Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions (pub. 18 Jun 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748778
Global Structured Finance Rating Criteria (pub. 31 Mar 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608
Additional Disclosures
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985407
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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