CHICAGO--(BUSINESS WIRE)--Fitch Ratings has upgraded one class and affirmed 19 classes of LB-UBS Commercial Mortgage Trust (LBUBS) commercial mortgage pass-through certificates series 2006-C1. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrade and affirmations follow positive developments in the modification of the largest loan in the pool. The pool has experienced 87.4% collateral reduction since issuance, with 12 loans outstanding, only two of which are currently considered performing. One loan, representing 26.4% of the pool, is scheduled to mature in 2017.
Deal Concentration: The deal is heavily concentrated by loan size. Twelve loans remain in the pool, including three assets (1.9% of the pool) that are real-estate-owned (REO). The largest loan in the pool makes up 34.9% of the total deal balance and is currently with the special servicer. Including this loan, 72.8% of the pool is in special servicing.
Modification of the Largest Loan: Although it is still in special servicing, the largest loan was modified in February 2016 and has performed in line with terms of the modification. Terms of the modification include a reduction to the interest rate, a three year maturity extension, with two additional one-year extension options and a conversion to interest only payments. In conjunction with the modification, a new equity partner purchased the majority ownership rights to the property which could aid in capital improvement projects and leasing activity.
Uncertain Timing: Nine of the 12 outstanding assets are in foreclosure proceedings or are already REO. None of the REO assets are currently being marketed for sale, and the timing for foreclosure processes varies significantly from state to state. Expected repayment of the senior bond hinges largely on the proceeds from the disposition of assets in special servicing.
The Triangle Town Center note is the largest in the pool with an outstanding principal balance of $108.2 million as of the November 2016 remittance. A non-trust subordinate note in the amount of $24.8 million is securitized in LBUBS 2006-C7. The subject is a 1.4 million square foot mall and lifestyle center in Raleigh, North Carolina. Anchor tenants, all of which own their own improvements, include Dillard's, Belk, Macy's, Saks Fifth Avenue and Sears. The mall is 90% owned by DRA Advisors after the original owner, CBL, sold its majority stake. CBL retains 10% ownership interest and acts as property manager.
The loan transferred to special servicing in September 2015 for imminent default and was originally scheduled to mature in December 2015. A modification of the loan was executed in February 2016. DRA Advisors contributed $25 million of new equity in the modification of the loan, to be used for funding of tenant improvements, leasing commissions and capital expenditures. Modification terms also included the lender's approval of a partial property release. The Triangle Town Place parcel sits across the street from the mall and lifestyle component and is 100% occupied by Dick's Sporting Goods, Bed Bath & Beyond, DSW, Party City and Kirkland's. Proceeds from the release of this parcel would be used to pay down the trust note. The sale and release are currently being negotiated, which is why the loan remains in special servicing despite being current on debt service payments.
The Rating Outlook for class A-J remains Stable. The class is not currently considered investment grade given the concentration of specially serviced loans in the deal. Timing of the disposition of these assets is uncertain, and the ultimate repayment of the senior bond depends in part on proceeds from those sales. Distressed classes may be subject to downgrades as losses are realized. Upgrades to class A-J are possible if loans are resolved with better than expected recoveries.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third party due diligence was provided or reviewed in relation to this rating action.
Fitch has upgraded the following class:
--$189 million class A-J to 'BBsf' from 'Bsf', Outlook Stable.
Fitch has affirmed the following ratings:
--$15.3 million class B at 'CCCsf', RE 100%;
--$27.6 million class C at 'CCCsf', RE 50%;
--$24.6 million class D at 'CCsf', RE 0%;
--$18.4 million class E at 'Csf', RE 0%;
--$21.5 million class F at 'Csf', RE 0%;
--$13.7 million class G at 'Dsf', RE 0%;
--$0 class H at 'Dsf', RE 0%;
--$0 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 IUU-3 at 'Dsf', RE 0%;
--$0 class IUU-4 at 'Dsf', RE 0%;
--$0 class IUU-5 at 'Dsf', RE 0%;
--$0 class IUU-6 at 'Dsf', RE 0%;
--$0 class IUU-7 at 'Dsf', RE 0%;
--$0 class IUU-8 at 'Dsf', RE 0%;
--$0 class IUU-9 at 'Dsf', RE 0%.
The class A-1, A-2, A-3, A-4, A-AB, A-M, IUU-1 and IUU-2 certificates have paid in full. Fitch does not rate the class P, Q, S, T and IUU-10 certificates. Fitch previously withdrew the ratings on the interest-only class X-CP and X-CL certificates.
Additional information is available at www.fitchratings.com.
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Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
North America and Asia-Pacific Multiborrower CMBS Surveillance Criteria (pub. 01 Dec 2016)
Dodd-Frank Rating Information Disclosure Form
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