Fitch Affirms LBUBS 2006-C7
CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed 21 classes of LB-UBS Commercial Mortgage Trust (LBUBS 2006-C7) commercial mortgage pass-through certificates series 2006-C7. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations reflect sufficient credit enhancement relative to Fitch expected losses. Fitch modeled losses of 9.9% of the remaining pool; expected losses on the original pool balance total 14%, including $188.7 million (6.3% of the original pool balance) in realized losses to date. Fitch has designated 38 loans (23.5%) as Fitch Loans of Concern, which includes nine specially serviced assets (6.2%).
As of the January 2014 distribution date, the pool's aggregate principal balance has been reduced by 23.7% to $2.3 billion from $3.02 billion at issuance. Per the servicer reporting, one loan (0.2% of the pool) is defeased. Interest shortfalls are currently affecting classes A-J through T.
The largest contributor to expected losses is an 872,252 sf office property (5.0% of the pool) located in Atlanta, GA secured by two office buildings, a retail mall building and a three-level underground parking garage. The loan was modified in December 2012 into an A/B note structure with a maturity extension to October 2016. The borrower infused additional equity to fund reserves and is completing several capital projects to improve leasing and tenant retention. As of June 2013, occupancy for the property was 64% with DSCR of 0.89x. The loan has returned to the master servicer and is current as of the January 2014 remittance.
The next largest contributor to expected losses is an office property (2.8%) totaling 494,012 sf located in Atlanta, GA. The loan is secured by two office buildings connected by a seven-level parking structure. As of June 2013, occupancy for the property was 61% with DSCR of 0.47x. The loan was modified in December 2012 into an A/B note structure with a maturity extension to October 2016. The borrower contributed additional equity to fund reserves and bring the loan current. The loan has returned to the master servicer and is current as of the January 2014 remittance.
The third largest contributor to expected losses is a portfolio of 38 office buildings totaling 1.1 million sf (4.1%) located in 15 states. The portfolio is generally classified as single-tenant and is leased to various federal and state government agencies of the United States. The loan transferred to special servicing in September 2011 for imminent monetary default and is in the process of foreclosure. The servicer will determine a strategy for disposition once the asset becomes REO.
Rating Outlooks on classes A-2 through A-M remain Stable due to sufficient credit enhancement and continued paydown. Although credit enhancement remains high relative to the rating category for class A-M, upgrades were limited given the potential for interest shortfalls associated with modified and specially serviced loans to impact the class. Distressed classes (those rated below 'B') may be subject to further downgrades as additional losses are realized.
Fitch affirms the following classes:
--$292.8 million class A-2 at 'AAAsf', Outlook Stable;
--$28.1 million class A-AB at 'AAAsf', Outlook Stable;
--$968.1 million class A-3 at 'AAAsf', Outlook Stable;
--$306.4 million class A-1A at 'AAAsf', Outlook Stable;
--$302 million class A-M at 'Asf', Outlook Stable;
--$294.4 million class A-J at 'CCCsf', RE 65%;
--$22.6 million class B at 'CCCsf', RE 0%;
--$30.2 million class C at 'CCCsf', RE 0%;
--$30.2 million class D at 'CCsf', RE 0%;
--$26.4 million class E at 'Csf', RE 0%;
--$3.7 million class F at 'Dsf', RE 0%;
--$0 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 P at 'Dsf', RE 0%;
--$0 class Q at 'Dsf', RE 0%;
--$0 class S at 'Dsf', RE 0%.
Class A-1 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. 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 >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria