Fitch Upgrades One and Affirms Nine Classes of DBUBS 2011-LC1 Mortgage Trust Series 2011-LC1

CHICAGO--()--Fitch Ratings has upgraded one class and affirmed the remaining nine classes of DBUBS Mortgage Trust commercial mortgage pass-through certificates, series 2011-LC1. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Fitch's affirmations are based on the stable performance of the underlying collateral pool. The current weighted-average debt service coverage ratio (DSCR) and loan-to-value (LTV) are 1.50x and 63%, respectively, according to the most recent remittance. In comparison, the weighted-average DSCR and LTV at issuance were 1.48x and 62.3%, respectively.

Fitch upgraded class B and amended the Rating Outlook on classes C, D and E to Positive from Stable as a result of increased defeasance, credit enhancement and a strong upcoming maturity profile. Five loans have repaid in full since the last rating action, contributing $367.9 million in principal repayment. Six loans representing 9.5% of the current pool balance are fully defeased, including two loans in the Top 15. All but one of these loans is scheduled to mature in the next four months, which should further improve credit support to the bonds.

There are no loans in special servicing, and there are three loans, including the eighth largest loan in the pool, on the servicer's watchlist. Since issuance, the pool has experienced 22.8% collateral reduction.

RATING SENSITIVITIES

Upgrades in the near future could be likely should the wave of loans scheduled to mature in 2016 successfully refinance. The weighted-average DSCR and debt yield for the non-defeased loans coming to maturity by YE2016 is 1.38x and 10.5%, respectively. Given the foreseeable positive ratings migration, Fitch has amended the Outlooks for classes C, D and E to Positive. The Outlooks for all other classes remain Stable, as Fitch does not expect negative ratings migration until a material economic or asset level event changes the transaction's overall portfolio-level metrics.

The sole Fitch Loan of Concern, Phoenix Plaza (4.7% of the current pool balance), is on the servicer's watchlist. The loan is secured by a Class A office property in the downtown Phoenix submarket comprising two 20-story office towers, one three-story retail building and an 11-level parking garage. The loan has been flagged for below-threshold DSCR, which was reported to be 0.84x at YE2014, with a corresponding occupancy rate of 70.4%. Reis reported the submarket currently experiences an average vacancy of 21.8% for office space, a figure that has remained relatively stagnant for a number of years. The property has lost several tenants since the loan was securitized, and while new leases have been signed during this time period, the majority of new tenants appear to have been granted concessions, including free rent periods, which has delayed the recovery in base rent. Although there are two tenants, together representing 11.8% of the NRA, with upcoming lease expirations in 2016, the borrower has reportedly executed a new lease with Banner Health for 300,000 square feet (sf) of space, which is more than what is currently vacant. According to servicer commentary, the tenant was expected to begin the first phase of its move-in process in September 2015. Fitch has not received an update on what concessions, if any, were granted as part of the lease agreement. This loan is scheduled to mature in February 2016.

The largest loan in the pool is Kenwood Towne Center (13% of the current pool balance), which is secured by one anchor space and the inline space of a 1.2 million sf regional mall in Cincinnati, Ohio. The mall is owned and operated by GGP, and is anchored by Dillard's, Macy's and Nordstrom. Macy's and Nordstrom are not included as collateral for the loan. The YE2014 DSCR was reported to be 2.20x, and the property is 98.6% occupied. Performance for the loan has been stable since issuance.

The second largest loan, Tempe Marketplace (11.1% of the current pool balance), is secured by an open-air mall in Tempe, Arizona, which is anchored by JCPenney, Sam's Club and a 16-screen Harkins Theatre. Target also occupies space on the property as a non-collateral shadow-anchor. The YE2014 DSCR was reported to be 1.36x, up from a Fitch issuance DSCR of 1.10x.

Fitch has taken the following rating actions:

Fitch upgrades the following class:

--$70.7 million class B to 'AAAsf' from 'AAsf', Outlook Stable.

Fitch affirms the following classes with revised Outlooks:

--$81.6 million class C at 'Asf', Outlook to Positive from Stable;

--$49 million class D at 'BBB+sf', Outlook to Positive from Stable;

--$90 million class E at 'BBB-sf', Outlook to Positive from Stable;

Fitch affirms the following classes:

--$614 million class A-1 at 'AAAsf' Outlook Stable;

--$182 million class A-2 at 'AAAsf' Outlook Stable;

--$459.7 million class A-3 at 'AAAsf' Outlook Stable;

--$24.5 million class F at 'BBsf' Outlook Stable;

--$40.8 million class G at 'Bsf' Outlook Stable;

--$1.3 billion* class X-A at 'AAAsf' Outlook Stable.

*Notional amount and interest only.

Fitch does not rate the class H or X-B certificates.

DUE DILIGENCE USAGE

No third-party due diligence was provided or reviewed in relation to this rating action.

Additional information is available on www.fitchratings.com

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

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

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992029

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992029

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Roxanna Tangen
Associate Director
+1 312 368 3116
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Mary MacNeill
Managing Director
+1 212 908 0785
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Roxanna Tangen
Associate Director
+1 312 368 3116
Fitch Ratings, Inc.
70 West Madison
Chicago, IL 60602
or
Mary MacNeill
Managing Director
+1 212 908 0785
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com