Fitch downgrades 8 Classes of LBUBS 2007-C6

The Pak Banker - - Front Page -

CHICAGO

Global rat­ing agency Fitch has down­graded eight classes and af­firmed 16 classes of LB-UBS Com­mer­cial Mort­gage Trust (LBUBS) com­mer­cial mort­gage pass-through cer­tifi­cates se­ries 2007-C6. The downgrades re­flect an in­crease in Fitch expected losses across the pool, pri­mar­ily due to updated val­u­a­tions and work­out strate­gies on the ex­ist­ing spe­cially ser­viced loans as well as the trans­fer of ad­di­tional loans to spe­cial ser­vic­ing since Fitch's De­cem­ber 2011 re­view. Fitch mod­eled losses of 10.5% of the re­main­ing pool; expected losses on the orig­i­nal pool bal­ance to­tal 12.8%, in­clud­ing losses al­ready in­curred. The pool has ex­pe­ri­enced $116.2 mil­lion (3.9% of the orig­i­nal pool bal­ance) in re­al­ized losses to date. Fitch has des­ig­nated 75 loans (42.4%) as Fitch Loans of Con­cern, which in­cludes 56 spe­cially ser­viced as­sets (19.9%).

As of the Oc­to­ber 2012 dis­tri­bu­tion date, the pool's ag­gre­gate prin­ci­pal bal­ance has been re­duced by 15.2% to $2.53 bil­lion from $2.98 bil­lion at is­suance. No loans have de­feased since is­suance. In­ter­est short­falls are cur­rently af­fect­ing classes J through T.

The sixth largest loan was im­pacted re­cently by Hur­ri­cane Sandy, 100 Wall Street (4.6% of the pool) lo­cated in the South Ferry fi­nan­cial dis­trict of down­town Man­hat­tan. Ser­vicer com­ments and a walkby in­spec­tion by Fitch re­vealed that the build­ing is cur­rently off line due to flood dam­age at the prop­erty. The ser­vicer re­ported that the bor­rower has be­gun the process for com­plet­ing the nec­es­sary build­ing re­pairs in­clud­ing dis­cus­sions with the in­sur­ance com­pany for the sub­ject prop­erty.

The largest con­trib­u­tor to expected losses is the McCand­less Tow­ers loan (4.6% of the pool). The prop­erty, which is also re­ferred to as the Santa Clara Tow­ers, is col­lat­er­al­ized by two 11-story, Sil­i­cone Val­ley of­fice build­ings to­tal­ing 426,326 square feet (sf) lo­cated in Santa Clara, CA. The prop­erty has ex­pe­ri­enced cash flow is­sues due to oc­cu­pancy de­clines, as well as soft­en­ing mar­ket con­di­tions. The year-to-date (YTD) June 2011 debt ser­vice cov­er­age ra­tio (DSCR) re­ported in-line with is­suance at 1.00 times (x), com­pared to year end (YE) De­cem­ber 2011 at 0.87x. The June 2012 rent roll re­ported oc­cu­pancy at 88%, com­pared to is­suance at 96%. Sig­nif­i­cant near term rollover is expected at the prop­erty due to the March 2013 lease ex­pi­ra­tion of McAfee As­so­ci­ates Inc., (46% of to­tal net rentable area [NRA]) which oc­cu­pies 100% of Tower II (214,080 sf). As of Oc­to­ber 2012, the loan is cur­rent and there are more than $4.6 mil­lion in up­front and on­go­ing leas­ing cost re­serves.

The next largest con­trib­u­tor to expected losses is the Peco Port­fo­lio (12.8%), which con­sists of 39 crossed-col­lat­er­al­ized loans to­tal­ing $323.2 mil­lion se­cured by 39 re­tail prop­er­ties lo­cated across 13 states, to­tal­ing 4.25 mil­lion sf. Pri­mar­ily gro­cery-an­chored, the port­fo­lio's ma­jor ten­ants in­clude Tops Mar­kets, Bi-Lo Gro­cery, Big Lots, and Publix. The loans had re­cently trans­ferred to spe­cial ser­vic­ing in Au­gust 2012 in re­sponse to the bor­rower's notice of im­mi­nent de­fault from cash flow con­straints due to the monthly amor­ti­za­tion pay­ments sched­uled to be­gin with the Au­gust 2012 pay­ment date. The YTD March 2012 DSCR re­ported at 1.34x. The an­nu­al­ized YTD March 2012 DSCR based on amor- tized pay­ments would cal­cu­late to ap­prox­i­mately 1.08x. The port­fo­lio oc­cu­pancy re­ported at 89% as of March 2012. As of the Oc­to­ber 2012 dis­tri­bu­tion date, the loans are 30-days delin­quent with debt ser­vice pay­ments paid through the Au­gust 2012 pay­ment date.

The third largest con­trib­u­tor to expected losses is the Greens­boro Park loan (4.3%), which is se­cured by two of­fice build­ings to­tal­ing 485,047 sf lo­cated in the Tyson's cor­ner area of McLean, VA. The prop­erty has ex­pe­ri­enced cash flow is­sues due to oc­cu­pancy de­clines since is­suance.

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