Fitch downgrades 8 Classes of LBUBS 2007-C6
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.