Fitch Ratings has downgraded four classes, upgraded four classes, and affirmed 10 classes of LB-UBS Commercial Mortgage Trust (LB-UBS) commercial mortgage pass-through certificates series 2005-C5. The downgrades were due to the increased certainty of expected losses on the specially serviced loans, while the upgrades reflect higher credit enhancement levels due to principal paydown. A detailed list of rating actions follows at the end of this press release.
Fitch modeled losses of 5.1% of the remaining pool; expected losses on the original pool balance total 4%, including losses already incurred. The pool has experienced $1.4 million (0.1% of the original pool balance) in realized losses to date. Fitch has designated 21 loans (14%) as Fitch Loans of Concern, which includes six specially serviced loans (5%).
As of the April 2012 distribution date, the pool's aggregate principal balance has been reduced by 23.4% to $1.8 billion from $2.34 billion at issuance. Per the servicer reporting, only one loan (less than 0.1% of the pool) has defeased since issuance. Interest shortfalls are currently affecting classes J through T.
The largest contributor to expected losses is the real estate owned (REO) TAG Portfolio (3% of the pool), which consists of two adjoining office buildings in Downers Grove, IL and an office building in Dulles, VA totaling approximately 405,000 square feet (sf). The assets transferred to special servicing in April 2010 for imminent default and became REO in November 2011. The special servicer is currently focusing on leasing efforts before listing the properties for sale.
The next largest contributor to expected losses is the Sandpiper Apartments loan (1.8%), which is secured by a 488-unit apartment complex built in 1987 and located just west of the strip in Las Vegas. Over the past several years, occupancy had fallen into the low- to mid-70% range. The borrower continues to offer concessions to attract new tenants and brought occupancy up to approximately 90% as of year-end 2011. On an interest only-basis, the 2011 debt service coverage ratio (DSCR) based on net operating income (NOI) was 1.14 times (x), but would fall to just 0.90x based on amortizing payments which commence next month. However, as of April 2012, the loan remained current.
The third largest contributor to expected losses is the specially-serviced Centre at Lake in the Hills loan (0.8%), which is secured by a roughly 100,000-sf anchored retail property in Lake in the Hills, IL (northwest of Chicago). The loan transferred to special servicing in May 2011 for payment default. According to the special servicer, the borrower has agreed in principle to a consensual foreclosure, which appears near finalization. As of April 2012, a receiver is in place.
Fitch downgrades the following classes and assigns or revises Recovery Estimates (REs) as indicated:
--$14.7 million class J to 'CCCsf' from 'B-sf'; RE 85%;
--$20.5 million class K to 'CCsf' from 'CCCsf'; RE 0%;
--$8.8 million class L to 'CCsf' from 'CCCsf'; RE 0%;
--$5.9 million class M to 'Csf' from 'CCsf'; RE 0%.
Fitch upgrades the following classes and revises Rating Outlooks as indicated:
--$20.5 million class B to 'AAsf' from 'Asf'; Outlook to Stable from Positive;
--$32.2 million class C to 'Asf' from 'BBBsf'; Outlook to Stable from Positive;
--$29.3 million class D to 'BBBsf' from 'BBsf'; Outlook to Stable from Positive;
--$23.4 million class E to 'BBB-sf' from 'BBsf'; Outlook to Stable from Positive.
Fitch affirms the following class and revises the Rating Outlook as indicated:
--$23.4 million class H at 'B-sf'; Outlook to Negative from Stable.
Fitch affirms the following classes as indicated:
--$109.9 million class A-3 at 'AAAsf'; Outlook Stable;
--$48.2 million class A-AB at 'AAAsf'; Outlook Stable;
--$809.5 million class A-4 at 'AAAsf'; Outlook Stable;
--$126.3 million class A-1A at 'AAAsf'; Outlook Stable;
--$234.4 million class A-M at 'AAAsf'; Outlook Stable;
--$187.5 million class A-J at 'AAsf'; Outlook Stable;
--$29.3 million class F at 'BBsf'; Outlook Stable;
--$26.4 million class G at 'Bsf'; Outlook Stable;
--$8.8 million class N at 'Csf'; RE 0%.
The class A-1 and A-2 certificates have paid in full. Fitch does not rate the class P, Q, S and T certificates. Fitch previously withdrew the ratings on the interest-only class X-CL and X-CP certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 21, 2011 report, 'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions', which is available at 'www.fitchratings.com' under the following headers:
Structured Finance then CMBS then Criteria Reports
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions' (Dec. 21, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Surveillance Methodology for U.S. Fixed-Rate CMBS Transactions
Scott Pritchard, +1-212-908-9141
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Sandro Scenga, +1-212-908-0278