Fitch Ratings has upgraded seven classes and affirmed three classes of Lehman Brothers Floating Rate Commercial Mortgage Trust 2007-LLF C5. The upgrades reflect the deleveraging of the transaction due to $1.2 billion in loan repayments since the last review. Fitch's performance expectations incorporate prospective views regarding the outlook of the commercial real estate market. A detailed list of rating actions follows at the end of this release.
All of the remaining loans have reached their original final maturity dates; three loans have been modified or are in forbearance. Eleven of the twelve remaining loans are in special servicing or are expected to be transferred imminently.
Under Fitch's methodology, all loans are modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 9.1% and pooled expected losses are 10.6%. To determine a sustainable Fitch cash flow and stressed value, Fitch analyzed servicer-reported operating statements and STR reports, updated property valuations, and recent sales comparisons. Fitch estimates that average recoveries will be strong at approximately 89.4% in the base case.
The transaction is collateralized by 12 loans; five loans are secured by office or office/industrial properties (33.8%), six by hotels (26.1%), and one by industrial properties (40.1%). Ten loans (89.3%) mature in 2012 or have already matured, and two loans (10.7%) mature in 2013/2014.
The three largest pooled contributors to losses in the 'B' stress scenario are: the CalWest Industrial Portfolio (40.1%), Sheraton Old San Juan (3.6%) and Park Hyatt Beaver Creek (4.6%).
The CalWest Industrial Portfolio loan is secured by 95 warehouse, business park, and flex/office properties located in 12 distinct markets across six states with a total of 23.4 million rentable sf. In addition to the $275 million included in the trust, there is $825 million of pari passu debt and $1.348 billion of mezzanine debt held outside the trust. Since issuance, occupancy has dropped as tenant leases have expired and in place rents have declined. Occupancy at issuance was 92% with in place rents of approximately $7.29 psf. As of April 2012, the portfolio was 83.8% occupied with average in place rents of approximately $7.03 psf. The loan reached its final maturity in June 2012 and is expected to transfer to special servicing imminently. According to news reports, Blackstone Group LP reached an agreement to take control of the properties after having acquired significant portions of the mezzanine debt.
The Sheraton Old San Juan loan is secured by the leasehold interest in a full service hotel containing 240 rooms located in San Juan, Puerto Rico. Amenities for the hotel include a casino, meeting space, full service restaurants, a swimming pool, and an exercise room. Performance lags the competition and is well below the banker's expectations underwritten at issuance. The loan transferred to special servicing in November 2011. The special servicer is assessing various resolution strategies.
The Park Hyatt Beaver Creek loan is secured by a full serve hotel containing 190 rooms located in Avon, Colorado (Vail). The performance is well below the banker's expectations underwritten at issuance. The loan transferred to special servicing in April 2012 for imminent maturity.
Fitch has upgraded the following classes and revised outlooks as indicated:
--$276,478,550 class A-2 to 'AAAsf' from 'AAsf'; Outlook Stable;
--$80,308,000 class A-3 to 'AAAsf' from 'Asf'; Outlook Stable;
--$52,674,000 class B to 'AAAsf' from 'BBBsf'; Outlook Stable;
--$48,678,000 class C to 'Asf' from 'BBBsf'; Outlook to Stable;
--$31,839,000 class D to 'BBBsf' from 'BBsf'; Outlook to Stable from Negative;
--$28,756,000 class E to 'BBB-sf' from 'BBsf'; Outlook Stable from Negative;
--$28,756,000 class G to 'Bsf' from 'CCC'; Outlook Stable.
Fitch has affirmed the following classes and revised outlooks as indicated:
--$28,756,000 class F at 'BBsf'; Outlook to Stable from Negative;
--$51,761,000 class H at 'CCC', RE 30%;
--$57,513,000 class J at 'D' RE 0%.
Classes A-1 and X-1 have paid in full. Fitch does not rate classes CGC, CPE, CQR-1, CQR-2, DMC-1, DMC-2, FBS-1, FBS-2, FTC-1, FTC-2, HAR-1, HAR-2, HRH, HSS, INO, JHC, LCC, MVR, NOP-1, NOP-2, NOP-3, OCS, ONA, OWS-1, OWS-2, PHO, SBG, SFO-1, SFO-2, SFO-3, SFO-4, SFO-5, TSS-1, and TSS-2, UCP, VIS, and WHH.
Fitch previously withdrew the rating of the interest-only class X-2. (For additional information, 'Fitch Revises Practice for Rating IO & Pre-Payment Related Structured Finance Securities' dated June 23, 2010.)
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' (Jun. 6, 2012);
--'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions' (Dec. 1, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923
Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657734
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