NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has downgraded one distressed class and affirmed 19
classes of LB-UBS Commercial Mortgage Trust (LBUBS) commercial mortgage
pass-through certificates series 2007-C6. A detailed list of rating
actions follows at the end of this press release.
KEY RATING DRIVERS
The downgrade to class K reflects losses incurred on the class. Fitch
modeled losses of 16.3% of the remaining pool; expected losses on the
original pool balance total 15.6%, including $159.8 million (5.4% of the
original pool balance) in realized losses to date. Fitch has designated
67 loans (52.8%) as Fitch Loans of Concern, which includes 48 specially
serviced assets (23.3%).
As of the June 2014 distribution date, the pool's aggregate principal
balance has been reduced by 37.2% to $1.87 billion from $2.98 billion at
issuance. Per the servicer reporting, one loan (1.7% of the pool) is
defeased. Interest shortfalls are currently affecting classes J through
The Negative Outlook on classes A-M and A-MFL reflects the potential
risk for greater than expected losses on the specially serviced loans,
primarily the PEC0 Portfolio. In addition, the Negative Outlook reflects
performance concerns and declining cash flows for several
underperforming properties in the top 15 loans. The classes could be
subjected to future downgrades should expected losses increase.
The largest contributor to expected losses is the specially-serviced
PECO Portfolio loan (17% of the pool), which consists of 39
cross-collateralized loans totaling $317.3 million secured by 39 retail
properties totaling 4.25 million square feet (SF) located across 13
states. Primarily grocery-anchored, the portfolio's major tenants
include Tops Markets, Bi-Lo Grocery, Big Lots, and Publix. The portfolio
had experienced cash flow issues due to turnover and vacancy costs at
several of the properties. Occupancy for the portfolio reported at
81.6%, per the December 2013 rent rolls.
The loan had transferred to special servicing in August 2012 due to the
borrower's request for a loan modification; the loan has been in payment
default since September 2012. A court-ordered cash management agreement
was enforced by the servicer in December 2012, and the borrower had
subsequently executed a deed-in-lieu (DIL) of foreclosure agreement. Per
the DIL agreement, all 39 properties are expected to become real estate
owned (REO) by year end (YE) 2014. The special servicer reports it is
currently evaluating the appropriate resolution and disposition strategy.
The next largest contributor to expected losses is the McCandless Towers
loan (6.1%). 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 SF, located in Santa Clara, CA. The property
has experienced cash flow issues due to occupancy declines, as well as
softening market conditions. McAfee Associates Inc. (McAfee) (previously
46% of the total net rentable area [NRA]), which occupied 100% of Tower
II (214,080 SF), had vacated the property at its lease expiration in
March 2013. The borrower has been successful in re-leasing approximately
85,000 SF (20% of total NRA) of the vacated McAfee space to CA
Technologies on a long-term lease from July 2013 through January 2024.
As a result occupancy improved to 67% per the December 2013 rent roll,
from 42% in December 2012.
The net operating income (NOI) debt service coverage ratio (DSCR) for YE
2013 reported at 0.51x, compared to 0.92x at YE 2012. Property cash flow
is expected to significantly improve for 2014 due to the burn off of CA
Technologies rent concessions, which have gradually expired between
January 2014 and May 2014. The loan is current as of the June 2014
The third largest contributor to Fitch expected losses is the Islandia
Shopping Center loan (3.9%) which is collateralized by a 376,774 SF
retail center located in Islandia, NY (Long Island). The property's
anchors are a Wal-Mart and a Stop & Shop. Additional major tenants
include Dave & Busters and TJ Maxx. Although the property is currently
96% occupied, the borrower cited previous cash flow constraints from
vacancies, reduced rental rates and chronically delinquent payments.
The property transferred to special servicing in March 2013 due to
imminent default and loan modification request, and subsequently went
into payment default in October 2013. The loan was recently modified in
April 2014 while in special servicing, which included an extension of
the loans maturity date, a reduction of the interest-only period with
amortization scheduled to begin in year two, a reduced initial interest
rate with scheduled rate increases, and a bifurcation of the loan into a
senior ($63.5 million) and junior ($10.1 million) component. Although
losses are not imminent , any recovery to the B-note is contingent upon
full recovery to the A-note proceeds at the loan's maturity in July
2021. Unless collateral performance improves, recovery to the B-note
component is unlikely. The loan is current under the modified terms and
is expected to be returned to the master servicer after the monitoring
Fitch downgrades the following class:
--$4 million class K to 'Dsf' from 'Csf'; RE 0%.
Fitch affirms the following classes:
--$859.1 million class A-4 at 'AAAsf'; Outlook Stable;
--$276.9 million class A-1A at 'AAAsf'; Outlook Stable;
--$227.9 million class A-M at 'Asf'; Outlook Negative;
--$70 million class A-MFL at 'Asf'; Outlook Negative;
--$156.4 million class A-J at 'CCCsf'; RE 80%;
--$33.5 million class B at 'CCCsf'; RE 0%;
--$37.2 million class C at 'CCCsf'; RE 0%;
--$33.5 million class D at 'CCsf'; RE 0%;
--$29.8 million class E at 'CCsf'; RE 0%;
--$29.8 million class F at 'Csf'; RE 0%;
--$33.5 million class G at 'Csf'; RE 0%;
--$37.2 million class H at 'Csf'; RE 0%;
--$41 million class J at 'Csf'; RE 0%;
--$0 class L at 'Dsf'; RE 0%;
--$0 class M at 'Dsf'; RE 0%;
--$0 class N at 'Dsf'; RE 0%;
--$0 class P at 'Dsf'; RE 0%;
--$0 class Q at 'Dsf'; RE 0%;
--$0 class S at 'Dsf'; RE 0%.
The class A-1, A-2, A-2FL, A-3 and A-AB certificates have paid in full.
Fitch does not rate the class T certificates. Fitch previously withdrew
the rating on the interest-only class X certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS
transactions is available in the Dec. 11, 2013 report, 'U.S. Fixed-Rate
Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is
available at 'www.fitchratings.com'
under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC
Criteria' (Dec. 11, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF
THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE
RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR
RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY
CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH
Fitch Ratings, Inc.
33 Whitehall Street
York, NY 10004
Media Relations, New York
Scenga, +1 212-908-0278
Source: Fitch Ratings