DBRS Changes Trend on Two Classes of Schooner, 2004-CF2

DBRS has today changed the trend to Negative from Stable on Classes K and L of the Commercial Mortgage Pass-Through Certificates of Schooner Trust, Series 2004-CF2 (the Bonds). The change in trend follows DBRS’s review of the third largest loan in the pool, Daimler Chrysler Building.

DBRS originally shadow rated the loan A (low), based on the long-term tenancy, high debt service coverage ratio (DSCR) and investment-grade tenants. The two largest tenants are Chrysler LLC (Chrysler; 67% net rentable area (NRA)) and the City of Windsor (14% NRA). However, the tenancy is now not viewed to be as strong as previously and the Windsor office market is expected to continue to soften, given its high correlation to the auto industry and the U.S. economy. The loan is still covering its debt service at a high 2.09 times (x) DSCR as of YE 2007 and is not at risk for immediate default due to the fact that Chrysler and the City of Windsor are subject to long-term leases expiring in 2022. However, the loan matures in September 2011 and because Chrysler’s financial situation has changed, the refinance profile of the asset is not as strong, given the tenancy concentration.

In its November 20, 2008, downgrade of Chrysler’s Issuer Rating, DBRS expected Chrysler to operate with a minimal liquidity facility in a rapidly deteriorating industry throughout 2009; the recent government financing is only expected to maintain operations through March 2009. In addition, the City of Windsor has never occupied its space and continues to sublet it to multiple tenants. It is unknown whether the sublet rent is higher or lower than the City of Windsor contractual rent. As a result of the market conditions and tenancy concentration, the refinance outlook for the property has changed and DBRS no longer considers the loan to be shadow rated. The impact on the Bonds is a change in trend to Negative from Stable for Classes K and L.

All loans in the transaction are current.

Notes:
The applicable methodology is CMBS Methodology, which can be found on our website under Methodologies

This is a STRUCTURED FINANCE rating.