DBRS Confirms 12 Classes and Downgrades Six Others of COMM 2004-LNB3

DBRS has today confirmed Classes A-2 through Class G, with Stable trends. Furthermore, DBRS has downgraded the ratings of six classes of COMM 2004-LNB3.

-Class J downgraded to B from BB (high)
-Class K downgraded to CCC from BB (low)
-Class L downgraded to CCC – Interest in Arrears from B (high)
-Class M downgraded to C – Interest in Arrears from B (low)
-Class N downgraded to C – Interest in Arrears from CCC
-Class O downgraded to D from C – Interest in Arrears.

Classes J through N continue to carry a Negative trend. In addition, Class H is placed Under Review Developing.

The downgrades are a result of the recent liquidation of Christy Estates Apartments (0.5% of the pool at issuance), at a $1.8 million loss, and estimated losses associated with the Beyman (Crossed Rollup) loans, representing a combined 2.1% of the pool: Windover of Melbourne, Windover Goldenpoint. and Wedgewood Park.

Class O experienced a loss as a result of the liquidation of Christy Estates Apartments. The loan was transferred to special servicing in June 2009 for imminent default and became Real Estate Owned (REO) following a December 2009 foreclosure sale. The loan was secured by an apartment/extended stay hotel (187 and 70 units, respectively) located in Corpus Christi, Texas and a July 2009 appraisal valued the property at $2.1 million. According to the April 2010 remittance report, gross sale proceeds for the asset totaled $3.5 million.

The Beyman (Crossed Rollup) loans are secured by multifamily properties in Florida and are all crossed-collateralized. The loans were transferred to special servicing in June 2009, after failing to obtain new financing at the July 1, 2009 maturity date. The three loans have been on the servicer’s watchlist since July/August 2007 for low DSCRs, after experiencing a decline in the combined DSCR (0.83x, as of Q2 2009) after switching to P&I debt service payments, in January 2007. The properties were collectively valued at $14.3 million in July 2009, at which time they reported occupancy rates between 85% and 94%. The borrower has requested an extension and modification which is being considered by the special servicer while also dual tracking with foreclosure. DBRS will continue to monitor the status of the loans closely. The ratings take into consideration a liquidation of The Beyman and assume the updated appraised value.

The performance of the transaction’s remaining assets remains stable overall. The ten largest loans in the pool are strong, many of which remain shadow-rated investment-grade by DBRS. As of the April 2010 reporting, the servicer’s watchlist is small representing only 3.3% of the pool and a total of 12 loans (22.1% of the pool) are defeased. DBRS will review the transaction again upon receipt of a greater number of loan level YE2009 financials.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology and CMBS Surveillance, which can be found on our website under Methodologies.

This is a Structured Finance CMBS rating.