DBRS Confirms All 13 Classes of Schooner Trust, Series 2004-CF2

DBRS has today confirmed the ratings of all 13 classes of Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2004-CF2 as follows:

Class A-1 at AAA
Class A-2 at AAA
Class B at AA (high)
Class C at A (high)
Class D at BBB
Class E at BBB (low)
Class F at BB (high)
Class G at BB
Class H at BB (low)
Class J at B (high)
Class K at B
Class L at B (low)
Class X at AAA

The ratings reflect the increased credit enhancement to the bonds from a collateral reduction of approximately 17% since issuance, the healthy weighted-average debt service coverage ration (DSCR) of 1.58x for the pool and the defeasance of seven loans in the pool, representing 8.32% of the current transaction balance.

There are currently three loans, representing 7.19% of the transaction, on the servicer’s watchlist; two of these loans are in the Top Ten, representing a combined 6.51% of the pool. Prospectus ID#12, Confederation Mall, is on the watchlist for an unauthorized second mortgage on the property. DBRS also notes that the anchor tenant, Wal-Mart, with 47% of the NRA, is currently dark. Canadian Tire is said to be taking the empty Wal-Mart space, however, lease details have yet to be provided by the servicer. DBRS has placed that loan on the DBRS HotList.

Prospectus ID#14, 215 St. Jacques Street, is on the servicer’s watchlist due to occupancy declines at the property; as of April 2010, the property was 72% occupied, down from 77% at YE2009 and 98% at issuance. Altus InSite reports the property to be 88% occupied. DBRS has requested confirmation of the current occupancy from the servicer and will continue to monitor the loan. Given the healthy DSCR at YE2009 of 1.19x and the property’s relatively strong location in Montrèal, this loan will not be placed on the DBRS HotList.

Two other loans in the Top Ten will be placed on the DBRS HotList.

Prospectus ID#10, Hespeler Road Retail, will be placed on the DBRS HotList due to occupancy declines since YE2009, when it was at 89%, to 81% as of May 2010. The property is well-located near Highway 401 in Cambridge, Ontario with large tenants in PetSmart, Good Life Fitness, and Winners; however, there is significant competition for retail tenants in the area, which could impact the property’s ability to fill the vacancy at the property.

Prospectus ID#3, DaimlerChrysler Building, remains on the DBRS HotList due to occupancy declines since YE2008, when the property was 100% occupied, the property last reported occupancy at 86% as of the March 2010 rent roll. The property’s largest tenant, Chrysler Canada, is currently experiencing difficulty with the downturn in the auto industry. The property is located in Windsor, Ontario, an area heavily impacted by the economic downturn overall. Furthermore, the loan matures in September 2011.

DBRS applied a net cash flow stress of 20% across all loans in the pool and when comparing the DBRS required credit enhancement levels to the current credit enhancement for all classes, the confirmations as outlined were appropriate.

The negative trend will be maintained on Class K and Class L to reflect the exposure for those classes to the above-mentioned issues with Prospectus ID#3 and the other loans in the Top Ten on the DBRS HotList. All other classes remain trend stable.

DBRS continues to monitor this transaction on a monthly basis in the Global CMBS Monthly Surveillance report, which can provide more detailed information on the individual loans in the pool.

Notes:
All figures are in Canadian dollars unless otherwise noted.

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