DBRS Confirms All 14 Classes of Schooner Trust, Series 2006-6

DBRS has today confirmed the ratings of all 14 classes of Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2006-6 as follows:

Class A-1 at AAA
Class A-2 at AAA
Class B at AA
Class C at A
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 XC at AAA
Class XP at AAA

The ratings reflect the slightly increased credit enhancement to the bonds from a balance reduction of approximately 8.5% since issuance, the healthy weighted-average debt service coverage ration (DSCR) of 1.53x for the pool and the defeasance of three loans in the pool, representing 4.07% of the current transaction balance.

There are currently five loans, representing 6.6% of the transaction, on the servicer’s watchlist; one of these loans is in the Top Ten, representing 3.08% of the pool. Prospectus ID#6, Alder Crossing Shopping Centre, is on the servicer’s watchlist for the occupancy decline since issuance by approximately 25% as of March 2010. The property is located in Surrey, British Columbia and is anchored by a grocery store tenant with 40% of the NRA on a lease through 2015. The YE2009 DSCR is healthy at 1.37x and the loan per square foot is reasonable at $204, given the good location on King George Highway in the southern portion of the city and the age of the centre, which was constructed in 2004.

Only one of the other four loans on the servicer’s watchlist individually comprises greater than 1.0% of the pool: Prospectus ID #14, 2150 Islington Avenue, with 1.97% of the current transaction balance. This loan is collateralized by an office property in Toronto and is on the watchlist for an occupancy decline to 71% at YE2007, down from 91% at issuance. The September 2010 rent roll shows the property remaining at 71% occupancy. As of October 28, 2010, Altus InSite shows the property with 7% of the NRA available; DBRS has requested confirmation of the current occupancy from the servicer and will continue to monitor the loan. The DSCR for the two years of reduced occupancy was quite healthy, with the YE2008 DSCR at 1.16x and the YE2009 DSCR at 1.26x; furthermore, the loan per square foot of $51 is considered reasonable given the location and age of the asset, which was constructed in 1992.

One of the remaining three loans on the servicer’s watchlist will be placed on the DBRS HotList. An industrial property in Vaughn, Ontario, Prospectus ID #66, 50 & 70 Snidercroft Road (comprising 0.43% of the current transaction balance), is on the servicer’s watchlist due to the Poor condition of the properties as noted during the servicer’s 2009 site inspection. The buildings were cited for numerous structural issues as well as two environmental issues in an unsound refuse container for toxic chemicals and the storage of discarded tires at the property. The environmental issues have been addressed, according to correspondence from the borrower to the servicer, with the structural issues to be addressed by year-end 2010. DBRS would also note that 56.7% of the NRA between the two buildings is set to expire between November 2010 and April 2011. A leasing update has been requested from the servicer; DBRS will continue to monitor the upcoming rollover as well as the maintenance issues at the property. The YE2009 coverage is quite healthy at 1.74x and the leverage is low, with a current loan amount of $14 per square foot.

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.

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.