DBRS Confirms 16 Classes and Downgrades Six other Classes of Merrill Lynch Mortgage Trust 2005-CIP1

DBRS has today confirmed the ratings of 16 classes and downgraded the ratings of six other classes of Merrill Lynch Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2005-CIP1 as follows:

• Class A-2 at AAA
• Class A-3A at AAA
• Class A-3B at AAA
• Class A-SB at AAA
• Class A-4 at AAA
• Class XC at AAA
• Class XP at AAA

The above noted classes maintain a Stable trend.

• Class E at CCC
• Class F at CCC
• Class H at C
• Class J at C
• Class K at C
• Class L at C
• Class M at C
• Class N at C
• Class P at C

DBRS notes that classes E through P have Interest in Arrears. Classes E and F has been placed on Negative trend and Class H through P remain with a Negative trend.

In addition, DBRS has downgraded six classes of this transaction as follows:

• Class A-M from AAA to AA
• Class A-J from BBB (high) to BBB
• Class B from BBB (low) to BB (high)
• Class C from BB to BB (low)
• Class D from B to B (low)
• Class G from CCC to C

Classes A-M, A-J, B, C and D all have a Stable trend while Class G has a Negative trend. DBRS also notes that Class G is Interest in Arrears.

The previous DBRS ratings action for this transaction occurred in October 2010 and in addition to downgrading 12 Classes at that time, Classes A-M, A-J, B, C and D were placed Under Review with Negative Implications.

Since the last review, the performance of the pool has further deteriorated, leading to the downgrades of the above noted classes that were Under Review.

In addition to the Holiday Inn Mission Bay Sea World loan (Prospectus ID#13), which was resolved in an REO sale, which caused a realized loss to the trust of $19.6 million, two smaller loans have liquidated since the last DBRS ratings action, for a combined realized loss to the trust of $3.9 million. As of the January 2011 remittance report, the cumulative realized loss to the trust totals $23.5 million.

Ten loans, representing 14.8% of the current pool balance, are delinquent. Three loans have transferred to the special servicer since the last DBRS ratings action.

The Highwoods Portfolio57 loan (Prospectus ID#2, 8.87% of the pool) has a current balance of $160 million and is collateralized by 31 suburban office properties located in Tampa and Charlotte, North Carolina. The properties are one- to five-story buildings, ranging in size from 15,000 sf to 133,359 sf, that were built between 1972 and 2000. The current loan per square foot is approximately $80 and the debt yield, based on the YE2009 net cash flow (NCF) is approximately 5.4%. The loan initially transferred to the special servicer because it was unable to refinance at its August 2010 maturity date. Since that time, the property has suffered occupancy issues and foreclosure proceedings have commenced. The property has not yet received an updated appraisal, but based on the YE2009 NCF, losses associated with this loan could be in excess of 60% of the original loan balance.

The University Village loan (Prospectus ID#12, 1.71% of the pool) is collateralized by a retail property that is located in Riverside, California, and situated one block east from the University of California, Riverside. DBRS considers the loan per square foot of $193 to be high for the local market and YE2009 financials are not available. This loan initially transferred to the special servicer in January 2009 because the borrower requested a loan modification. Since the transfer, the property has continued to suffer from occupancy issues, and the appraised value was reduced from $41 million at issuance to $20 million, as of the July 2009 appraisal. Given this dated appraisal, DBRS has estimated losses for this loan by deflating the most recent appraisal, and estimating a loss severity in excess of 40%.

The 2801 Network Blvd. loan (Prospectus ID#20, 1.2% of the pool) is collateralized by a Class A office property located in Frisco, Texas, that was built in 2001. The current loan per square foot is approximately $115 and based on the depressed 2009 NCF, the debt yield is approximately 2.6%. The cash flow has declined substantially since issuance due to low occupancy at the property, which has been an issue since May 2008 when a tenant representing 45% of the NRA vacated. The loan transferred to the special servicer in January 2010 due to imminent default and the property received an updated appraisal of $24 million in February 2010. Although the updated appraisal does not suggest a substantial loss, DBRS estimates a more significant loss to the trust is likely, based on the cash flow decline and continued poor performance of the asset.

The further deterioration of the pool, specifically with respect to the above mentioned loans has led to these downgrades.

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.