DBRS Upgrades Three Classes and Confirms Eight Others of Column Canada 2002-CCL1

DBRS has today upgraded the ratings of three classes of Column Canada Issuer Corporation, Commercial Mortgage Pass-Through Certificates, Series 2002-CCL1 as follows:

-- Class D to AA (sf) from A (high) (sf)
-- Class E to A (high) (sf) from A (sf)
-- Class F to A (low) (sf) from BBB (high) (sf)

DBRS has also confirmed the ratings of eight classes as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AAA (sf)
-- Class A-X at AAA (sf)
-- Class G at BBB (sf)
-- Class H at BB (sf)
-- Class J at B (high) (sf)

DBRS does not rate the $4.9 million first loss piece, Class K. All trends are Stable.

The ratings upgrades reflect the stable performance of this transaction since issuance in addition to a significant increase in credit enhancement caused by collateral reduction (amortization and loan maturities) and the defeasance of four loans (12% of the current pool balance). Additionally, there are no loans in special servicing and while there are seven loans (17.8% of the pool) on the servicer’s watchlist, there is only one loan on the DBRS HotList.

The Travelodge Airport loan (Prospectus ID #5, 6.8% of the current pool balance) is secured by a 283-room full-service hotel near Pearson Airport in Toronto and has been on the servicer’s watchlist since 2007 because of a low DSCR. The YE2009 DSCR was -0.31x. The borrower has kept the loan current the entire time it has been on the watchlist, but the property continues to struggle. DBRS has placed this loan on the HotList due to the poor performance in addition to the upcoming maturity date in October 2011. Based on the performance, it is possible that this loan will have difficulties refinancing. Despite the concern, the loan benefits from a reasonable leverage point, on a per key basis, of approximately $41,000 and has full recourse to Royal Host REIT. DBRS will continue to monitor this loan on a monthly basis for developments in the performance as the loan approaches its maturity date.

The DBRS analysis included an in-depth look at the top ten loans in the transaction, in addition to the loans on the servicer’s watchlist and the loans that are scheduled to mature throughout the remainder of 2011. Cumulatively, these loans represent more than 68% of the current pool balance. DBRS has run various cash flow stress scenarios where cash flows stresses up to 25% were applied across the entire transaction. As more loans report YE2010 financials, we see that these cash flow stresses are not exactly reflective of the actual cash flows the assets are generating, however, in running these stressed scenarios and comparing the DBRS required credit enhancement levels to the current increased credit enhancement levels, across the transaction, the ratings upgrades are appropriate.

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.