DBRS Confirms 17 Classes and Downgrades One Other Class of COMM 2004-LNB3

DBRS has confirmed the ratings of COMM 2004-LNB3 as follows:

--Class A-3 at AAA (sf)
--Class A-4 at AAA (sf)
--Class A-5 at AAA (sf)
--Class A-1A at AAA (sf)
--Class X at AAA (sf)
--Class B at AAA (sf)
--Class C at AA(high) (sf)
--Class D at AA(low) (sf)
--Class E at A (sf)
--Class F at A(low) (sf)
--Class G at BBB(high) (sf)
--Class H at BBB(low) (sf)
--Class O at D (sf)

The trends on the above ratings are Stable.

DBRS has also confirmed the rating but changed the trend on the ratings of the following:

--Class J at B (sf)
--Class K at CCC (sf)
--Class M at C (sf)
--Class N at C (sf)

The trends on the above ratings are Stable.

DBRS has downgraded Class L from CCC to C. The trend is Stable.

DBRS also notes that Classes C through N have interest in arrears.

A workout fee associated with the disposition of the DDR-Macquarie Portfolio (Prospectus ID#3) was included in the April 2011 remittance report, and contributes to the interest shortfalls that lead to this rating action. The loan had been in special servicing and underwent a modification, which ultimately extended the maturity date of the loan from June 2009 to June 2011. The loan transferred back to the master servicer prior to maturity and has paid off in full with no loss to the trust. DBRS anticipates the interest shortfalls to the investment-grade rated classes to be repaid in full in the next one to two remittance periods.

The downgrade is a result of estimated losses associated with the Beau Terre Office Building (Prospectus ID#16, 3.35% of the current pool balance). This loan is now more than 90 days delinquent and was transferred to the special servicer in May 2010 after the borrower requested a loan modification. A 371,083 sf office property in Bentonville, Arkansas serves as collateral for the loan. Bentonville is the corporate headquarters for Wal-Mart Stores, Inc. (Wal-Mart), With the departure of Wal-Mart’s apparel division, which relocated to New York in 2008, the occupancy at the subject property has declined significantly. The YE2008 financials reported occupancy was at 93.2%; the Q1 2010 financial are reporting occupancy at rate of 63.7%. In July 2010, the property was appraised at a value of $22.5 million, down from an issuance value of $49 million. The special servicer is dual tracking a modification and foreclosure. DBRS will continue to monitor the loan closely.

The next largest exposure within special servicing is surrounding a crossed loan portfolio. Windover of Melbourne (Prospectus ID#22, 1.03% of the current pool balance), Windover Goldenpoint (Prospectus ID#23, 0.76% of the current pool balance) and Wedgewood Park (Prospectus ID#24, 0.46% of the current pool balance) 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. Although the properties were collectively valued at $14.3 million in July 2009, updated appraisals indicate the value of the properties has stabilized. Current appraised value for the combined properties is $17.3 million. The borrower has requested a modification, which is being considered by the special servicer while also dual tracking a foreclosure. DBRS will continue to monitor the status of the loans closely.

The performance of the transaction’s remaining assets remains stable overall. The ten largest loans in the pool are strong, three of which remain shadow-rated investment-grade by DBRS. As of the April 2011 remittance report, the servicer’s watchlisted loans represent 12.9% of the pool, and a total of 12 loans, representing 23.3% of the pool, are defeased. Three non-defeased loans are scheduled to mature by YE2011, however, those loans reported an average debt yield in excess of 14% for YE2009.

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

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