DBRS Confirms the Ratings of 25 Classes of WBCMT 2004-C15 and downgrades Six

DBRS has today downgraded six classes in the Wachovia Bank Commercial Mortgage Trust, Series 2004-C15 transaction as follows:

--Class H to BB (sf) from BBB (low) (sf)
--Class J to B (sf) from BB (low) (sf)
--Class K to B (low) (sf) from B (high) (sf)
--Class L to CCC (sf) from B (sf)
--Class M to CCC (sf) from B (low) (sf)
--Class O to C C (sf) from CCC (sf)

In addition, DBRS has confirmed Classes A-1 through G and Class N, including the notional Class X-C and Class X-P. DBRS has also confirmed the ratings of the rake bonds associated with the non-pooled 175 West Jackson B-note and the rake bonds associated with the non-pooled 180 Maiden Lane B-note. All trends are stable.

The shadow ratings of 175 West Jackson (9.8% of the current pool balance) and Coastal Grand Mall (7.7% of the current pool balance) have also been confirmed at BBB (sf) and A (low) (sf), respectively.

The downgrades are a result of the estimated losses associated with the loans in special servicing, which are expected to affect the DBRS rated Class O. Further, the estimated losses incurred by the trust, with respect to the specially serviced loans, will erode the credit enhancement to a number of the lower rated classes, further prompting the downgrades.

The transaction has seasoned for almost seven years. In addition to the seasoning, the transaction benefits from defeasance collateral, representing 4.25% of the current pool balance. The total collateral reduction as of the April 2011 remittance report is 14.3% and the weighted-average DSCR for the 82 loans remaining in the pool is reported at 1.60x, as compared with 1.56x at issuance.

The largest loan in special servicing is Prospectus ID#6, IRS Building – Fresno (4.12% of the current pool balance), which is secured by a 180,000 sf office property located in Fresno, California and fully leased to the IRS through November 2018. This loan transferred to the special servicer in January 2010 due to the borrower bankruptcy, however, the borrower has emerged from bankruptcy and all past due principal and interest from that time has been brought current. The loan remains in special servicing because the borrower failed to post a $4 million letter of credit, as required by the loan documents, when the loan was not paid in full at the anticipated repayment date (ARD) in November 2009. The loan remains current and following the ARD, entered a hyper-amortization period (through November 2034). The current loan per square foot is approximately $250. Although DBRS considers this leverage point to be high for this market, the loan benefits from the long term lease of the IRS through November 2018.

Prospectus ID#20, Penn’s Purchase II (1.21% of the current pool balance) is secured by a factory outlet center in Lahaksa, Pennsylvania, approximately one hour north of Philadelphia. This loan transferred to the special servicer in 2008 for monetary default and the property has been in receivership since August 2009. Although the performance has declined since issuance, it is a positive sign that the property has attracted one new tenant and renewed the leases of two others in the past 12 months, with occupancy in the mid-70% range, as of March 2011. Based on the July 2010 appraised value of $12.2 million, DBRS estimates that losses associated with this loan would indicate a loss severity in excess of 30%.

Prospectus ID#24, Omni Hotel – Newport News, Virginia (1.08% of the current pool balance) is secured by a full-service, 182-key hotel approximately 15 miles north of Norfolk, Virginia. The loan was transferred to the special servicer at the end of 2010 when the borrower indicated that he would no longer be able to fund the debt service payments. The property had struggled with occupancy issues in the years leading up to the transfer, and DBRS formerly had this loan on the HotList for that reason. The loan is now more than 90-days delinquent and although there is no updated appraisal, by looking at the June 2010 net cash flow against a conservative cap rate, DBRS estimates that the loss severity associated with this loan could approach 40%.

Prospectus ID#42, Suntree Apartments (0.62% of the current pool balance) is secured by a 216-unit multifamily property located in Peoria, Arizona and transferred to the special servicer in 2009 because of imminent maturity default and is currently in receivership. Based on the November 2010 appraised value of $7.1 million, DBRS estimates that the loss severity associated with this loan will be in excess of 25%.

The rest of the transaction continues to exhibit stable performance. The top ten loans represent more than 45% of the current pool balance and all of those loans remain current, as of the April 2011 remittance report. In addition, based mostly on 2010 financials, the top ten loans reported a weighted-average DSCR of 1.25x.

As part of its review, DBRS analyzed the top ten loans, the servicer’s watchlist and the four specially serviced loans, which comprises approximately 71% of the current pool balance.

Notes:
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.