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 (sf)
Class A-2 at AAA (sf)
Class XC at AAA (sf)
Class XP at AAA (sf)
Class B at AA (sf)
Class C at A (sf)
Class D at BBB (sf)
Class E at BBB (low) (sf)
Class F at BB (high) (sf)
Class G at BB (sf)
Class H at BB (low) (sf)
Class J at B (high) (sf)
Class K at B (sf)
Class L at B (low) (sf)

All trends are Stable

The ratings confirmations reflect the increased credit enhancement from a collateral reduction of approximately 18% since issuance. Fourteen loans have paid out of the pool since issuance. The weighted-average debt service coverage ratio is stable at 1.50x.

There are currently three loans on the servicer’s watchlist, representing 2.85% of the current pool balance. These loans remain current but are reporting performance issues and have been placed on the servicer’s watchlist. One of these loans is highlighted below.

The 2150 Islington Avenue loan (2.13% of the current pool balance) is secured by a Class B office property in northwestern Toronto. It was placed on the servicer’s watchlist due to a low occupancy rate, which had been approximately 71% from December 2007 through January 2010. At YE2010 however, the occupancy rate had increased to 86%, but the DSCR had fallen to 0.98x, down from 1.26x at YE2009. The drop in the DSCR was attributed to the borrower offering free rent and rent credits in order to sign new tenants. Rental income from recently signed tenants is scheduled to be paid in the latter half of 2011 and should stabilize performance.

DBRS has placed two loans to the DBRS HotList. Both loans are being added to the DBRS HotList for occupancy issues. Each loan is discussed in detail below.

The EPCOR Centre loan (4.11% of the current pool balance) is secured by an office building in the financial district of downtown Edmonton. The loan is being added to the DBRS HotList because the namesake tenant, EPCOR Utilities, which occupies 98% of the NRA, will vacate the property when its lease expires at YE2011. According to the servicer, the borrower intends to complete $3 million in renovations to the building upon the departure of EPCOR and plans to make the building more suitable for multiple tenants, which should help facilitate leasing activity. The YE2010 DSCR was stable at 1.56x, but is expected to fall if new tenants are not signed. The city of Edmonton has yet to fully rebound from the economic recession which could make finding new tenants difficult. The loan does benefit from 100% recourse to GE Canada. DBRS will continue to closely monitor the loan.

The Northwest Centre loan (3.21% of the current pool balance) is secured by two Class B office properties in northwestern suburban Calgary. The loan is being added to the DBRS HotList because one tenant, Komex International, which occupies 67% of the NRA, will vacate most of its space upon its lease expiration at YE2011. Of the approximately 52,500 sf Komex currently occupies, it will only maintain 4,500 sf, on a month-to-month basis after its lease expiration. According to the servicer, an existing tenant at the subject has expressed interest in taking over a portion of the space to be left vacant by Komex. While DBRS does not give credit to the potential take over of the Komex space, it is a positive sign that existing tenants have expressed interest in expanding their operations within the building. The YE2010 DSCR was strong at 1.85x, but is likely to decline if the borrower cannot sign replacement tenants. DBRS will monitor the loan closely.

DBRS continues to monitor this transaction on a monthly basis in the Monthly CMBS 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 North American Surveillance Methodology, which can be found on our website under Methodologies.