DBRS Confirms 13 Classes and Downgrades 4 Others of Bear Stearns Commercial Mortgage Securities Corp., Series 2004-PWR5

DBRS has today confirmed the ratings of 12 classes of Bear Stearns Commercial Mortgage Securities Trust 2004-PWR5 as follows:

-Class A-4 at AAA (sf)
-Class A-5 at AAA (sf)
-Class B at AAA (sf)
-Class C at AA (high) (sf)
-Class D at AA (low) (sf)
-Class E at A (high) (sf)
-Class F at A (low) (sf)
-Class G at BBB (sf)
-Class H at BBB (low) (sf)
-Class J at BB (high) (sf)
-Class K at BB (sf)

• Class X-1 at AAA (sf)
• Class X-2 at AAA (sf)

In addition, DBRS has downgraded the ratings of four classes as follows:

-Class L to B (sf) from BB (low) (sf)
-Class M to CCC (sf) from B (high) (sf)
-Class N to CCC (sf) from B (sf)
-Class P to CCC (sf) from B (low) (sf)

DBRS does not rate the first loss piece, Class Q. The trends for Classes A-4 through L are Stable.

The downgrades to Classes L through P are largely due to the projected loss associated with the Palmetto Business Park loan (Prospectus ID#23, 1.44% of the current pool balance). The collateral for the loan is a 535,000 sf flex industrial property in Palmetto, Florida. The loan transferred to the special servicer in March 2011 because of imminent default. The property currently has an economic vacancy rate of 89% and a physical vacancy rate of 100% after a former tenant holding 60% of the Net Rentable Area (NRA) vacated at lease expiry in February 2011. The property received an updated “as is” appraisal value of $6.75 million in April 2011, which is substantially less than the current outstanding loan balance of $11.6 million. Although DBRS does anticipate a loss to the trust associated with this loan, the loss is expected to be contained to the unrated Class Q.

The ratings confirmations are supported by transaction-level performance that is consistent with the metrics at the time of the last DBRS review in December 2010. As of the November 2011 remittance report, there are 108 loans remaining in the pool, reporting a weighted-average debt service coverage ratio (DSCR) of 1.47 times (x) and a weighted-average debt yield of 14.1%. Furthermore, eight loans, representing 21.9% of the current pool balance, are fully defeased. Approximately 34.2% of the collateral has been reduced since issuance.

DBRS shadow-rates one loan, New Castle Marketplace (Prospectus ID#19, 1.23% of the current pool balance), as investment grade. DBRS has today confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

Since the last annual review in December 2010, one loan previously in special servicing has been liquidated from the trust. This loan caused a realized loss of $4.28 million to the trust. The DBRS liquidation scenario at the time of the last review assumed a loss to the trust of approximately $5.1 million.

The DBRS analysis for this review included an in-depth look at the top 15 loans in the transaction, in addition to the loans on the servicer’s watchlist, the shadow-rated loan and the loan in special servicing. Cumulatively, these loans represent 50.5% of the current pool balance.

DBRS continues to monitor this transaction on a monthly basis for changes at the bond and loan level. Although DBRS has projected losses for the specially serviced and most pivotal loans in the transaction, we continue to monitor these loans on a monthly basis for any changes that may affect the losses that those loans may realize.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

Notes:
All figures are in U.S. 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.