DBRS Confirms All Classes of Schooner Trust, Series 2006-5

DBRS has today confirmed the following classes of Schooner Trust, Series 2006-5 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 (high) (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)

The trends on all classes are Stable.

Overall, performance in the pool has remained stable since issuance. The weighted-average debt service coverage ratio (DSCR) is currently 1.6 times (x), compared with 1.5x at issuance, and the weighted-average debt yield is currently 13.0%, compared with 10.6% at issuance. Seventy-nine loans remain after 73 months of seasoning has reduced the original collateral balance by 18.2%.

There are seven loans are on the servicer’s watchlist and all are current. DBRS considers two of these loans to be of some concern.

675 Yonge Street (Prospectus ID#56, 0.50% of the current pool balance) is secured by a mixed-use retail and office property in downtown Toronto, just east of the University of Toronto campus. This loan has been on the servicer’s watchlist since May 2009 when occupancy dropped to 35%. Exposure to tenant roll is concentrated in one unit, which represents approximately 39% of the net rentable area (NRA). Challenges in finding a stable tenant to occupy this space since the original tenant vacated have resulted in a significant decline in cash flow since issuance; however, the loan has never been delinquent. The borrower continues to actively market available space and make timely mortgage payments.

2695 Dollard Avenue (Prospectus ID#48, 0.7% of the current pool balance) is secured by an industrial property in LaSalle, Québec. This loan was placed on the watchlist in April 2010 when the sole tenant vacated. According to the servicer, a new tenant had been found for the space in late 2010 and signed a five-year lease for 100% of the NRA. That lease was scheduled to expire in November 2015. A March 2012 rent roll, however, indicates that the property is still vacant. At press time, DBRS is awaiting confirmation from the servicer regarding the lease in question. This loan has no history of delinquency.

The top fifteen loans in this transaction represent more than half of the current pool balance. The weighted-average DSCR and weighted-average debt yield for these loans is 1.64x and 13.4%, respectively. Five loans, including the third largest loan in the pool, representing 6.4% of the current pool balance, are fully defeased.

DBRS maintains investment-grade shadow-ratings on two loans in this pool. These shadow-ratings were also confirmed today, in addition to the previously mentioned rating actions.

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.