DBRS Confirms All Classes of DBUBS 2011-LC2 Mortgage Trust, Series 2011-LC2

DBRS has today confirmed all classes of the Commercial Mortgage Pass-Through Certificates, Series 2011-LC2 issued by DBUBS 2011-LC2 Mortgage Trust (the Trust) as follows:

–Classes A-1, A-1FL, A-1C, A-2, A-3FL, A-3C, A-4, X-A and X-B at AAA (sf)
–Class B at AA (sf)
–Class C at A (sf)
–Class D at BBB (low) (sf)
–Class E at BB (low) (sf)
–Class F at B (low) (sf)
–Class FX at B (low) (sf)

The trend for all classes is Stable. The Class A-1C and Class A-3C certificates are exchangeable with the Class A-1FL and Class A-3FL certificates, respectively. The Class FX certificate is considered notional. Its notional balance will be equal to the principal certificate balance of Class F.

The pool comprises 67 fixed-rate loans secured by 132 commercial properties in 21 states. The pool is heavily concentrated by size, with the ten largest loans comprising 56.7% of the total pool balance. Additionally, more than half of the pool is concentrated in three states: New York, Pennsylvania and Texas. There are no loans in this transaction with additional subordinate debt; however, six loans which represent 12.5% of the current pool balance have additional mezzanine debt in place. Seven loans, representing 6.9% of the current pool balance, are interest-only for the full loan term. An additional seven loans, representing 18.3% of the current pool balance, are structured with partial interest-only terms. The transaction closed in June 2011 and, since issuance, the outstanding principal balance for the pool overall has been reduced by 0.96%. Updated performance figures for YE2011 were available for 62 loans, representing 94.7% of the outstanding pool balance. The weighted-average debt service coverage ratio (DSCR) for those loans reporting updated financials was 1.47 times (x); the weighted-average DBRS Term DSCR was 1.42x for the pool at the time of issuance.

As of the June 2012 remittance, there were three loans on the servicer’s watchlist, representing 7.24% of the current pool balance. Of these, one loan is on the watchlist for a low DSCR. Keystone Marquee Office Portfolio (Prospectus ID#6, 4.2% of the current pool balance) is secured by three suburban office properties located outside of Philadelphia and comprising a total of 546,500 sf. The YE2011 DSCR was reported to be 1.19x and reflects a 24.2% decline over the DBRS underwritten net cash flow (NCF). The servicer attributes the decline to rent abatements. An upfront reserve meant to cover rent abatements granted to certain tenants was provided at closing. The loan is performing as expected and DBRS expects the cash flow will improve once the rent abatement periods expire.

Ridgeview Apartments (Prospectus ID# 10, 2.4% of the current pool balance) is secured by a 416-unit multifamily property in Elmsford, New York, in Westchester County. This loan is interest-only for its five-year term and is scheduled to mature in June 2016. This loan is on the watchlist because of the borrower’s non-compliance with the lockbox provisions. At press time, the loan is paid through May 2012. The servicer will continue to monitor the borrower’s monthly deposits. At YE2011, the occupancy and DSCR were reported to be 94% and 1.87x, respectively.

The smallest loan on the watchlist is Sutton Place Apartments (Prospectus ID#35, 0.7% of the current pool balance). The subject is a 288-unit multifamily property in Winter Park, Florida. This loan is on the watchlist because of a fire that occurred within six units and affected a total of 18 units. The repair cost was originally estimated to be between $900,000 and $1.2 million. A fire escrow, totaling $452,354, was funded at closing to be used in conjunction with the renovation of the building affected by the fire. Excluding income from the six damaged units would have reflected a 1.36x DSCR at issuance. At press time, DBRS has not received an update regarding the status of repairs. According to a March 2012 rent roll, the property was 90.6% occupied. An updated servicer site inspection has been requested.

For the purposes of this review, DBRS modeled the 27 loans included in the original DBRS sample (comprising 80.5% of the pool at issuance) using the original DBRS underwritten NCF figure. For the 40 loans not included in the original DBRS sample, DBRS applied a 9.3% haircut to the issuer’s underwritten NCF. In addition, approximately 35.8% of the pool was assigned a property quality of Above Average or Excellent, and just 1.6% of the pool was designated Below Average or Poor. The three loans on the servicer’s watchlist are secured by properties with a stable occupancy rates. One loan is being monitored for performance issues and a second is being monitored for lockbox compliance. DBRS did not apply any additional stress to the respective underwritten NCF figures.

For further information on the DBRS viewpoint for this pool, including commentary on the largest loans, please see the June 2012 Monthly Surveillance Report for this transaction, which will be published shortly on the DBRS website at www.dbrs.com.

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

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are CMBS Rating Methodology and CMBS North American Surveillance Methodology, which can be found on our website under Methodologies.