DBRS Confirms 13 Classes of MSC 2011-C3

DBRS has today confirmed 13 classes of Commercial Mortgage Pass-Through Certificates, Series 2011-C3 issued by the MSC 2011-C3 Mortgage Trust. The trends are Stable.

– Class A-1 at AAA (sf)
– Class A-2 at AAA (sf)
– Class A-3 at AAA (sf)
– Class A-4 at AAA (sf)
– Class A-J at AAA (sf)
– Class X-A at AAA (sf)
– Class X-B at AAA (sf)
– Class B at AA (sf)
– Class C at A (sf)
– Class D at BBB (high) (sf)
– Class E at BBB (low) (sf)
– Class F at BBB (low) (sf)
– Class G at B (high) (sf)

This transaction closed in October 2011 and the collateral consists of 63 fixed-rate loans secured by 76 multifamily, mobile home parks and commercial properties. At issuance, the portfolio had a balance of $1,491,988,764 and as of the September 2012 remittance report, the total pool balance was $1,478,222,649, with all of the original 63 loans remaining in the pool. The pool benefits from relatively low-leverage financing, with a DBRS weighted-average debt service coverage ratio (DSCR) and debt yield of 1.53 times (x) and 10.02%, respectively, based on the current trust balance and the DBRS underwritten net cash flow at issuance for each loan. As of the September 2012 remittance report, 87.20% of the pool was reporting YE2011 financials, with a weighted-average DSCR of 1.70x and a weighted-average debt yield of 10.90%.

There are three loans in the pool, representing 13.77% of the outstanding pool balance, shadow-rated investment grade by DBRS.

As many of the trust loans were secured as part of an acquisition of the collateral, some of the reported YE2011 net cash flow (NCF) figures are representative of annualized figures from partial-year statements and are not considered as reliable as a full year of reporting in assessing the strength of the properties’ cash flow. As such, for the purposes of this review, DBRS compared the borrower’s reported NCF figure for each loan with the DBRS underwritten NCF figure to assess the performance since issuance. As no loans exhibited significant cash flow movement since issuance, DBRS modeled the DBRS underwritten NCF figure and the current outstanding trust balance for each loan.

As of the September 2012 remittance report, there were three loans on the servicer’s watchlist. The largest of these loans, Prospectus ID #33 (420 East 72 Street Coop), represents 0.74% of the pool is secured by a 182-unit multifamily property in New York City. The property was 100% occupied as of the YE2011 rent roll. The loan is on the watchlist for a low DSCR at YE2011 of 0.67x. However, this figure is artificially low as the borrower’s reported NCF figure does not fully capture the cash flow generated under the property’s co-op structure. Given the strong occupancy and good location of the property, DBRS does not anticipate performance issues with the loan through the near term.

The other two loans on the watchlist, Prospectus ID #29 (Heathrow Market Center) and Prospectus ID #46 (San Angelo Marketplace-Phase II), are secured by anchored retail properties. Prospectus ID #29 is being monitored for an upcoming lease expiry for the grocery anchor and Prospectus ID #46 is being monitored for a low DSCR related to free rent periods for tenants at the recently constructed property. The anchor at Heathrow Market Center has been renewed for five years to 2017 and the Q2 2012 DSCR for Prospectus ID #46 shows improvement in the DSCR to a 1.10x from 1.02x at YE2011. DBRS expects both loans to be removed from the servicer’s watchlist in the near term.

For additional details on the DBRS viewpoint for this transaction, and for details on the largest loans in the pool and the loans on the servicer’s watchlist, please see the September 2012 Monthly Surveillance Report for this transaction, which will be published shortly.

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

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (May 2011), which can be found on our website under Methodologies.

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