DBRS Upgrades Three and Confirms 12 Classes of COMM 2004-LNB2

DBRS has today upgraded three classes of COMM 2004-LNB2 as follows:

-- Class D to AA (high) (sf) from AA (sf)
-- Class E to AA (low) (sf) from A (sf)
-- Class F to A (sf) from A (low) (sf)

Additionally, DBRS has confirmed the ratings on the remaining classes in the transaction. All trends are Stable.

The ratings upgrades reflect the increased credit enhancement to the bonds from a collateral reduction of approximately 41.2% since issuance. As of the September 2012 remittance report, 63 loans remain in the pool out of the original 90 loans at issuance. Additionally, seven loans, representing 21.9% of the current pool balance, are fully defeased. The weighted-average debt service coverage ratio and weighted-average LTV remain stable at 2.11x and 59.9%, respectively.

As of the September 2012 remittance report, there are three loans in special servicing and ten loans on the servicer’s watchlist, representing 4.86% and 5.31% of the current pool balance, respectively. The two largest specially serviced loans, which share a borrower, but are not cross-collateralized, are highlighted below.

The 1 Northbrook Corporate Center loan (Prospectus ID#15) is secured by a Class B office property in Trevose, Pennsylvania, that was built in 1989. This loan transferred to special servicing in June 2009 because of imminent default and became Real Estate Owned (REO) in April 2011. According to the August 2012 rent roll, the property was 52.5% occupied. According to the Q2 2012 REIS report, the average vacancy in the Bucks County submarket of Philadelphia was 23.1%, with average asking rental rates of $22.89 psf, which is in line with the property's rates. An August 2012 appraisal valued the subject at $5.5 million, down from $19.2 million at issuance. DBRS expects the trust to experience a loss to the trust with the resolution of this loan.

The Northbrook loan (Prospectus ID#22) is secured by a Class B office property in Bensalem, Pennsylvania, that was built in 2001. The loan transferred to special servicing in June 2009 because of imminent default and became REO in April 2011. According to the August 2012 rent roll, the property was 72.3% occupied. According to the Q2 2012 REIS report, the average vacancy in the Bucks County submarket of Philadelphia was 23.1%, with average asking rental rates of $22.89 psf, which is in line with the property's rates. An August 2012 appraisal valued the property at $6.5 million, down from a value of $14.1 million at issuance. DBRS expects the trust to experience a loss with the resolution of this loan.

At issuance, DBRS shadow-rated two loans, representing 33.1% of the current pool balance, as investment grade. DBRS has today confirmed that the performance of these individual loans remain consistent with investment-grade loan characteristics.

As part of its review, DBRS analyzed the top 15 loans, loans in special servicing, loans on the servicer’s watchlist and shadow-rated loans, which comprise approximately 83.93% of the current pool balance.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report to assess any material changes at the bond or collateral level that may affect ratings. The Monthly CMBS Surveillance Report also highlights any material updates in the loans on the servicer’s watchlist and any specially serviced loans.

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