DBRS Confirms All Classes in DBUBS 2011-LC2 Mortgage Trust

DBRS has today confirmed all classes of DBUBS 2011-LC2 Mortgage 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)
-- Classes F and 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 and has experienced 2.1% of collateral reduction since issuance. The pool is heavily concentrated by loan size, with over half of the pool represented in the largest seven loans alone. The top 15 comprises 67% of the current pool balance. The pool is also concentrated by property type and location, with 44% of the current pool balance represented by office properties and 55% of the pool being located in three states. Mitigating this concern is the pool’s diversity by property count. The 67 outstanding loans are secured by 132 properties. Four of the top 15 loans are multi-property portfolios. Much of the pool’s office exposure is located in urban or dense urban areas within primary or strong secondary markets. New York has the highest geographic exposure within the pool, and DBRS views the strength of its market as a moderating influence to the concentration.

There are five loans on the servicer’s watchlist for performance decline. At this time, DBRS does not foresee any immediate danger of default to the loans on the watchlist. DBRS continues to monitor these loans on a monthly basis as part of ongoing surveillance.

One loan, Ridgeview Apartments (Prospectus ID#10) has been in special servicing since September 2012. The borrower was reportedly not in compliance with a hard lockbox provision set forth in the loan documents and, after continuing to ignore requests for compliance, the loan was transferred to special servicing. This loan is secured by a 416-unit multifamily property in Elmsford, New York, which is approximately 30 miles north of New York City. A modification of the loan documents has been negotiated and is currently being finalized. DBRS is in communication with the 17g5 provider for more details on the structure of the modification. At this time, the loan is performing well, with a YE2012 DSCR of 1.90x, up from the DBRS UW DSCR of 1.60x.

The pool benefits from low-leverage financing, with a weighted-average debt yield of 11.2% as of the June 2013 remittance. At issuance, the weighted-average debt yield, based on the issuer’s cash flows, was 10.6%, and the DBRS UW Debt Yield was 9.6%. The largest loans in the pool have experienced some cash flow growth over the last two years, showing an average NCF change of 12.6%.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the remaining loans in the pool. The June 2013 Monthly Surveillance Report for this transaction will be published shortly. 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 (January 2012) and CMBS North American Surveillance Methodology (November 2012), which can be found on our website under Methodologies.

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