DBRS Confirms Rating on SMA, Series 2012-LV1 and Changes Trend to Positive

DBRS has today confirmed the rating of BBB (low) (sf) on the Class A notes issued by SMA Issuer I and SMA Issuer II (SMA, Series 2012-LV1). The trend has been changed to Positive.

The rating has been confirmed based on the performance of the transaction and, in aggregate, disposition outcomes since issuance that compare favorably to the DBRS loan-level disposition assumptions made at securitization. The Positive trend recognizes the significant paydown of the Class A notes, from $181.6 million at securitization to $40.1 million as of December 2013. When compared to the equity behind the Class A notes, this implies a substantial increase in credit enhancement to the Class A notes.

The transaction is a liquidating vehicle with the Class A notes originally secured by 12 performing and non-performing commercial mortgage loans secured by 13 properties, as well as one real estate owned (REO) property. The loans were all secured by a mix of traditional commercial real estate properties, including multifamily, retail, hotel and office, in addition to non-traditional commercial real estate, including a senior living facility, infill urban land and a completed condominium development. A joint venture formed by affiliates of Square Mile Capital Management LLC and affiliates of Invesco Advisors, Inc. purchased the collateral from Bank of America, N.A. between October 2011 and September 2012 in three separate transactions, for a total acquisition price of $262.0 million.

Since issuance, five loans have been disposed out of the trust. Four of those loans were disposed as par payoffs with no loss, while one was disposed as a discounted payoff. As a result of these dispositions, the Class A notes balance has been reduced to $40.1 million, from its original balance of $181.6 million.

The current pool is concentrated as there are eight loans remaining in the transaction secured by nine properties. Five of the loans are performing, one is non-performing and there are two REO properties. The issuer’s total acquisition basis for the remaining eight loans is $143.5 million against an outstanding loan balance of $199.8 million. Compared to the outstanding Class A balance of $40.1 million, the issuer has remaining equity of $103.4 million or an implied credit enhancement of 72.1%.

The rating assigned to the Class A notes by DBRS is based exclusively on the credit provided by the transaction structure and underlying trust assets.

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

The applicable methodologies are CMBS Rating Methodology, Rating North American Commercial Real Estate Non-Performing Loan Liquidating Trusts and the Unified Interest Rate Model for U.S. and European Structured Credit, which can be found on our website under Methodologies.

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