DBRS Confirms All Classes in Merrill Lynch Mortgage Trust 2005-CIP1

DBRS has today confirmed the following classes of Merrill Lynch Mortgage Trust 2005-CIP1:

-- Classes A-2, A-3A, A-3B, A-SB, A-4 and XC at AAA (sf)
-- Class A-M at AA (sf)
-- Class A-J at BBB (sf)
-- Class B at BB (high) (sf)
-- Class C at BB (low) (sf)
-- Class D at B (low) (sf)
-- Class E at CCC (sf)
-- Classes F, G, H, J and K at C (sf)

The above ratings reflect DBRS’s outlook for the pool following a detailed analysis of the 15 largest loans in the pool, loans in special servicing and watchlist loans over 1.0% of the current pool balance. These loans represent 69.0% of the pool as of the January 2014 remittance.

Of the 113 outstanding loans that remain in the pool, there are 99 non-specially serviced loans scheduled to mature in 2015. These loans have an average DBRS refinance debt service coverage ratio of 1.44 times and an average exit debt yield of 11.2% as of the January 2014 remittance. DBRS considers a loan with a debt yield in excess of 11.0% to be a good candidate for refinance. In the last 12 months, cash flow for reporting loans has improved by approximately 4.0% across the pool.

There is continued uncertainty surrounding the two largest loans in special servicing, Highwoods Portfolio (Prospectus ID#2, 9.7% of the current pool balance) and University Village (Prospectus ID#12, 2.2% of the current pool balance). Both loans were modified in 2011, but remain in special servicing.
Highwoods Portfolio was originally secured by 33 suburban office properties in Tampa, Florida, and Charlotte, North Carolina, comprising nearly 2.0 million square feet of space. The loan, which had an original securitized balance of $160.0 million, transferred to the special servicer for default after the borrower failed to refinance at the original maturity date in August 2010. The loan was modified in May 2011, the terms of which included an A/B note split, an $18 million capital infusion deposited into three reserve accounts and a maturity date extension to May 2014. Eleven assets have been released since the loan was modified, and the A-note balance has been paid down by approximately $24.5 million. The balance of the A-note and hope note were $75.5 million and $60.0 million, respectively, as of the January 2014 remittance.

University Village is secured by an anchored retail property in Riverside, California. The property is located adjacent to the University of California, Riverside campus. The largest tenant is Regency Cinemas (23.0% of the net rentable area) and leases the space through 2021. Other tenants include the University of California, Riverside, Starbucks, Quizno’s, Gamestop, T-Mobile and 7-Eleven. The loan, which had an original securitized balance of $32.0 million, transferred to special servicing in February 2009 and was modified in March 2011. Modification terms included an A/B note split and a capital infusion of $1.4 million to pay down the outstanding principal balance and fund reserves. As of the January 2014 remittance, the balance of the A-note and hope note were $20.0 million and $10.1 million, respectively.

Neither Highwoods Portfolio nor University Village was transferred back to the master servicer following modification. Both loans have reportedly performed in accordance with the modification terms, but there is concern regarding the refinance outlook for these loans, given their respective underlying property values. It should be noted that both loans have experienced principal paydown since modification as a result of property releases (in the case of Highwoods Portfolio) and excess cash flow (in the case of University Village). Additionally, Highwoods Portfolio has $11.4 million of available lender-controlled reserves as of January 2014. Both loans are currently open to prepayment. DBRS will continue to monitor both of these loans closely, especially leading up to the scheduled May 12, 2014, maturity for Highwoods Portfolio.

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 largest loans in the pool, the loans in special servicing and the loans on the servicer’s watchlist. The January 2014 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 methodology is 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.