DBRS Changes Trends of Waterfall Victoria Mortgage Trust, Series 2011-SBC2 to Positive from Stable

DBRS has today changed the trends on the Class M-1 through Class M-3 certificates of Waterfall Victoria Mortgage Trust, Series 2011-SBC2 to Positive from Stable. The trend on Class A remains Stable. DBRS does not rate the bottom two classes in the capital stack, Class M-4 and Class M-5.

DBRS has also confirmed the ratings of the certificates as follows:

-- Class A at AAA (sf)
-- Class M-1 at AA (sf)
-- Class M-2 at A (sf)
-- Class M-3 at BBB (sf)

The trend changes and rating confirmations reflect the performance of the underlying collateral coupled with the increased credit enhancement to the bonds from loan liquidations, early repayments and amortization. The collateral for the transaction originally consisted of 175 fixed- and floating-rate loans secured by 175 commercial properties. The loans were originated between 2003 and 2009, with an average seasoning of 33 months at issuance. Approximately 91.4% of the transaction balance was secured by 162 fully amortizing loans.

Since issuance, 56 of the original 175 loans have either paid off in advance of maturity or been liquidated from the trust, including 31 loans since the last DBRS rating action in March 2013. As a result, the total collateral reduction has increased to 41.4% as of the March 2014 remittance. Realized losses remain small as the liquidations of nine loans have combined to result in total losses to the trust of approximately $1.9 million, which has been contained to the unrated Class M-5.

Given that the loans were not originated for securitization and the seasoned nature of this transaction, updated property financial reporting was not available for all loans within the transaction. Modeling assumptions included DBRS underwritten net cash flows from issuance, an increase in loss severity given default for loans secured by owner-occupied properties and a LIBOR interest rate stress for floating-rate loans.

As of the March 2014 remittance report, there are ten loans in special servicing, representing 8.0% of the pool. DBRS analyzed these loans assuming a 100% probability of default and elevated losses. According to the March 2014 remittance report, there are 40 loans on the servicer’s watchlist, representing 29.5% of the outstanding pool balance. These loans remain current but are being monitored for low debt service coverage ratios and low occupancy rates.

As part of its review, DBRS analyzed the top 15 loans, the specially serviced loans and the loans on the servicer’s watchlist, which comprise approximately 60.1% of the current pool balance.

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 and loans on the servicer’s watchlist. The March 2014 Monthly CMBS 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.

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 (November 2012), which can be found on our website under Methodologies.