DBRS Downgrades Three Classes of ML-CFC Commercial Mortgage Trust, Series 2006-1

DBRS has today downgraded three classes of the Commercial Mortgage Pass-Through Certificates, Series 2006-1 issued by ML-CFC Commercial Mortgage Trust, Series 2006-1 (the Trust) as follows:

-- Class C to B (low) (sf) from BB (low) (sf)
-- Class D to CCC (sf) from B (low) (sf)
-- Class E to C (sf) from CCC (sf)

In addition, nine classes have been confirmed as follows:

-- Class A-1A at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class AM at AAA (sf)
-- Class X at AAA (sf)
-- Class AN-FL at A (low) (sf)
-- Class A-J at A (low) (sf)
-- Class B at BBB (low) (sf)
-- Class F at C (sf)
-- Class G at C (sf)

The trend on Classes A-1A through B, and including Class X, are Stable. Classes D, E, F and G have no trend.

The downgrades follow increased loss projections as a result of six loans having transferred to special servicing in the last 12 months. These additions represent 4.5% of the current pool balance. The largest loan in special servicing is a recent transfer. Airport Square (Prospectus ID#17, 1.9% of the current pool balance) is secured by an anchored retail property in Reno, Nevada. The loan was previously on the servicer’s watchlist for a low DSCR following the departure of the property’s largest tenant, PetSmart, in 2007. This space has never been released and the asset was 67.3% occupied as of June 2014. The loan transferred to special servicing in October 2013 for imminent default. The borrower’s proposal for modification was rejected and the workout strategy is currently foreclosure. A January 2014 appraisal valued the property at $21.5 million, down from $36.3 million at issuance.

Singleton Square (Prospectus ID#36, 1.0% of the current pool balance) is also secured by an anchored retail property and has been in special servicing since 2010. A Kroger grocery store acts as the property’s anchor, and recently extended its lease through September 2022. The loan transferred to special servicing for imminent default shortly after the borrower requested relief and has been real estate owned since May 2014. The property is currently 78% occupied and a February 2014 appraisal valued the property at $10.5 million, down from $19.1 million at issuance. The special servicer’s strategy is to stabilize the asset before marketing it for sale.

The pool’s current weighted-average debt service coverage ratio is 1.3 times (x), down from 1.5x at issuance, and the Trust has experienced 42.6% of collateral reduction since the deal closed. There are currently 25 loans on the servicer’s watchlist, representing 21.2% of the current pool balance, including four of the Top 15 loans. Four loans representing 10.2% of the current pool balance, including two Top 15 loans, are fully defeased.

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 and CMBS North American Surveillance Methodology, which can be found on our website under Methodologies.