DBRS Upgrades Eight Classes and Confirms Six Classes of Schooner Trust, Series 2005-4

DBRS has today upgraded classes of the Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2005-4 transaction as follows:

-- Class D to AA (high) (sf) from AA (low) (sf)
-- Class E to AA (low) (sf) from A (high) (sf)
-- Class F to A (low) (sf) from BBB (high) (sf)
-- Class G to BBB (high) (sf) from BB (high) (sf)
-- Class H to BBB (sf) from BB (low) (sf)
-- Class J to BBB (low) (sf) from B (high) (sf)
-- Class K to BB (high) (sf) from B (sf)
-- Class L to BB (low) (sf) B (low) (sf)

DBRS has also confirmed the ratings of the following classes:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AAA (sf)
-- Class C to AAA (sf)
-- Class XC-1 at AAA (sf)
-- Class XC-2 at AAA (sf)

All trends are Stable. DBRS did not rate the first loss piece, Class M.

The upgrades reflect the pool’s continued strong overall performance as the transaction has a weighted-average (WA) debt service coverage ratio (DSCR) of 1.39 times (x) and a WA DBRS Exit Debt Yield of 18.30%, not inclusive of fully defeased loans, based on the most recent year-end reporting available for the individual loans as of the August 2014 remittance report. There are 55 of the 76 original loans remaining in the pool. Since issuance, the pool has experienced collateral reduction of 42.4% as a result of scheduled amortization and loan repayment.

The largest 15 loans represent 74.7% of the current pool balance. Within the top 15 loans, one loan is fully defeased and four loans, representing 22.15% of the current pool balance, are shadow-rated investment grade. The largest 15 loans in the pool have a WA DSCR of 1.48x and a WA DBRS Exit Debt Yield of 12.61%. The transaction benefits from defeasance collateral as four loans, representing 8.5% of the current pool balance, are fully defeased. There are two loans, representing 1.50% of the current pool balance, on the servicer’s watchlist as of the August 2014 remittance report. One of these loans is highlighted below.

The largest loan on the servicer’s watchlist is 6895 Columbus Road (Prospectus ID #30), representing 0.97% of the current pool balance. The loan is secured by an 85,685 square foot industrial property in Mississauga, Ontario, located on the west side of the Toronto Pearson International Airport. The loan was initially added to the servicer’s watchlist in September 2012 after the single tenant at the property, Accord Transport Ltd., vacated the property in November 2012 at lease expiry. According to the servicer, a logistics company leased 100% of the space on a month-to-month basis from April 2013 to October 2013. A prospective tenant was interested in the vacant space with an April 2014 lease commencement date; however, it seems that a lease agreement did not materialize because there has been no change in the leasing status of the property as of the July 2014 servicer commentary. The decline in occupancy has led to a depressed YE2013 DSCR of 0.28x compared with the YE2012 DSCR of 1.77x. The loan does benefit from strong sponsorship as a Canadian REIT, rated BBB by DBRS, provides full recourse. DBRS has followed up with the servicer regarding a detailed update on the status of the loan.

At issuance, DBRS shadow rated seven loans, representing 24.6% of the current pool balance, as investment grade. DBRS has today confirmed that the performance of these loans remains consistent with investment-grade loan characteristics.

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 August 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 Canadian 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.