DBRS Upgrades Three Classes and Confirms Ten Classes of Schooner Trust, Series 2006-6

DBRS has today upgraded the ratings of three classes of Commercial Mortgage Pass-Through Certificates, Series 2006-6 issued by Schooner Trust, Series 2006-6 as follows:

-- Class C to AA (high) (sf) from AA (sf)
-- Class D to A (sf) from A (low) (sf)
-- Class E to BBB (high) (sf) from BBB (sf)

Additionally, DBRS has confirmed the ratings on the remaining classes in the transaction. All trends are Stable.

The upgrades are a result of continued strong performance of the transaction. As of the September 2014 remittance, 22 loans have paid out of the pool since issuance, leaving 76 loans remaining in the transaction. Since issuance, the transaction has experienced collateral reduction of 30.7% as a result of scheduled amortization and successful loan repayment. The transaction also benefits from defeasance collateral as nine loans, representing 11.7% of the current pool balance, are fully defeased. Overall pool performance remains stable, as the largest 15 loans in the transaction, excluding defeasance collateral, have a weighted-average debt service coverage ratio and weighted-average debt yield of 1.42 times (x) and 11.5%, respectively. The 990 Avenue Road loan (Prospectus ID#40), representing 1.0% of the current pool balance, is the only loan in the pool scheduled to mature in the next 12 months, and this loan is fully defeased.

There are currently 13 loans on the servicer’s watchlist, representing 15.9% of the current pool balance; however, two of the largest loans on the servicer’s watchlist (Northwest Centre and 50 Mooregate Crescent), which combined, account for 5.5% of the pool, will be removed from the servicer’s watchlist due to a rebound in each loan’s performance. Two additional loans on the servicer’s watchlist are highlighted below. There are no loans in special servicing.

The 165-167 Hymus Boulevard loan (Prospectus ID#9, 2.80% of pool) is secured by a multi-tenant industrial building in Pointe-Claire, Québec, and was added to the servicer’s watchlist after two tenants vacated the property ahead of their lease maturity dates in March 2013, leaving the property 59.8% occupied. As a result the YE2013 DSCR declined to 0.54x compared with 1.15x at YE2012. The borrower has been able to sign another tenant on a month-to-month basis for an additional 11.6% of the net rental area (NRA), bringing total occupancy to 71.4%; however, the lease of the other tenant expires in June 2015. DBRS is currently awaiting information from the servicer regarding potential lease extensions for both tenants. According to Altus Insite, the subject performs similarly to other competing properties in the area as the submarket’s average vacancy was quoted at 33.0%. The loan remains current and the property benefits from its location close to major highways, the Montréal-Pierre Elliott Trudeau International Airport and rail and commuter trains.

The 5180 Orbitor Drive loan (Prospectus ID#18, 1.54% of pool) is secured by a Class B office property in Mississauga, Ontario, and was added to the servicer’s watchlist after Motorola, which formerly occupied 100% of the NRA, vacated its space at lease expiration in March 2013. In conjunction with Motorola vacating the property, the property was purchased and the loan was assumed at a purchase price of $5.8 million, representative of a 70% loan to purchase price ratio. As part of the assumption, the new borrower is required to provide monthly leasing updates. Much of the building was renovated to better suit multi-tenant use; however, leasing activity has been slower than expected, as the property was only 40.0% occupied in September 2014. The two largest tenants combine to occupy 26.2% of the NRA on long-term leases expiring in 2023; however, both currently pay below market rental rates of $13.00 per square feet (psf) compared to market rental rate of $15.27 psf as quoted by the Q2 2014 Colliers Canada Office Market Report. The loan remains current and the former Motorola space has been renovated and is lease ready. The property is well located, in vicinity to major highways and just south of the Toronto Pearson International Airport.

As part of its review, DBRS analyzed the top 15 loans and the loans on the servicer’s watchlist, which comprise approximately 61.4% 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, specially serviced loans and loans on the servicer’s watchlist. The September 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 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 (January 2012) and CMBS North American Surveillance Methodology (November 2012), which can be found on our website under Methodologies.