DBRS Upgrades Two Classes, Confirms Eight of COMM 2004-LNB3

DBRS, Inc. (DBRS) has today upgraded two classes of COMM 2004-LNB3, as follows:

-- Class F to AAA (sf) from A (low) (sf)
-- Class G to AA (low) BB (high) (sf)

Additionally, DBRS has confirmed the ratings on eight classes, as follows:

-- Class X at AAA (sf)
-- Class H at CCC (sf)
-- Class J at D (sf)
-- Class K at D (sf)
-- Class L at D (sf)
-- Class M at D (sf)
-- Class N at D (sf)
-- Class O at D (sf)

All trends remain Stable.

The rating upgrades reflect the increased credit enhancement to the bonds as a result of loan repayment and amortization. The most recent paydown occurred following the repayment of Melbourne Park Apartments (Prospectus ID#76) in October 2014. Of the 94 original loans, six loans currently remain outstanding, with a collateral reduction of 96.53% since issuance. Approximately 44.23% of total collateral reduction has occurred over the past 12 months, as 58 loans have repaid in that time. As of November 2014 remittance, there are three loans on the servicer’s watchlist, representing 80.29% of the current pool.

The largest loan on the server’s watchlist, 3 Beaver Valley (Prospectus ID#14, 75.71% of the current pool) is secured by a 263,000 sf Class A office building, located in Wilmington, Delaware. As of YE2013 financials, the loan reported a DSCR of 1.72x, representing a 2.2% growth since YE2012 and a 24.7% growth over the DBRS UW NCF. The loan was placed on the watchlist as of October 2014, due to upcoming loan maturity (scheduled to occur on December 1, 2014). Also of concern is the 20% of NRA that has recently become vacant. The sole tenant, 21st Century Insurance, which has been a tenant at the property since January 2002, recently gave back 20% of its previously occupied space and extended its lease to the remaining 80% of the NRA at a reduced rental rate. The newly available space presents some refinance risk; however, the property is well located and attractive. DBRS took a conservative approach in its modeling of the property value, based on a projected decline in cash flow. While DBRS views a liquidation scenario as unlikely, should an event of default occur, DBRS believes there is limited risk for interest to remain unpaid to any rated classes for an extended period of time.

Notes:
All figures are in U.S. dollars unless otherwise noted.

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.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.