DBRS Downgrades Two Classes of WBCMT 2004-C15, Places One Class Under Review, Negative

DBRS Limited (DBRS) has today downgraded the rating of the following classes of Commercial Mortgage Pass-Through Certificates, Series 2004-C15 (the Certificates) issued by Wachovia Bank Commercial Mortgage Trust, Series 2004-C15 (WBCMT 2004-C15 or the Trust):

-- Class G to C (sf) from BB (high) (sf)
-- Class H to C (sf) from CCC (sf)

In addition to the rating actions above, DBRS has placed one class Under Review with Negative Implications, as follows:

-- Class F at BBB (high) (sf), Under Review with Negative Implications

In addition, DBRS has confirmed Class A-1A through Class E, Class J, and the notional Class X-C. All trends are Stable, with the exception of Class F through Class J, which have ratings that do not carry trends. Class H and Class J continue to have Interest in Arrears.

The rating downgrades to Class G and Class H are a result of increased projected losses associated with five loans in special servicing. Furthermore, the estimated losses with respect to these loans is projected to erode the credit enhancement to Class F, prompting the rating to be placed Under Review with Negative Implications. DBRS will continue to maintain a dialogue with the special servicer to track the resolution process of the specially serviced loans to determine if any strategies and actions will result in near-term rating actions.

Since issuance, the transaction has experienced collateral reduction of 88.1% from loan amortization, successful loan repayment, principal recovered from liquidated loans and realized losses from defaulted loans. As of the March 2015 remittance report, nine loans remain out of the original loan count of 87. One loan is fully defeased, representing 3.4% of the current pool balance. According to the March 2015 remittance report, there are six loans in special servicing representing 91.3% of the current pool balance. Three of the loans in special servicing, representing 69.4% of the current pool balance, are secured by Class B office properties throughout Northern New Jersey. The loans are all sponsored by Mack-Cali REIT (Mack-Cali), which has a portfolio of 282 properties in New Jersey. Mack-Cali has commenced potential deed-in-lieu discussions with the lender on each of the three specially serviced assets it sponsors. Two of loans are highlighted in greater detail below.

The Gale Office Pool (Pros ID#4, representing 46.9% of the current pool balance) loan is secured by four Class B office properties in Parsippany and Roseland, New Jersey. The loan transferred to special servicing in August 2014 for maturity default. According to the servicer, all cash is being trapped with funds to pay operating expenses released to the borrower. The property was 82.1% occupied, according to the December 2013 rent roll, with major tenants across the four properties including Lowenstein Sandler LLP (17.6% of the NRA, lease expires August 2017), Connell Foley LLP (15.1% of the NRA, lease expires December 2015) and Torre Lazur Healthcare Group (12.4% of NRA, lease expires May 2022). DBRS has followed-up with the servicer regarding a leasing update for the Connell Foley LLP tenant. The four properties are in average to above average condition with minor deferred maintenance items noted, according to the individual 2014 servicer site inspections. The properties were last appraised in September 2014 with a combined value of $72.7 million, a $16.9 million decrease from the issuance value of $89.6 million. DBRS expects the Trust to experience a loss with the resolution of this loan.

The 10 Independence Boulevard (Pros ID#10, 12.1% of the current pool balance) loan is secured by a Class B office building situated in a suburban business park in Warren, New Jersey. The loan transferred to special servicing for imminent default in October 2013. According to the most recent financial reporting, the debt service coverage ratio (DSCR) remains below threshold with a Q2 2014 DSCR of 0.91 times (x) compared with the YE2013 DSCR of 0.89x. The property was 93.0% occupied, according to the June 2014 rent roll, with Virgin Mobile USA LP occupying 77.5% of the NRA on a lease expiring in February 2016. Other tenants at the property include Shape Inc. (6.4% of the NRA, lease expires May 2020) and Rosenberger Technology LLC (4.5% of NRA, lease expires May 2016). The April 2014 appraisal valued the property at $12.5 million, a $16.5 million decline from the issuance value of $29.0 million. The current appraised value is also less than the combined outstanding loan balance and advances of $17.8 million. DBRS also expects the Trust to experience a loss with the resolution of this loan.

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 2015 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.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The applicable methodologies are North American CMBS Rating Methodology (March 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

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