DBRS Confirms Ratings of WBCMT, Series 2004-C15 and Changes Trend on Five Classes

DBRS Limited (DBRS) has today removed Class F from Under Review with Negative Implications and has confirmed the ratings 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 B at AA (sf)
-- Class C at AA (low) (sf)
-- Class D at A (sf)
-- Class E at A (low) (sf)
-- Class F at BBB (high) (sf)
-- Class G at C (sf)
-- Class H at C (sf)
-- Class J at C (sf)
-- Class X-C at AAA (sf)

In addition to the rating actions above, DBRS has changed the trends on Class B through Class F to Negative from Stable, while Class F through Class J do not carry trends. Class H and Class J continue to have Interest in Arrears.

The rating confirmations reflect the relatively stable performance of the transaction since the last DBRS rating action in April 2015. As of the July 2015 remittance, the transaction has experienced collateral reduction of 89.9% since issuance with only seven of the original 87 loan remaining in the pool. In May 2015, two formerly specially serviced loans were resolved with no realized losses passed through to the trust. DBRS had projected one of the loans to experience a loss based on an updated property value calculated by capping the property’s most recently reported net operating income. As a result of no losses occurring with the resolution of this loan, Class F, which carried a rating that was Under Review with Negative Implications, has been confirmed.

The trend changes on Class B through Class F to Negative from Stable are a result of the potential for investment grade-rated bonds to be shorted interest due when currently specially serviced loans are liquidated from the trust. As of the July 2015 remittance, four loans representing 89.9% of the current pool balance are delinquent and in special servicing. Given the imbalance of non-performing loans to performing loans and the amount of total collateral reduction to date, future loan liquidations may result in interest shortfalls up the capital stack as the master and special servicer are expected to recoup their fees and advances from available interest, shorting interest due to the bonds. While projected recoveries on specially serviced loans are expected to repay a majority of the principal bond balances of the investment grade-rated classes based on the most recently reported property valuations, DBRS will continue to evaluate the interest shortfall mechanics of the pool and will track the resolution process of the specially serviced loans to determine if any strategies and actions will result in near-term rating actions as updates from the servicer are made available.

Three of the specially serviced loans are secured by Class B office properties throughout Northern New Jersey and are sponsored by Mack-Cali Realty Corporation (Mack-Cali). These loans represent 80.8% of the current pool balance. Updates from the servicer on two of the loans are highlighted below.

The Gale Office Pool (Prospectus ID#4, representing 54.7% of the current pool balance) loan is secured by four Class B office properties in Parsippany and Roseland, New Jersey. As the loan matured on August 2014, the borrower was in ongoing discussions regarding a potential deed-in-lieu workout strategy in March 2015. As of July 2015, the servicer has indicated that the borrower is continuing to pursue a deed-in-lieu strategy with an upcoming closing date that has yet to be determined. According to the servicer, the borrower is continuing to pursue new leases with a letter of intent received from an existing tenant, representing 10.0% of the net rentable area (NRA), on a lease scheduled to expire in July 2023, which has shown interest in expanding its footprint at the subject. The tenant is interested in taking on an additional 0.5% of NRA with a lease term of three years. Updated year-end financials show an improvement as the YE2014 debt service coverage ratio (DSCR) was 1.09 times (x) compared with the YE2013 DSCR of 0.93x.

The 10 Independence Boulevard (Prospectus ID#10, representing 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 and the borrower was exploring a deed-in-lieu of foreclosure strategy in March 2015. As of July 2015, the servicer has noted that the deed-in-lieu strategy has closed and the property is now real estate owned.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction. The July 2015 Monthly CMBS Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact DBRS 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 (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.