DBRS Upgrades One Class and Confirms Eight Classes of COMM 2004-LNB2

DBRS Limited (DBRS) has today upgraded the ratings of one class of COMM 2004-LNB2 as follows:

-- Class H to AAA (sf) from BBB (high) (sf)

Additionally, DBRS has confirmed the ratings on the remaining classes in the transaction. The trends on Classes C, D, E, F, G, H and J are Stable.

The rating upgrades reflect the overall collateral reduction since issuance, which is 91.8% as a result of successful loan repayment, scheduled amortizations and principal recoveries on liquidated loans. Since issuance, 85 loans have been repaid, leaving five loans in the current pool. The transaction benefits from defeasance collateral as two loans, representing 80.7% of the current pool balance, are fully defeased. Aside from the one loan in special servicing, representing 3.2% of the current pool balance, the nearest loan maturity occurs in December 2018.

As of the July 2015 remittance, the Alta Mesa loan (Prospectus ID#54, 3.2% of the pool) remains in special servicing because of a maturity default in January 2014. Performance of the loan has declined since YE2013 after four tenants, representing approximately 28% of the net rentable area (NRA), vacated the property at year end. The most recently reported debt service coverage ratio (DSCR) is the T-12 ending August 31, 2014, figure of 1.03 times (x), a decrease from the YE2013 DSCR of 1.32x. The most recent appraised value of $3,970,000 was conducted on May 2014, when the occupancy rate was 73.0%. As of the April 2015 rent roll, the property occupancy has dropped to 65.4%, primarily as a result of Sam’s Dollar store, representing 14.9% of the NRA, leaving after its lease expired. According to the January 2015 site inspection, the property seems to be neglected and showing its age as roof tiles are missing, asphalt in the sidewalk and parking lot has cracked, paint is chipping and one tenant is in need of heating, ventilation and air conditioning replacement. While DBRS expects the 2015 appraised value to decrease to reflect the property’s current condition, the current outstanding loan exposure to appraised value is 72.7%, indicative of $1.8 million of market equity remaining in the transaction.

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 August 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 (June 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.