DBRS Upgrades Two Classes of DBUBS 2011-LC2 Mortgage Trust

DBRS Limited (DBRS) has today upgraded the ratings on two classes of Commercial Mortgage Pass-Through Certificates, Series 2011-LC2 issued by DBUBS 2011-LC2 Mortgage Trust:

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

In addition, the following ratings were confirmed:

-- Class A-1 at AAA (sf)
-- Class A-1FL at AAA (sf)
-- Class A-1C at AAA (sf)
-- Class A-3FL at AAA (sf)
-- Class A-3C at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class B at AAA (sf)
-- Class X-A at AAA (sf)
-- Class E at BB (low) (sf)
-- Class X-B at B (sf)
-- Class F at B (low) (sf)
-- Class FX at B (sf)

All trends are Stable.

The rating upgrades reflect the overall stable performance of the pool with 43 of the original 67 loans remaining and a collateral reduction of 34.7% since issuance. The transaction also benefits from one loan, representing 0.8% of the pool, which is fully defeased. Performance metrics are healthy with a weighted-average (WA) in-place debt service coverage ratio (DSCR) of 1.65 times (x) and a WA debt yield of 12.4% based on the most recent year-end figures reported for the remaining loans in the pool. Those figures compare well with the DBRS WA Term DSCR and DBRS WA Debt Yield for those loans at issuance of 1.35x and 9.4%, respectively.

As of the March 2017 remittance, there are seven loans on the servicer’s watchlist, representing 8.8% of the pool balance, and one loan in special servicing, representing 0.6% of the pool. The watchlisted loans report a preceding-year WA DSCR of 1.49x and a WA debt yield of 11.7%. The loan in special servicing was transferred in May 2014 when the borrower stopped making payments and has been real estate owned since April 2015. Given the sharp value decline for the property since issuance, DBRS anticipates a loss will be incurred at resolution, currently projected to be contained to the unrated Class G Certificates.

There is one loan scheduled to mature in the next 12 months, Prospectus ID#5, 1450 Broadway, representing 7.4% of the pool. The loan has a relatively low DBRS refinance (Refi) DSCR of 1.1x and exit debt yield of 8.8%. However, the property’s location in the highly desirable location of Midtown Manhattan at the Times Square intersection of 41st Street and Broadway and the relatively low trust exposure of approximately $270 per square foot mitigates any concerns with the relatively low credit metrics. DBRS expects a successful refinance at maturity.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans, the specially serviced loan and the largest 15 loans in the pool in the DBRS CMBS IReports platform. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please log into DBRS CMBS IReports at www.ireports.dbrs.com.

The ratings assigned to Classes E and F materially deviate from the higher ratings implied by the quantitative results. The deviations are warranted because sustainability of loan trends has not yet been demonstrated.

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 principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

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