DBRS Downgrades One Class of COMM 2004-LNB2

DBRS Limited (DBRS) downgraded the rating of one class of the Commercial Mortgage Pass-Through Certificates, Series 2004-LNB2 issued by COMM 2004-LNB2, as follows:

-- Class K to C (sf) from CCC (sf)

Class K is the only remaining class in the transaction rated by DBRS and is assigned a rating that does not carry a trend.

The rating downgrade reflects the increase in expected loss to the trust for the Alta Mesa loan (Prospectus ID#54, 57.0% of the pool), which is one of two loans remaining in the pool and has been in special servicing since 2014 after failing to repay at maturity as a result of sustained performance declines at the collateral property following the closure of the Sack N Save shadow anchor in 2010. The property became real estate owned in February 2016. As of the November 2018 rent roll, the property was 46.9% occupied and an August 2018 site inspection conducted by the servicer noted the overall quality of the property remained below average compared to other centers in the submarket. DBRS expects the servicer will have significant difficulty with any attempts to stabilize and/or sell this asset and, in the analysis for this review, DBRS assumed a loss severity approaching 65% based on the most recent appraised value of $2.9 million as of February 2018. If that scenario is realized, DBRS expects a minor loss to Class K, supporting the rating downgrade to C. For additional information on this loan, please see the loan commentary on the DBRS Viewpoint platform, for which information is provided below.

As of the January 2019 remittance report, the transaction has experienced collateral reduction of 99.6% as a result of successful loan repayment, scheduled amortization, realized losses from liquidated loans and principal recoveries from liquidated loans as only two of the original 90 loans remain in the pool. Since last review in July 2018, three fully defeased loans, representing 8.9% of the pool at issuance, were successfully repaid and have left the pool and seven classes have been fully repaid. The other remaining loan in the pool, Walgreen College Station (Prospectus ID#62, 43% of the pool), is secured by a single-tenant retail property occupied by the Walgreen Company (Walgreens), an investment-grade-rated tenant, on a triple-net lease with extension options until May 2078. The loan is fully amortizing and the Walgreens lease expires at loan maturity in April 2028.

All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Prospectus ID#54 – Alta Mesa (57.0% of the pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

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

The principal methodology is North American CMBS Surveillance Methodology, which can be found on www.dbrs.com under Methodologies & Criteria. For a list of the structured-finance-related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. Please note that not every related methodology listed under a principal structured finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please note that a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

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

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