Press Release

DBRS Morningstar Upgrades One Class of DBUBS 2011-LC2 Mortgage Trust and Changes Trend on One Class to Positive

CMBS
March 22, 2021

DBRS, Inc. (DBRS Morningstar) upgraded its rating on the following class of Commercial Mortgage Pass-Through Certificates, Series 2011-LC2 issued by DBUBS 2011-LC2 Mortgage Trust:

-- Class D to A (low) (sf) from BBB (sf)

DBRS Morningstar confirmed its ratings on the remaining classes as follows:

--Class A-4 at AAA (sf)
--Class B at AAA (sf)
--Class X-A at AAA (sf)
--Class C at AA (high) (sf)
--Class E at BB (sf)
--Class FX at B (sf)
--Class X-B at B (sf)
--Class F at B (low) (sf)

With this review, Classes F, FX, and X-B were removed from Under Review with Negative Implications, where they were placed on August 6, 2020. DBRS Morningstar changed the trend on Class C to Positive from Stable. All other classes have Stable trends.

The upgrades reflect the stable performance of the transaction, which has remained in line with DBRS Morningstar’s expectations, as well as the significant paydown since issuance. At issuance, the transaction consisted of 67 loans with an original trust balance of $2.1 billion. As of the March 2021 remittance report, only 18 loans remained in the transaction with a trust balance of $608.7 million, representing a collateral reduction of approximately 71.6% since issuance that resulted from amortization, the payoff of 48 loans, and the liquidation of one loan, which resulted in a loss of $7.7 million to the nonrated Class G.

Two loans, representing 7.7% of the pool balance, are in special servicing. DBRS Morningstar’s primary concern is with the Magnolia Hotel Houston (Prospectus ID#16; 5.6% of pool), which is secured by a 314-key full-service hotel (Marriott Tribute collection) located in the Houston CBD. The loan transferred to special servicing in July 2020. The hotel’s performance was languishing for several years and was further exacerbated by the pandemic. The loan was operating below a breakeven debt service coverage ratio (DSCR) for each of the past three years with the year-end 2019 net cash flow reported at 49% below the issuance level. The borrower requested a short-term forbearance, but according to the most recent servicing commentary, negotiations have stalled with the borrower consenting to receivership. For purposes of this analysis, the loan was liquidated from the trust with an assumed loss severity in excess of 40%.

The second-largest specially serviced loan, Louisiana Tower (Prospectus ID#33; 2.1% of pool), transferred to special servicing in February 2021. The loan is secured by the leasehold interest in a 21-story Class B office building in Shreveport, Louisiana. The property’s occcupancy declined to 68% in 2017 and has remained relatively unchanged to date. As a result of the occupancy decline, the loan has been performing below breakeven since 2017 and most recently reported a trailing-nine-months DSCR of 0.99 times as of Q3 2020. Backfilling the vacant space will be challenging given the amount of supply within the Shreveport CBD, which is tied in part to the energy sector. According to Reis, the Shreveport CBD submarket reported a vacancy rate of 21.3% as of Q4 2020, which reflects an 100 basis point increase from the prior quarter.

Fourteen loans, representing 90.8% of the current trust balance, are on the servicer’s watchlist. The majority of the loans are being monitored for upcoming maturity risk as the pool’s remaining 18 loans mature by Q2 2020. Outside of the specially serviced loans, the majority of the loans pose minimal maturity risk due strong credit matrics as only one loan has an estimated debt yield lower than 10% based on the current loan balance and most recent full-year net cash flow.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Classes X-A, X-B, and FX are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.

DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform.

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

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

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

The principal methodology is North American CMBS Surveillance Methodology (March 6, 2020), which can be found on dbrsmorningstar.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 Morningstar Global Structured Finance Related Methodologies document, which can be found on dbrsmorningstar.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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS Morningstar 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.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

Ratings

DBUBS 2011-LC2 Mortgage Trust
  • Date Issued:Mar 22, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Mar 22, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Mar 22, 2021
  • Rating Action:Confirmed
  • Ratings:AAA (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Mar 22, 2021
  • Rating Action:Trend Change
  • Ratings:AA (high) (sf)
  • Trend:Pos
  • Rating Recovery:
  • Issued:US
  • Date Issued:Mar 22, 2021
  • Rating Action:Upgraded
  • Ratings:A (low) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Mar 22, 2021
  • Rating Action:Confirmed
  • Ratings:BB (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Mar 22, 2021
  • Rating Action:Confirmed
  • Ratings:B (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Mar 22, 2021
  • Rating Action:Confirmed
  • Ratings:B (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • Date Issued:Mar 22, 2021
  • Rating Action:Confirmed
  • Ratings:B (low) (sf)
  • Trend:Stb
  • Rating Recovery:
  • Issued:US
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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