Fitch Downgrades 9 Classes of LB-UBS Series 2007-C2; Revises Outlooks.
--$13.3 million class E to 'A' from 'A+'; Outlook Negative;
--$26.7 million class F to 'A-' from 'A'; Outlook Negative;
--$35.5 million class G to 'BBB' from 'A-'; Outlook Negative;
--$31.1 million class H to 'BBB-' from 'BBB+'; Outlook Negative;
--$35.5 million class J to 'BB+' from 'BBB'; Outlook Negative;
--$40 million class K to 'BB-' from 'BBB-'; Outlook Negative;
--$17.8 million class L to 'B+' from 'BB+'; Outlook Negative;
--$8.9 million class M to 'B' from 'BB'; Outlook Negative;
--$4.4 million class N to 'B-' from 'BB-'; Outlook Negative.
Fitch has also affirmed the following ratings and revised the Outlooks:
--$53.3 million class C at 'AA'; Outlook Negative;
--$40 million class D at 'AA-'; Outlook Negative.
In addition, Fitch has affirmed the following classes:
--$20.1 million class A-1 at 'AAA'; Outlook Stable;
--$447 million class A-2 at 'AAA'; Outlook Stable;
--$78 million class A-AB at 'AAA'; Outlook Stable;
--$1.3 billion class A-3 at 'AAA'; Outlook Stable;
--$659.4 million class A-1A at 'AAA'; Outlook Stable;
--$355.4 million class A-M at 'AAA'; Outlook Stable;
--$315.5 million class A-J at 'AAA'; Outlook Stable;
--Interest only class X-CP at 'AAA'; Outlook Stable;
--Interest only class X-W at 'AAA'; Outlook Stable;
--Interest only class X-CL at 'AAA'; Outlook Stable;
--$26.7 million class B at 'AA+'; Outlook Stable.
The $8.9 million class P, $4.4 million class Q, $13.3 million class S and $35.5 class T are not rated by Fitch.
The downgrades and Negative Outlooks reflect losses expected on special serviced loans and a significant increase in Fitch Loans of Concern, respectively, since Fitch's last rating action. Rating Outlooks reflect the likely direction of any rating changes over the next one to two year. As of the February 2009 distribution date, the transaction has paid down 0.2% to $3.549 billion from $3.554 billion at issuance.
Fitch identified 22 Loans of Concern (14.1% of the pool), including six specially serviced assets (2.8%). Fitch expected losses would be absorbed by the non-rated classes. The largest specially serviced asset (0.7%) is an industrial warehouse facility located in Winter Haven, FL. The loan was transferred to special servicing after the property suffered extensive fire damage in 2008. The loan remains current as of February 2008.
The second largest specially serviced asset (0.6%) is an office property in Orlando, FL. The loan was transferred to special servicing due to monetary default. The borrower filed for bankruptcy in November 2008.
The third largest specially serviced asset (0.5%) is a retail property located in Kailua-Kona, HI. The property has suffered from a decline in occupancy and a tenant bankruptcy. The special servicer is pursuing foreclosure.
The largest non-specially serviced Loan of Concern (5.2%) is secured by a portfolio of three multifamily facilities located throughout Maryland. Occupancy as of June 2008 was 86.2%, a slight decrease from issuance. The servicer-reported debt service coverage ratio (DSCR) as of June 2008 was 1.08 times (x).
Fitch reviewed the most recent servicer provided operating statement analysis reports and rent rolls for the seven shadow rated loans (26.6%). Based on their stable performance since issuance, all seven loans maintain investment grade shadow ratings.
The largest shadow rated loan (11.3%) is secured by the Tishman Speyer DC Portfolio II which consists of over 2 million square feet (sf) of office space in Washington, D.C. and Northern Virginia. As of December 2008, weighted average occupancy at the properties has decreased to 82% from 93% at issuance, however, the servicer reported weighted-average DSCR as of June 2008 was 1.27x. At origination, it was expected that approximately 40% of the leases will expire before 2010.
The second and third largest shadow rated loans, the Extendicare Portfolio (3.5%) and Extendicare II Portfolio (2.5%), respectively, are both secured by portfolios of Extendicare healthcare facilities in various states. Although the larger Extendicare Portfolio maintains its investment grade shadow rating, expenses related to repairs and maintenance, and general and administrative have increased significantly from issuance, resulting in an approximately 28% decline in net cash flow.
The largest non-shadow rated loan (9.6%) is secured by an interest in the Sears Tower office building in Chicago, IL. Occupancy as of June 2008 was 76.1%, a slight decrease from issuance. In addition, the building's largest tenant, Ernst & Young, is expected to vacate its space when the company's lease expires in 2012. The servicer-reported DSCR as of June 2008 was 1.24x.
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|Date:||Mar 2, 2009|
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