Fitch Ratings has affirmed LB-UBS Commercial Mortgage Trust (LB-UBS)
commercial mortgage pass-through certificates series 2007-C7. A detailed
list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations reflect sufficient credit enhancement to offset Fitch
modeled losses across the pool. Fitch modeled losses of 8.5% of the
remaining pool; expected losses on the original pool balance total
11.7%, including losses already incurred. The Negative Outlook on
classes A-M and A-J reflect performance concerns and the overall high
leverage on several loans in the top 15. The allocation of the loan pool
is highly concentrated with the top 15 loans representing 79% of the
pool balance; the top three loans combined represent 39% of the pool
balance with their individual loan balances each representing greater
than 10% of the pool.
Fitch has designated 19 loans (27%) as Fitch Loans of Concern, which
includes 11 specially serviced assets (8.7%). The specially serviced
loans include two loans in foreclosure (5.84%), six loans greater than
90 days delinquent (1.71%), one loan greater than 60 days delinquent
(0.56%), and two loans greater than 30 days delinquent (0.55%).
As of the February 2013 distribution date, the pool's aggregate
principal balance has been reduced by 15.5% to $2.68 billion from $3.17
billion at issuance, of which 11% was due to paydowns and 4.5% was due
to realized losses. Per the servicer reporting, one loan is partially
defeased (0.1% of the pool). Interest shortfalls are currently affecting
classes F through T.
The largest contributor to expected losses is the District at Tustin
Legacy loan (7.7% of the pool), which is secured by 521,694 square feet
(sf) of a 979,883 sf retail center in Tustin, CA. Major tenants include
Target, Whole Foods, TJ Maxx, and an AMC Theater. Non-collateral anchors
are Costco and Lowes. Best Buy, which leases 30,000 sf of the collateral
(or 5.8% of the net rentable area [NRA]) through January 2016, had
vacated the property in 2012; the space remains dark and Best Buy
continues to pay rent. The December 2012 rent roll reported the property
98.5% leased (which includes the vacant Best Buy space). Despite the
high occupancy since issuance, the property's net operating income (NOI)
has performed lower than expected as rental rates and reimbursements
remain below underwritten levels. The NOI debt service coverage ratio
(DSCR) reported at 0.90 times (x) and 0.92x for year-to-date (YTD)
September 2012 and year end (YE) December 2012, respectively. The loan
remains current as of the February 2013 remittance.
The next largest contributor to expected losses is the Ritz Carlton
Bachelor Gulch loan (2.3%), which is secured by a 117-room, full service
resort hotel in Avon, CO located in Colorado's Vail Valley on Beaver
Creek Mountain. The loan had previously transferred to special servicing
in October 2010 due to payment default. The property had experienced
cash flow issues in 2009 from declining occupancy and RevPAR stemming
from the recent economic recession. The loan was modified while in
special servicing and returned to the master servicer in June 2012;
modified terms include a reduced pay rate and a deferred accrual rate.
As of February 2013, the loan is current under its modified terms. The
trailing 12 month (TTM) December 2012 occupancy reported at 55%, ADR at
$393.41, and RevPAR at $216.35, an increase of 2%, 2.5%, and 4.6%,
respectively, over the prior year.
The third largest contributor to expected losses is the
specially-serviced The Legends at Village West loan (5.1%), which is
secured by a 680,157 sf retail center in Kansas City, KS. The open-air
life style center, built in 2006, features several restaurants as well
as 'premium brand' outlet tenants including Saks Fifth Avenue, Tommy
Hilfiger, Polo Ralph Lauren, Nike, and BCBG. The property had
experienced cash flow issues due to an increase in expenses since
underwriting. The borrower had requested a restructure of the loan, and
the loan transferred to special servicing in November 2011 due to
After transferring to special servicing, the borrower continued to
aggressively lease up the property. Current occupancy is 93%, a
significant improvement from June 2011 at 79%. A foreclosure auction
occurred in January 2013, and the special servicer approved the sale
which is expected to close by early March 2013.
Fitch affirms the following classes as indicated:
--$1.2 million class A-2 at 'AAAsf', Outlook Stable;
--$69.4 million class A-AB at 'AAAsf', Outlook Stable;
--$1.7 billion class A-3 at 'AAAsf', Outlook Stable;
--$132.7 million class A-1A at 'AAAsf', Outlook Stable;
--$317 million class A-M at 'AAAsf', Outlook Negative;
--$269.5 million class A-J at 'B-sf', Outlook Negative;
--$47.6 million class B at 'CCCsf', RE 20%;
--$35.7 million class C at 'CCsf', RE 0%;
--$23.8 million class D at 'CCsf', RE 0%;
--$27.7 million class E at 'CCsf', RE 0%;
--$15.9 million class F at 'Csf', RE 0%;
--$31.7 million class G at 'Csf', RE 0%;
--$27.7 million class H at 'Csf', RE 0%;
--$11.5 million class J at 'Dsf', RE 0%;
--Class K at 'Dsf', RE 0%;
--Class L at 'Dsf', RE 0%;
--Class M at 'Dsf', RE 0%;
--Class N at 'Dsf', RE 0%;
--Class P at 'Dsf', RE 0%;
--Class Q at 'Dsf', RE 0%;
--Class S at 'Dsf', RE 0%.
The balances for classes K, L, M, N, P, Q, and S have been reduced to
zero due to realized losses. The class A-1 certificate has paid in full.
Fitch does not rate the class T certificates. Fitch previously withdrew
the ratings on the interest-only class X-CP, X-CL and X-W certificates.
Additional information on Fitch's criteria for analyzing U.S. CMBS
transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate
Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is
available at 'www.fitchratings.com'
under the following headers:
Structured Finance >> CMBS >> Criteria Reports
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC
Criteria' (Dec. 18, 2012).
Applicable Criteria and Related Research
Global Structured Finance Rating Criteria
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
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