2008-11-14 00:41:04 -
Fitch Ratings has downgraded the following class of LB 2006-LLF C5, commercial mortgage pass-through certificates as follows:
--$57.0 million class L to 'B' from 'BB-'; Outlook Negative
Fitch also affirms the following classes and assigns Outlooks as follows:
--$139.6 million class A-1 at 'AAA'; Outlook Stable;
--$388.3 million class A-2 at 'AAA';
Outlook Stable;
--Interest-only class X-1 at 'AAA'; Outlook Stable;
--Interest-only class X-2 at 'AAA'; Outlook Stable;
--Interest-only class X-FLP at 'AAA'; Outlook Stable;
--$58.5 million class B at 'AAA'; Outlook Stable;
--$53.6 million class C at 'AAA'; Outlook Stable;
--$34.1 million class D at 'AA+'; Outlook Stable;
--$45.4 million class E at 'AA'; Outlook Stable;
--$26.4 million class F at 'AA-'; Outlook Stable;
--$45.0 million class G at 'A'; Outlook Stable;
--$40.9 million class H at 'A-'; Outlook Stable;
--$3.7 million class J at 'BBB+'; Outlook Negative; and
--$32.8 million class K at 'BBB'; Outlook Negative.
Fitch does not rate classes CHA-1, CHA-2, PR1-1, PR1-2, PR2, PR3-1, PR3-2, PRT-1, PRT-2, PRT-3, PRT-4, PRT-5, and WSD. Classes FLM, FRT-1, FRT-2, FRT-3, SFL and SMN have paid in full.
The downgrade of class L is due to the recent transfer of the Sheraton Keauhou Bay Resort & Spa (5.5%) to special servicing. The loan transferred in September 2008 due to the operator no longer being able to pay debt service. The asset is a 521-room full service hotel located in Kailua-Kona, HI. The property features 49,510 sf of meeting space, a full service spa, a large outdoor swimming pool, a fitness center, and various leased retail outlets. In 2001, the property underwent a $70 million ($134,357/key) renovation and was formally re-branded to a Sheraton in April, 2005. The property has not stabilized to the level outlined in the sponsor's business plan at issuance, and is underperforming the market. The mid-year 2008 occupancy, average daily rate (ADR), and RevPAR were 57%, $164, and $94, respectively, as compared with the market (as of March 2008) occupancy, ADR, and RevPAR of 70%, $232, and $163, respectively. The servicer is in the process of selecting the best workout option for the asset.
The Negative Rating Outlooks assigned to classes J, K, and L are due to declining performance of the Sheraton Keauhou Bay Resort & Spa, Praedium Rental Portfolio II (3.2%), Praedium Rental Portfolio III (2.6%), and Praedium Rental Portfolio I (2.2%) loans. The loans, which were projected to stabilize, have not achieved the level of performance expected at issuance. As a result, current cash flow is less than expectations and indicates that performance may not reach stabilization by maturity. The Rating Outlooks reflect the likely direction of any rating changes over the next one to two years.
The Praedium Rental Portfolio's I, II, and III (8.0%) are primarily secured by 27 five and six story multi-family properties built in the early 1900's and located throughout the northern Manhattan markets of Hamilton Heights, Morningside Heights, and Harlem. The current sponsor acquired the properties in August 2005 and budgeted $19.5 million ($14,275/unit) in renovation costs to improve the portfolio. Based on mid-year 2008 financials, the properties have not experienced the increase in rental income expected at this point in the sponsor's business plan.
The Walt Disney World Swan & Dolphin (32.5%), the largest loan in the pool, is secured by a 2,267-room resort hotel complex located within Walt Disney World in Lake Buena Vista, FL. As of year-end (YE) 2007, the ADR and revenue per available room are $225.85 and $183.39 compared to $180.06 and $144.33 at issuance, respectively. The loan's initial maturity date is Sept. 12, 2009, with four, one-year extension options available. The sponsors of the loan, Metlife and affiliates of Tishman Hotel Corp., began investing approximately $77.5 million ($34,186/key) of capital expenditures into the hotels in 2006 and plan to continue the improvements through 2010. Fitch will closely monitor the stabilization of this asset.
The second largest loan in the pool, 1515 Broadway (20.9%), is secured by a 1.76 million square foot office building located in the Times Square area of Midtown Manhattan. The $212.5 million pari passu A-1 note portion of the $425 million A-note is included in the trust. As of mid-year 2008 the Fitch stressed debt service coverage ratio is 1.49 times (x). Occupancy as of July 31, 2008 is 92%.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site,
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Fitch Ratings
Chris Bushart, 212-908-0606, New York
Britt Johnson, 312-606-2341, Chicago
or
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