Fitch Downgrades 1 Class of LB 2006-LLF C5

2008-06-27 23:06:11 -

- Fitch Ratings has downgraded and removed from rating watch negative the following class of LB 2006-LLF C5, commercial mortgage pass-through certificates as follows:

--$57 million class L from 'BBB-' to 'BB-'.

Additionally, Fitch affirms the following classes:

--$146.1 million class A-1 at 'AAA';

--$388.3 million class A-2 at 'AAA';

--Interest-only class X-1 at 'AAA';

--Interest-only class X-2 at 'AAA';

--Interest-only class X-FLP at 'AAA';

--$58.5 million class B at 'AAA';

--$53.6 million class C at 'AAA';

--$34.1 million class D at 'AA+';

--$45.4 million class E at 'AA';

--$26.4 million class F at 'AA-';

--$45 million class G at 'A';

--$40.9 million class H at 'A-';

--$3.7 million class J at 'BBB+'; and

--$32.8 million class K at 'BBB';.

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 declining performance of the Sheraton Keauhou Bay Resort & Spa (5.5%), 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 Sheraton Keauhou Bay Resort & Spa (5.5%) is a 521-room full service hotel located in Kailua-Kona, HI. The property features 49,510 square feet 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 year-end (YE) 2007 occupancy, average daily rate (ADR), and RevPAR were 62.9%, $174.8, and $109.9, respectively, as compared with the market YE 2007 occupancy, ADR, and RevPAR of 66%, $218.6, and $144.7, respectively.

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 YE 2007 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 YE 2007, the average daily rate and revenue per available room are $225.85 and $183.39 compared to $180.06 and $144.33 at issuance, respectively.

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 YE 2007 the Fitch stressed debt service coverage ratio is 1.35 times (x), in line with 1.38x at issuance. Occupancy as of YE 2007 was 99%. The loan exercised its first extension option in November 2007, and has two, one-year extension options remaining.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site

Fitch Ratings
Chris Bushart, +1-212-908-0606 (New York)
Britt Johnson, +1-312-606-2341 (Chicago)
Sandro Scenga, +1-212-908-0278
(Media Relations, New York)