Fitch Upgrades 3 Classes of LB-UBS 2005-C5

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded three and affirmed 13 classes of LB-UBS Commercial Mortgage Trust (LBUBS) commercial mortgage pass-through certificates series 2005-C5. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrades are due to an increase in credit enhancement from paydown and the expectation that the transaction will continue to delever as maturing loans repay. The affirmations reflect the sufficient credit enhancement for the balance of the classes and overall stable performance of the underlying loans. Fitch modeled losses of 9.8% of the remaining pool; expected losses on the original pool balance total 3.8%, including $14.3 million (0.6% of the original pool balance) in realized losses to date. Fitch has designated 22 loans (29.7%) as Fitch Loans of Concern, which includes six specially serviced assets (8.2%).

As of the March 2015 distribution date, the pool's aggregate principal balance has been reduced by 67.3% to $766.3 million from $2.34 billion at issuance. Per the servicer reporting, 11 loans (10.5% of the pool) are defeased. Interest shortfalls are currently affecting classes K through T.

The largest loan and the largest contributor to expected losses is secured by a 449,443 square foot (sf), four building office complex located in Germantown, MD (9.1% of the pool). The loan transferred to special servicing in January 2013 due to imminent default. The top three tenants at the property include the Department of Energy (19%), JDS Uniphase Corporation (11%), and ActioNet, Inc. (6%) with lease expirations in November 2019, December 2021, and February 2020, respectively. As of December 2014, the property was 76.5% occupied with average rent of $21.71 sf. There is approximately 6% upcoming rollover in 2015 and 8% in 2016. Per REIS as of fourth quarter (4Q) 2014, the I-270/Gaithersburg-Germantown submarket had a vacancy of 15.9% with average asking rent of $23.75 sf. The loan was previously modified in January 2014 and split into a $52.5 million A note and $17.1 million B-note.

The next largest contributor to expected losses is a 99,451 sf shopping center built in 1997 and located at Lake in the Hills, IL (1.8%). The loan transferred to the special servicer due to delinquency in May 2011 and became real estate owned (REO) in March 2013. The main building contains a 72,385 sf vacant Dominick's Finer Foods and 10,346 sf of in-line small shop tenants including GNC, H&R Block, and a salon. The second building is located to the north on Randall Road and contains 16,720 sf. Tenants in this building include Einstein Brothers Bagels and Jersey Mike's Subs. Per the special servicer, the property is in good overall condition with no major deferred maintenance needs noted. Their strategy is to increase the value of the asset as they work to lease up the vacant spaces. Since the property's transfer to REO, the special servicer has entered into four renewals or new leases at the property. As of February 2015, the property is 86% occupied with average rent of $11.66 sf.

The next largest contributor to expected losses and the third largest loan in the pool is secured by the retail portion (50,515 sf) of the Palmolive Building, located on The Magnificent Mile in Chicago (6.5%). Per the master servicer, the decline in the property's performance is attributed to the loss of Sudler Sotheby's Realty (9,938 sf or 19.8% of GLA). Major tenants include Elizabeth Arden Red Door Salon, 22%, St. John Apparel (18%), Louis Vuitton, (16%), and Private Bank (10%) with lease expirations in January 2019, May 2018, November 2017, and January 2019, respectively. Per REIS as of 4Q 2014 the Chicago retail metro had a vacancy rate of 14.8% with average asking rent $20.14 sf. As of year-end (YE) 2014, the property is 80.3%. The most recent debt-service coverage ratio for the property as of September 2014 was 1.26x.

The fifth largest loan and a Fitch loan of concern is a single-tenanted office property in McLean, VA (4%). The loan is scheduled to mature in July 2015, with the single-tenant lease expiration in March 2016. The in-place rents are slightly above the submarket and some of the space appears to be available for sub-lease.

RATING SENSITIVITY

Rating Outlooks on classes A-4 through D remain Stable due to increasing credit enhancement and continued paydown. Rating Outlooks on classes E through G are revised to Positive as credit enhancement has increased; as 85% of the pool matures in 2015, Fitch will monitor the payoff of loans as they reach their maturity dates.

Fitch upgrades the following classes:

--$20.5 million class B to 'AAAsf' from 'AAsf'; Outlook Stable;

--$32.2 million class C to 'AAsf' from 'Asf'; Outlook Stable;

--$29.3 million class D to 'Asf' from 'BBBsf'; Outlook Stable.

Fitch affirms the following classes and revises Rating Outlooks and REs as indicated:

--$23.4 million class E at 'BBB-sf'; Outlook to Positive from Stable;

--$29.3 million class F at 'BBsf'; Outlook to Positive from Stable;

--$26.4 million class G at 'Bsf'; Outlook to Positive from Stable;

--$23.4 million class H at 'CCCsf'; RE 85%.

Fitch affirms the following classes:

--$4.8 million class A-4 at 'AAAsf'; Outlook Stable;

--$88.9 million class A-1A at 'AAAsf'; Outlook Stable;

--$234.4 million class A-M at 'AAAsf'; Outlook Stable;

--$187.5 million class A-J at 'AAAsf'; Outlook Stable;

--$14.7 million class J at 'CCsf'; RE 0%;

--$20.5 million class K at 'Csf'; RE 0%;

--$8.8 million class L at 'Csf'; RE 0%;

--$5.9 million class M at 'Csf'; RE 0%;

--$8.8 million class N at 'Csf'; RE 0%.

The class A-1, A-2, A-3 and A-AB certificates have paid in full. Fitch does not rate the class P, Q, S and T certificates. Fitch previously withdrew the ratings on the interest-only class X-CL and X-CP certificates.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 10, 2014 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'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (March 31, 2015);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 10, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=983347

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst
Lisa Cook, +1-212-908-0665
Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
[email protected]

Source: Fitch Ratings

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