Fitch Upgrades One Class of LBUBS 2005-C7

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded one class and affirmed 12 classes of LB-UBS Commercial Mortgage Trust (LBUBS) commercial mortgage pass-through certificates series 2005-C7. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade and affirmations reflect increased credit enhancement relative to expected losses. Fitch's expected losses totaled 6.4% of the remaining pool; expected losses on the original pool balance total 5.7%, including $128.9 million (5.5% of the original pool balance) in realized losses to date. As of the November 2016 distribution date, the pool's aggregate principal balance has been reduced 97% to $73.9 million from $2.3 billion at issuance. There are currently no defeased loans. Interest shortfalls are affecting classes J through T.

Concentrated Pool with Adverse Selection: The pool is highly concentrated with only six of the original 137 loans remaining in the transaction. Aside from the largest loan in the pool, the other five loans (68% of the pool), secured by retail properties, carry refinance risk including secondary markets, high submarket vacancies, and rollover concerns. All of the loans have remained current since issuance, with current occupancies between 89% and 100%, and stable debt service coverage ratios (DSCR), per the most recent servicer reporting.

The largest loan in the pool is the 1166 Avenue of the Americas loan (31.8%), which is secured by the condominium interests in a 1.7 million sf class A office building located in New York, NY. The 902,232 square feet (sf) of collateral, located on floors 22-32 and 33-44, serve as the corporate headquarters for the loan's sponsor, Marsh & McLennan Companies, Inc. (rated 'A-'/Outlook Stable). The collateral is 100% master leased by the sponsor though October 2035. The net operating income (NOI) DSCR has remained flat at 1.44x since issuance. The A-note contributed to the trust is pari passu with another $241.6 million A-note with respect to the payment of interest, but it is senior with respect to the payment of principal. The mortgage has a maturity date in October 2035, but the pooled trust note is expected to fully amortize by November 2018.

Amortization and Maturity Concentration: Credit enhancement continues to increase due to continued loan paydown. The pool balance has reduced 24% since the December 2015 remittance, primarily due to $16.9 million in principal payments over the past 12 months. All of the remaining loans are currently amortizing. Based on the November 2016 distribution statement, the pool received $1.02 million in scheduled principal payments of which the 1166 Avenue of the Americas loan contributed $935,747 (or 91% of total principal received). The fully amortizing 1166 Avenue of the Americas loan is expected to pay in full by November 2018. The five remaining retail loans are amortizing balloon with a total current principal contribution of only $89,000 per month. One retail loan is scheduled to mature in 2017 (5.7% of the pool), with the remaining four loan maturities concentrated in 2020 (62.5%).

RATING SENSITIVITIES

The Outlook on class D is expected to remain Stable as the class benefits from increasing credit enhancement and continued delevering of the transaction through amortization and repayment of maturing loans. The Positive Outlook on class E reflects the possibility for future upgrades due to an expected increase in credit enhancement from amortization and near term loan maturities. Downgrades are not likely due to sufficient credit enhancement.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has upgraded and assigned a Rating Outlook to the following class:

--$23.5 million class F to 'Bsf' from 'CCCsf'; assigned Outlook Stable.

In addition, Fitch has affirmed the following classes:

--$9.6 million class D at 'AAAsf'; Outlook Stable;--S23.5 million class E at 'BBsf'; Outlook Positive;--$17.3 million class G at 'Dsf'; RE 80%;--$0 class H at 'Dsf'; RE 0%;--$0 class J at 'Dsf'; RE 0%;--$0 class K at 'Dsf'; RE 0%;--$0 class L at 'Dsf'; RE 0%;--$0 class M at 'Dsf'; RE 0%;--$0 class N at 'Dsf'; RE 0%;--$0 class P at 'Dsf'; RE 0%;--$0 class Q at 'Dsf'; RE 0%;--$0 class S at 'Dsf'; RE 0%.

The class A-1, A-2, A-3, A-AB, A-4, A-1A, A-M, A-J, B, C, CM-1, CM-2, CM-3, and CM-4 certificates have paid in full. Fitch does not rate the class T certificate. Fitch previously withdrew the ratings on the interest-only class X-CP and X-CL certificates.

Fitch also does not rate the SP-1 through SP-7 rake classes, which are specific to the Station Place I $63 million B-note. The senior A-note for Station Place I was part of the pooled portion of the trust, which has since paid in full.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)https://www.fitchratings.com/site/re/886006

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)https://www.fitchratings.com/site/re/882401

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)https://www.fitchratings.com/site/re/883130

North America and Asia-Pacific Multiborrower CMBS Surveillance Criteria (pub. 01 Dec 2016)https://www.fitchratings.com/site/re/891159

Additional Disclosures

Dodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1016500

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1016500

Endorsement Policyhttps://www.fitchratings.com/regulatory

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Fitch Ratings
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Source: Fitch Ratings

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