Fitch Affirms LBUBS 2007-C7
NEW YORK -- February 27, 2013
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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Benson Thomas, +1-212-908-0645
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Mary MacNeill, +1-212-908-0785
Sandro Scenga, +1-212-908-0278 (New York)
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