One Rating Raised From LB-UBS Commercial Mortgage Trust 2004-C8

Stocks and Financial Services Press Releases Tuesday January 31, 2017 08:44
NEW YORK--31 Jan--S&P Global Ratings

NEW YORK (S&P Global Ratings) Jan. 30, 2017-- S&P Global Ratings today raised its rating on class G of commercial mortgage pass-through certificates from LB-UBS Commercial Mortgage Trust 2004-C8, a U.S. commercial mortgage-backed securities (CMBS) transaction (see list).

Our rating action follows our analysis of the transaction, primarily using our criteria for rating U.S. and Canadian CMBS transactions, which included a review of the credit characteristics and performance of the remaining assets in the pool, the transaction's structure, and the liquidity available to the trust.

We raised our rating on class G to 'AA+ (sf)' from 'CCC- (sf)' to reflect our expectation of the available credit enhancement for this class, which we believe is greater than our most recent estimate of necessary credit enhancement for the rating level. The upgrade also reflects our views regarding the current and future performance of the transaction's collateral and available liquidity support. In addition, t he upgrade reflects the significant reduction in trust balance, and our expectation of stable performance for the performing loans in the pool .

TRANSACTION SUMMARY

As of the Jan. 18, 2017, trustee remittance report, the collateral pool balance was $26.0 million, which is 2.0% of the pool balance at issuance. The pool currently includes four loans and one real estate -owned (REO) asset, down from 78 loans at issuance. One of these assets ($7.1 million, 27.2%) is with the special servicer and one ($3.0 million, 11.4%) is on the master servicer's watchlist. The master servicer, Wells Fargo Bank N.A., reported financial information for 72.8% of the loans in the pool, of which 54.6% was year-end 2015 data, and the remainder was partial-year 2016 data.

We calculated a 1.31x S&P Global Ratings' weighted average debt -service coverage (DSC) and 68.2% S&P Global Ratings' weighted average loan-to-value (LTV) ratio using a 7.75% S&P Global Ratings' weighted average capitalization rate. The DSC, LTV, and capitalization rate calculations exclude the specially serviced asset.

To date, the transaction has experienced $60.1 million in principal losses, or 4.6% of the original pool trust balance. We expect losses to reach approximately 5.0% of the original pool trust balance in the near term, based on losses incurred to date and additional losses we expect upon the eventual resolution of the specially serviced asset.

CREDIT CONSIDERATIONS
As of the Jan . 18, 2017, trustee remittance report, one asset in the pool is with the special servicer, Aegon USA Realty Advisors LLC. Details of the asset are given below:

The Amelia Center REO asset ($7.1 million, 27.2%) is the second -largest asset in the pool and has a total reported exposure of $8.5 million. The asset is a 113,213–sq.-ft. retail property in Amelia, Ohio. The loan was transferred to the special servicer on Nov . 17, 2014, due to maturity default, and the property became REO on April 1, 2015. Based on special servicer comments, the grocery anchor at the property, Krogers, vacated upon lease expiration in November 2014. Following this, the property occupancy has been low. The reported occupancy and DSC as of June 30, 2016, were 27.0% and 0.04x, respectively. An appraisal reduction amount (ARA) of $4.9 million is in effect against this asset. We expect a significant loss (greater than 60%) upon this asset's eventual resolution.


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