DBRS Upgrades Three and Confirms Eight Classes of Schooner Trust, Series 2006-6

DBRS Limited (DBRS) has today upgraded the ratings of three classes of Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2006-6 as follows:

-- Class C to AAA (sf) from AA (high) (sf)
-- Class D to AA (sf) from A (sf)
-- Class E to A (low) (sf) from BBB (high)

Additionally, DBRS has confirmed the ratings on the remaining classes in the transaction. The trends on all classes are Stable. DBRS does not rate the first loss piece, Class M.

The rating upgrades reflect the continued strong performance of the transaction as well as the overall collateral reduction since issuance. Since issuance, the transaction has experienced a collateral reduction of 30.9% as a result of scheduled amortization and successful loan repayment, leaving 76 remaining loans out of an original count of 98. The transaction also benefits from defeasance collateral, as 11 loans, representing 14.4% of the current pool balance, have fully defeased.

Within the next 12 months, 68 loans (81.2% of the pool balance) are scheduled to mature. The weighted-average debt service coverage ratio (DSCR) and exit debt yield for these maturing loans are 1.53 times (x) and 13.3%, respectively. DBRS considers the credit metrics of the maturing loans to generally be strong.

As of the August 2015 remittance, there are six loans on the servicer’s watchlist, representing 5.9% of the pool balance. Five of these loans have improved in performance and are expected to stabilize in the future. One loan on the servicer’s watchlist is highlighted below.

The 165-167 Hymus Boulevard Loan (Prospectus ID#9, 2.80% of pool) is secured by a multi-tenant industrial building in Pointe-Claire, Québec, and was added to the servicer’s watchlist after two tenants vacated the property ahead of their lease maturity dates in March 2013. Following the departure of the former two tenants, only one tenant, Leviton Manufacturing (Leviton) remained at the subject, occupying 59.8% of the net rentable area (NRA). Leviton has agreed to renew its lease, which originally expired in December 2015, and to lease two other vacant units beginning in January 2016. Leviton will now occupy 65.1% of the NRA through 2030. Along with the recent signing of Vitesse Transportation (Vitesse) to a one-year lease for 34.9% of the NRA in December 2014, the property is now 100.0% leased. According to the June 2015 servicer site inspection, approximately $2.9 million will be spent on office and warehouse renovations. The YE2014 OSAR reported a DSCR of 0.69x; however, with the addition of Vitesse’s rental payments, the YE2015 DSCR is expected improve above the 1.10x threshold, which may precipitate the loan’s removal from the servicer’s watchlist, assuming Vitesse renews its lease.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool and loans on the servicer’s watchlist. The August 2015 Monthly CMBS Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodologies are North American CMBS Rating Methodology (June 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.