OREANDA-NEWS. Fitch Ratings affirms Dillon Read Capital Management Four Times Square Trust, commercial mortgage pass-through certificates, series 2006-FTS. A full list of rating actions follows at the end of this ratings action commentary.

KEY RATING DRIVERS

The rating affirmations reflect stable to improved performance of the collateral from issuance expectations. The mortgage loan is collateralized by a long-term leasehold interest in Four Times Square, a 48-story class A office building located in Manhattan's Times Square submarket, built in 1999. The loan currently consists of a $5.3 million A-1 note, a $516.1 million A-2 note, a $25.9 million B note, and a $24.1 million C note. The A-1 note, which is currently amortizing, is not an asset of the trust and is pari passu with the A-2 note, which is not yet receiving principal payments. The total outstanding mortgage debt of $571.4 million translates to $344 per square foot (psf). The loan has an anticipated repayment date (ARD) of December 2020, at which time the loan will have amortized down to approximately $305 psf.

At issuance, the two largest tenants Skadden, Arps, Slate, Meagher & Flom LLP (49% of net rentable area [NRA]) and Advanced Magazine Publishers Inc. (Conde Nast) (46% NRA) occupied 95% of the building's 1.69 million square feet (sf) of NRA. Per the April 2016 rent roll, the property is 99.2% leased. There is currently 3,184 sf of vacant retail space.

The leases for Skadden, Arps, Slate, Meagher & Flom LLP and Conde Nast expire prior to the ARD and each tenant has a springing rollover reserve two years prior to its lease expirations. The Skadden, Arps, Slate, Meagher & Flom LLP lease expires in 2020. The Conde Nast lease expires in 2019.

Conde Nast signed a 25 year lease for office space at One World Trade Center and vacated their space between November 2014 and March 2015. Per the master servicer, the Port Authority of New York and New Jersey has agreed to assume Conde Nast's lease obligation. Additionally, it has been publicly reported that Skadden, Arps, Slate, Meagher & Flom LLP have signed a 20-year lease at the to-be-built, 1 Manhattan West to take effect at the expiration of their current lease. Per the master servicer the borrower is in the process of re-leasing the vacant space; however, the Lender has not approved any leases.

As part of Fitch's analysis, the Fitch adjusted debt service coverage ratio (DSCR) for the loan was 2.37x. The DSCR was calculated based on a Fitch adjusted NCF (reflective of an additional vacancy factor, expenses inflated 3%.

RATING SENSITIVITIES

The Positive Rating Outlook on class B reflects the potential for upgrades if performance remains stable and there is additional certainty on future leasing of the Conde Nast and Skadden Arps space, as well as continued amortization. The Stable Outlooks on classes A and C reflect the likelihood of future affirmations. Future downgrades are possible should there be a material decline in portfolio cash flow or occupancy if vacated space does not lease up.

DUE DILIGENCE USAGE

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

Fitch has affirmed the following ratings and revised outlooks as indicated:

--$561.1 million class A at 'AAAsf; Outlook Stable;

--S25.9 million class B at 'AA+sf; Outlook to Positive from Stable;

--$24.1 million class C at 'AAsf', Outlook Stable.