Fitch Affirms WBCMT 2006-C28
KEY RATING DRIVERS
The affirmations reflect sufficient credit enhancement (CE) relative to Fitch expected losses. Fitch modeled losses of 12.1% of the remaining pool; expected losses on the original pool balance total 14.5%, including \$263.7 million (7.3% of the original pool balance) in realized losses to date. Fitch has designated 31 loans (11.6%) as Fitch Loans of Concern, which includes four assets in special servicing (4.9%).
As of the February 2015 distribution date, the pool's aggregate principal balance has been reduced by 39.6% to \$2.18 billion from \$3.6 billion at issuance. Per the servicer reporting, six loans (2.3% of the pool) are defeased. Interest shortfalls are currently affecting classes D through F.
The largest contributor to expected losses is The Gas Company Tower loan (10.5%), which is secured by a 1.3 million square foot ( sf) class A office tower in downtown Los Angeles, CA. The building has experienced positive leasing momentum with the signing of two new leases in 2014, including a 112,000 sf lease with Deloitte (8.5%). Occupancy is projected to improve to 82% from the most recently reported occupancy of 73.5% as of December 2014. The improvement comes on the heels of several tenant departures and downsizes in 2013. According to Reis' January 2015 report, the CBD submarket of Los Angeles had an office vacancy rate of 15.2% with average asking rents of \$34.67 psf as compared to 15.6% and \$32.57 psf in 2013. The subject underperforms the market with respect to occupancy and average in-place rents. The loan is sponsored by Brookfield Office Properties and is current as of the February 2015 remittance date.
The next largest contributor to expected losses is the Westin Falls Church asset (2.8%), which is a 405-room full-service hotel in Falls Church, VA. The loan transferred to special servicing in June 2014 due to imminent default. Performance of the hotel has yet to achieve projected performance metrics upon rebranding as a Westin and continues to be challenged with weakening demand from federal contractors and government employees. In addition to waning demand, the development of Metrorail stations on the Silver Line has sparked additional supply in the market. The hotel continues to underperform its competitive set with January 2015 trailing 12-month occupancy, ADR and RevPAR of 62.3%, \$146.08 and \$91.00, respectively, as compared to competitive set averages of 71.8%, \$147.82, and \$106.10. A receiver was appointed in January 2015 and the servicer is exploring resolution options.
The third largest contributor to expected losses is the Brookfield Lakes Corporate Center (2.7%), which is a campus of office buildings totaling 506,719 sf in Brookfield, WI. As of September 2014, occupancy improved to 81% from 76% in December 2013; however, net operating income remains weak with September 2014 debt service reserve ratio (DSCR) of 1.16x. Fitch accounted for lease rollover exposure in 2015, which is approximately 20% of the net rentable area (NRA). According to Reis' January 2015 report, the Brookfield/New Berlin submarket of Milwaukee had a vacancy rate of 19.1% with average asking rents of \$19.00 compared with average in-place rents of the subject property of \$21.23 psf. The loan is current as of the February 2015 remittance.
RATING SENSITIVITIES
Rating Outlooks on classes A-4 through A-4FL remain Stable due to increasing credit enhancement and continued paydown of the pool. The Positive Outlook reflects the potential for upgrade should the performance of loans continue to stabilize and improve loss expectations. Distressed classes (those rated below 'B') may be subject to further downgrades as additional losses are realized.
Fitch affirms the following classes as indicated:
--\$702 million class A-4 at 'AAAsf'; Outlook Stable;
--\$437.3 million class A-1A at 'AAAsf'; Outlook Stable;
--\$218.8 million class A-4FL at 'AAAsf'; Outlook Stable;
--\$359.5 million class A-M at 'BBBsf'; Outlook to Positive from Stable;
--\$278.6 million class A-J at 'CCCsf'; RE 80%;
--\$22.5 million class B at 'CCsf'; RE 0%;
--\$58.4 million class C at 'Csf'; RE 0%;
--\$31.5 million class D at 'Csf'; RE 0%;
--\$49.4 million class E at 'Csf'; RE 0%;
--\$19.8 million class F at 'Dsf'; RE 0%;
--\$0 class G at 'Dsf'; RE 0%;
--\$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 O at 'Dsf'; RE 0%;
--\$0 class P at 'Dsf'; RE 0%.
The class A-1, A-2, A-PB and A-3 certificates have paid in full. Fitch previously withdrew the rating on the interest-only class IO certificates. Fitch does not rate the class Q and FS certificates.
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