OREANDA-NEWS. Fitch Ratings upgrades two classes of Lone Star Funds (LSTAR) commercial mortgage pass-through certificates series 2011-1. A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS
The upgrades are due to additional paydown and amortization since Fitch's last rating action. The attributes of this transaction are materially different from recent Fitch-rated conduit transactions. The collateral at issuance featured high initial loan to values (LTVs) ratios, low debt service coverage ratios (DSCR), and several loans in the transaction had a history of delinquency at issuance. The loans were seasoned at issuance and are scheduled to amortize more rapidly than newly originated loans.

As of the May 2015 distribution date, the pool's aggregate principal balance has been reduced by 74.7% to \$91 million from \$359.5 million at issuance. No loans are defeased. Interest shortfalls are currently affecting class G.

Fitch modeled losses of 24.6% of the remaining pool; expected losses on the original pool balance total 7.4%, including \$4.2 million (1.2% of the original pool balance) in realized losses to date. Fitch has designated 29 loans (61.9%) as Fitch Loans of Concern, which includes seven specially serviced assets (16.2%).

The largest contributor to expected losses (3.3% of the pool), is secured by an 8,980 square foot office property located in Tigard, OR. Property performance declined back in 2012 when the top two tenants vacated at lease expiration. The property continues to underperform due to low occupancy. Per the master servicer, the borrower has reported an 81% increase in base rent; however, the property remains 29% occupied. An update on leasing activity was not available. Per REIS, as of first quarter 2015 (1Q15), the Beaverton/Sylvan submarket of Portland vacancy rate is 16% with average asking rent \$20.40 per sf.

The next largest contributor to expected losses (5.5%), is secured by a multifamily property consisting of 162 units (160 - two-Bedroom, 2 - three-Bedroom) located in Bakersfield, CA. The loan has been in special servicing since October 2011 and is currently real estate owned (REO). The foreclosure sale took place in November 2013, and was sold to LSTAR at the opening bid price. The receivership was ended and the receiver was retained as property manager. The property was marketed for sale and was previously under contract but the transaction fell through due to pending litigation with the former owner. Settlement negotiations with the previous owner (defendant) were underway through April 2015 but have been stalled due to the defendant expressing an interest in pursuing damages in litigation as the only way to resolve the matter. The special servicer recently approved work to turn some units and accelerate lease-up.

The third largest contributor to expected losses (4.3%), is also specially serviced and REO. The asset is secured by an 85,106 sf retail property consisting of a four-building strip center anchored by Harvest Fare. The commercial portion of the property was foreclosed in February 2013, and the residential portion of the asset was foreclosed September 2013. Trigild has been retained as the property manager. A listing agreement has been executed with Marcus Millichap for the sale of the commercial and residential parcels of the property. The property is under contract but the purchaser is still in the inspection period. The property is undergoing parking lot/light repairs. Per the special servicer, a sale is expected in 3Q15.

RATING SENSITIVITIES
Rating Outlooks on classes C through F are expected to remain Stable due to increasing credit enhancement and continued amortization and paydown.

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

Fitch has upgraded the following ratings:

--\$362,369 class C to 'AAAsf' from 'Asf'; Outlook to Stable from Positive;
--\$27.4 million class D to 'Asf' from 'BBB-sf; Outlook Stable.

Fitch has also affirmed the following ratings:

--\$7.6 million class E at 'BBsf'; Outlook Stable;
--\$6.7 million class Fat 'Bsf'; Outlook Stable.

Classes A and B are paid in full. Fitch does not rate the class G, residual class R or the interest only class X certificates.