NEW YORK CITY-In a sign that troubled office loans are still shaky amid a slow economy, Fitch Ratings has downgraded four classes of commercial mortgage pass-through certificates from LB-UBS Commercial Mortgage Trust 2005-C2. The two largest contributors to the pool’s losses include loans for the Woodbury Office Portfolio I & II on Long Island and loans for the two-building Park 80 West office complex in Saddle Brook, NJ.

While four classes in the pool were downgraded, at the same time, 12 classes were affirmed. "The remainder of the bonds have stable outlooks, which indicates no downgrades to these classes," says Mary MacNeill, managing director at Fitch Ratings, in an e-mail.

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But the downgrades of the four mortgage certificates reflect an increase in expected losses across the entire pool, says Fitch, as well as update valuations on the existing specially serviced loans. The ratings agency designated 36 loans--or 68.49% of the pool balance--as loans of concern. Of that 36, 14 of the loans--or 31.71%--are specially serviced. As of their August 2011 distribution date, the pool’s aggregate principal balance has been paid down to $1.21 billion from $1.94 billion at issuance.

The Woodbury Office Portfolio II loan, the largest contributer of losses, is secured by 22 office properties totaling 1.1 million square feet in Woodbury, NY. The $155-million loan transferred in January 2010 for imminent default; payments have remained current or less than 30 days delinquent since, says Fitch. The servicer is in the process of finalizing a loan modification with the mezzanine lender and borrower.

The second largest, Woodbury Office Portfolio I loan, is secured by 10 office properties containing 480,000 square feet. GlobeSt.com previously reported that RXR Realty assumed control of all leasing, management and construction activities at the 32-building Woodbury portfolio in an agreement with CLK/Houlihan-Parnes, a partnership that defaulted on nearly $30 million in mezzanine debt by RXR.

The third largest loss, the Park 80 West loan, was transferred to special servicing in December 2009 due to imminent default. According to Real Capital Analytics, the first mortgage is $100 million. The borrower is currently in discussions with the special servicer regarding a modification, says Fitch. Current tenants here include New York Life, Washington Mutual, Unilever and CB Richard Ellis, according to RCA.

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