OREANDA-NEWS. S&P Global Ratings today affirmed its ratings on four classes of commercial mortgage pass-through certificates from Four Times Square Trust's series 2006-4TS, a U. S. commercial mortgage-backed securities (CMBS) transaction (see list).

The affirmations on the principal - and interest-paying classes reflect our analysis of the transaction primarily using our criteria for rating U. S. and Canadian CMBS transactions. Our analysis included our revaluation of the Four Times Square property securing the mortgage loan that serves as collateral forthe trust. In addition, our analysis included a review of the transaction structure, and the liquidity available to the trust.

The rating on class C reflects our application of the CMBS criteria, which applies a credit enhancement minimum equal to 1% of the transaction or loan amount to address the potential for unexpected trust expenses that may be incurred during the life of the loan or transaction. These potential unexpected trust expenses may include servicer fees, servicer advances, workout or corrected mortgage fees, and potential trust legal fees.

We affirmed our 'AAA (sf)' rating on the class X interest-only (IO) certificates based on our IO criteria.

Our analysis of this transaction is predominantly a recovery-based approach that assumes a loan default. Using this approach, our property analysis included a revaluation of the Four Times Square property, a 48-story 1.69 million sq.-ft. primarily office (with some retail component) property locatedin Manhattan. We based our analysis on the servicer-reported financial performance for the years ended 2012, 2013, 2014, and 2015, as well as the April 2016 rent roll. Historically, the property reported stable net operatingincome. Our adjusted valuation, which considers the two major tenants rolling in 2019 and 2020 as well as current market data, using a 6.50% capitalization rate, yielded a whole-loan loan-to-value ratio of 54.3%.

As of the July 13, 2016, trustee remittance report, the fixed-rate mortgage loan has a whole-loan balance of $569.6 million that is split into four promissory notes: A-1, A-2, B, and C. The $3.5 million A-1 and $516.1 million A-2 notes are pari passu and senior to the $25.9 million subordinate junior B note and $24.1 million subordinate junior C note. The A-2, B, and C notes, totaling $566.1 million, are the sole source of cash flow for the certificatesin the trust. The $3.5 million A-1 note is included in LB-UBS Commercial Mortgage Trust 2007-C1, also a U. S. CMBS transaction. The mortgage loan has a 5.59% per annum fixed interest rate, amortizes on a 33-year amortization schedule, and matures on Dec. 11, 2020.

The property, Four Times Square, also generally known as the Conde Nast Building, is located on 42nd Street, between Broadway and the Avenue of the Americas. According to the April 2016 rent roll, the property was 99.2% leased.

The office space, consisting of approximately 1.6 million sq. ft., is majorityleased to Skadden, Arps, Slate, Meagher & Flom LLP (Skadden) (49.0% of the netrentable area [NRA]; May 31, 2020, lease expiration) and Advance Magazine Publishers Inc. doing business as The Conde Nast Publications (Conde Nast) (45.5% of NRA; April 30, 2019, lease expiration). It is our understanding thatthe Conde Nast space is currently dark as they have moved downtown to 1 World Trade Center. In addition, from media reports, Skadden is also expected to leave the property before its lease expiration for 1 Manhattan West in 2019. We have considered the potential risk this poses to the property in our analysis. According to communications with the master servicer, Wells Fargo Bank N. A., there are considerable interests for the dark Conde Nast space, while the Skadden space is not being marketed at this time.

The 83,945 sq.-ft. retail space is majority leased to H&M Hennes and Mauritz (2.5% of NRA; Jan. 31, 2034, lease expiration) and The Nasdaq OMX Group (1.5% of NRA; July 31, 2025, lease expiration). Wells Fargo Bank N. A. reported a 1.92x debt service coverage for the 12 months ended Dec. 31, 2015. To date, the trust has not incurred any principal losses.