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Rating Action:

Correction to Text, March 09, 2011 Release: Moody's Upgrades Four and Affirms 15 CMBS Classes of LB-UBS 2001-C7

10 Mar 2011

New York, March 10, 2011 -- Substitute 15 for 13 classes in the heading and the first paragraph.

Correct the list of affected ratings, add Cl. X-CL and Cl. X-CP has been affirmed.

Revised Release follows.

Moody's Investors Service (Moody's) upgraded the ratings of four classes and affirmed 15 classes of LB-UBS Commercial Mortgage Trust 2001-C7, Commercial Mortgage Pass-Through Certificates, Series 2001-C7 as follows:

Cl. A-3, Affirmed at Aaa (sf); previously on Dec 18, 2001 Assigned Aaa (sf)

Cl. A-4, Affirmed at Aaa (sf); previously on Dec 18, 2001 Assigned Aaa (sf)

Cl. A-5, Affirmed at Aaa (sf); previously on Dec 18, 2001 Assigned Aaa (sf)

Cl. B, Affirmed at Aaa (sf); previously on May 25, 2005 Upgraded to Aaa (sf)

Cl. C, Affirmed at Aaa (sf); previously on Jan 11, 2006 Upgraded to Aaa (sf)

Cl. D, Affirmed at Aa1 (sf); previously on Apr 12, 2007 Upgraded to Aa1 (sf)

Cl. E, Affirmed at Aa2 (sf); previously on Apr 12, 2007 Upgraded to Aa2 (sf)

Cl. F, Affirmed at A1 (sf); previously on Apr 12, 2007 Upgraded to A1 (sf)

Cl. G, Affirmed at A3 (sf); previously on Apr 12, 2007 Upgraded to A3 (sf)

Cl. H, Affirmed at Baa2 (sf); previously on Apr 12, 2007 Upgraded to Baa2 (sf)

Cl. J, Affirmed at Baa3 (sf); previously on Apr 12, 2007 Upgraded to Baa3 (sf)

Cl. K, Affirmed at Ba2 (sf); previously on Dec 18, 2001 Assigned Ba2 (sf)

Cl. L, Affirmed at B2 (sf); previously on Apr 28, 2010 Downgraded to B2 (sf)

Cl. M, Upgraded to B3 (sf); previously on Apr 28, 2010 Downgraded to Caa2 (sf)

Cl. N, Upgraded to Caa1 (sf); previously on Apr 28, 2010 Downgraded to Ca (sf)

Cl. P, Upgraded to Caa2 (sf); previously on Apr 28, 2010 Downgraded to C (sf)

Cl. Q, Upgraded to Caa3 (sf); previously on Apr 28, 2010 Downgraded to C (sf)

Cl. X-CL, Affirmed at Aaa (sf); previously on Dec 18, 2001 Assigned Aaa (sf)

Cl. X-CP, Affirmed at Aaa (sf); previously on Dec 18, 2001 Assigned Aaa (sf)

RATINGS RATIONALE

The upgrades are due to overall improved pool performance and a significant increase in subordination levels since Moody's last review. Additionally, at last review, Moody's had estimated $5.3 million in potential losses from three specially serviced loans: The Pavilion Senior Residences, Huntington Lane Apartments and Westpark Plaza. All three loans paid off since last review and actual losses were only $57,000 - a difference of $4.7 million. The affirmations are due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining within acceptable ranges. Based on our current base expected loss, the credit enhancement levels for the affirmed classes are sufficient to maintain their current ratings.

Moody's rating action reflects a cumulative base expected loss of 1.3% of the current balance. At last review, Moody's cumulative base loss was 1.2%. Moody's stressed scenario loss is 3.5% of the current balance. Moody's provides a current list of base and stress scenario losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255. Depending on the timing of loan payoffs and the severity and timing of losses from specially serviced loans, the credit enhancement level for investment grade classes could decline below the current levels. If future performance materially declines, the expected level of credit enhancement and the priority in the cash flow waterfall may be insufficient for the current ratings of these classes.

Moody's analysis reflects a forward-looking view of the likely range of collateral performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside an acceptable range of the key parameters may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated during the current review. Even so, deviation from the expected range will not necessarily result in a rating action. There may be mitigating or offsetting factors to an improvement or decline in collateral performance, such as increased subordination levels due to amortization and loan payoffs or a decline in subordination due to realized losses.

Primary sources of assumption uncertainty are the current sluggish macroeconomic environment and varying performance in the commercial real estate property markets. However, Moody's expects to see increasing or stabilizing property values, higher transaction volumes, a slowing in the pace of loan delinquencies and greater liquidity for commercial real estate in 2011. The hotel and multifamily sectors are continuing to show signs of recovery, while recovery in the office and retail sectors will be tied to recovery of the broader economy. The availability of debt capital continues to improve with terms returning toward market norms. Moody's central global macroeconomic scenario reflects an overall sluggish recovery through 2012, amidst ongoing individual, corporate and governmental deleveraging, persistent unemployment, and government budget considerations.

The principal methodology used in this rating was "CMBS: Moody's Approach to Rating Fusion Transactions" published in July 2000.

Moody's review incorporated the use of the excel-based CMBS Conduit Model v 2.50 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate used by Moody's to estimate Moody's value). Conduit model results at the B2 level are driven by a pay down analysis based on the individual loan level Moody's LTV ratio. Moody's Herfindahl score (Herf), a measure of loan level diversity, is a primary determinant of pool level diversity and has a greater impact on senior certificates. Other concentrations and correlations may be considered in our analysis. Based on the model pooled credit enhancement levels at Aa2 and B2, the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, the credit enhancement for loans with investment-grade credit estimates is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the underlying rating of the loan which corresponds to a range of credit enhancement levels. Actual fusion credit enhancement levels are selected based on loan level diversity, pool leverage and other concentrations and correlations within the pool. Negative pooling, or adding credit enhancement at the underlying rating level, is incorporated for loans with similar credit estimates in the same transaction.

Moody's uses a variation of Herf to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 22 compared to 20 at last review.

In cases where the Herf falls below 20, Moody's also employs the large loan/single borrower methodology. This methodology uses the excel based Large Loan Model v 8.0 and then reconciles and weights the results from the two models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations.

Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. Therefore, the rating outcome may differ from the model output.

The rating action is a result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions. Moody's monitors transactions on a monthly basis through two sets of quantitative tools -- MOST® (Moody's Surveillance Trends) and CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic basis through a comprehensive review. Moody's prior full review is summarized in a press release dated April 28, 2010. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

Moody's Investors Service received and took into account one or more third party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the ratings.

DEAL PERFORMANCE

As of the February 17, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 37% to $764.2 million from $1.2 billion at securitization. The Certificates are collateralized by 78 mortgage loans ranging in size from less than 1% to 19% of the pool, with the top ten loans representing 37% of the pool. Twenty-nine loans, representing 47% of the pool, have defeased and are collateralized by U.S. Government securities. There are two loans in the pool with investment grade credit estimates.

Twenty-five loans, representing 19.4% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of our ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance.

Six loans have been liquidated from the pool since securitization, resulting in an $11.2 million loss (51% loss severity). The pool had experienced an aggregate $4.7 million loss at last review. There are presently three loans in special servicing. The largest specially serviced loan is the Shadow Creek Apartments Loan ($5.9 million -- 0.8% of the pool), which is secured by a 231-unit apartment complex located in Kansas City, Missouri. The loan was transferred to special servicing December 2010 due to monetary default and is presently 90+ days delinquent.

The remaining two specially serviced loans are secured by an industrial facility and an apartment complex. Moody's estimates a $3.9 million aggregate loss for all of the specially serviced loans (37% expected loss on average).

Moody's has assumed a high default probability for one poorly performing loan representing 0.35% of the pool and has estimated a $306,000 loss (16% expected loss based on a 50% probability default) from this troubled loan.

Moody's was provided with full year 2009 and partial year 2010 operating results for 59% and 55%, respectively, of the pool's non-defeased loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 82% compared to 81% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 12.0% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.1%.

Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.33X and 1.55X, respectively, compared to 1.30X and 1.42X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance.

The largest loan with a credit estimate is the Fashion Centre at Pentagon City Loan ($145.9 million -- 19.1% of the pool), which is secured by the borrower's interest in an 820,000 square foot (SF) enclosed regional shopping mall located in Arlington, Virginia. The center is anchored by Nordstrom and Macy's, which each own their respective improvements. The center is a dominant mall in the Washington, D.C. metro area and has been nearly 100% leased since securitization.

The loan sponsor is a joint venture between Simon Property Group (SPG) and CalPERS. The loan has amortized 2% since last review. Moody's current credit estimate and stressed DSCR are Aaa and 2.76X compared to Aaa and 2.74X at last review.

The second loan with a credit estimate is the Connell Corporate Center I Loan ($14.5 million -- 1.9% of the pool) which is secured by a 415,000 SF Class A suburban office building located in Berkeley Heights, New Jersey. The property is 100% leased to two tenants -- American Home Assurance (85% of net rentable area (NRA); lease expiration June 2018) and EMC Corporation (14% of the NRA; lease expiration March 2013). The loan fully amortizes over its 11.75-year term, maturing June 2013 and has amortized 24% since last review. Moody's current credit estimate and stressed DSCR are Aaa and 4.0X compared to Aaa and 3.81X at last review.

The top three performing conduit loans represent 8% of the pool balance. The largest loan is the Torrance Executive Plaza East and West Loans ($30.5 million -- 4.0% of the pool), two cross collateralized loans which are secured by two office properties located in Torrance, California. The properties total 345,100 SF and were 78% leased as of September 2010 versus 82% leased at last review. Property performance has remained stable yet Moody's analysis incorporates a stressed cash flow due to the recent occupancy declines at this asset which mirror current office submarket conditions. Moody's LTV and stressed DSCR are 82% and 1.38X, respectively, compared to 98% and 1.16X at last review.

The second largest conduit loan is the Meadows Corporate Park Loan ($15.7 million -- 2.1% of the pool), which is secured by a 165,000 SF Class A office complex located in Silver Spring, Maryland. The loan had been listed on the Master Servicer's Watchlist due to a low DSCR. Higher occupancy has yielded stronger financial performance. The property was 95% leased as of September 2010, the same as at last review but above 81% leased as of December 2008. Moody's LTV and stressed DSCR are 90% and 1.14X, respectively, compared to 102% and 1.0X at last review.

The third largest conduit loan is the Court Tower Office Building Loan ($15.2 million -- 2.0% of the pool), which is secured by a 132,000 SF Class A office property located in Towson, Maryland. The loan is currently on the Master Servicer's Watchlist due to increased vacancy and low DSCR concerns. The property was 72% leased as of September 2010 compared to 62% leased as of November 2009. Moody's analysis incorporates a stressed cash flow due to vacancy and financial performance concerns. The loan has an anticipated repayment date of August 2011. Moody's LTV and stressed DSCR are 120% and 0.85X, respectively, compared to 144% and 0.75X at last review. Moody's anticipates a high probability of maturity default for this loan.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, confidential proprietary Moody's Investors Service Information, and confidential and proprietary Moody's Analytics information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Gregory Reed
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Keith Banhazl
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Correction to Text, March 09, 2011 Release: Moody's Upgrades Four and Affirms 15 CMBS Classes of LB-UBS 2001-C7
No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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