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
