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Rating Action:

Moody's Affirms 13 CMBS Classes of MSC 2011-C3

12 Jul 2013

Approximately $1.4 Billion of Structured Securities Affected

New York, July 12, 2013 -- Moody's Investors Service (Moody's) affirmed the ratings of 13 classes of Morgan Stanley Capital I Trust Commercial Pass-Through Certificates, Series 2011-C3 as follows:

Cl. A-1, Affirmed Aaa (sf); previously on Oct 6, 2011 Definitive Rating Assigned Aaa (sf)

Cl. A-2, Affirmed Aaa (sf); previously on Oct 6, 2011 Definitive Rating Assigned Aaa (sf)

Cl. A-3, Affirmed Aaa (sf); previously on Oct 6, 2011 Definitive Rating Assigned Aaa (sf)

Cl. A-4, Affirmed Aaa (sf); previously on Oct 6, 2011 Definitive Rating Assigned Aaa (sf)

Cl. A-J, Affirmed Aaa (sf); previously on Oct 6, 2011 Definitive Rating Assigned Aaa (sf)

Cl. B, Affirmed Aa2 (sf); previously on Oct 6, 2011 Definitive Rating Assigned Aa2 (sf)

Cl. C, Affirmed A2 (sf); previously on Oct 6, 2011 Definitive Rating Assigned A2 (sf)

Cl. D, Affirmed Baa1 (sf); previously on Oct 6, 2011 Definitive Rating Assigned Baa1 (sf)

Cl. E, Affirmed Baa3 (sf); previously on Oct 6, 2011 Definitive Rating Assigned Baa3 (sf)

Cl. F, Affirmed Ba2 (sf); previously on Oct 6, 2011 Definitive Rating Assigned Ba2 (sf)

Cl. G, Affirmed B2 (sf); previously on Oct 6, 2011 Definitive Rating Assigned B2 (sf)

Cl. X-A, Affirmed Aaa (sf); previously on Oct 6, 2011 Definitive Rating Assigned Aaa (sf)

Cl. X-B, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf)

RATINGS RATIONALE

The affirmations of the P&I classes 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. 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.

The ratings of the IO Classes, Class X-A and X-B, are consistent with the expected credit performance of their referenced classes and thus are affirmed.

Moody's rating action reflects a base expected loss of approximately 2.2% of the current deal balance compared to approximately 2.0% at last review. Moody's base expected loss plus realized loss is 2.2% of the original securitized deal balance compared to 2.0% at Moody's last review. Moody's provides a current list of base losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.

Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery in the commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated.

Moody's central global macroeconomic outlook indicates the global economy has lost momentum over the past quarter as it tries to recover. US GDP growth for 2013 is likely to remain close to 2%, however US sequestration cuts that came into effect in March may create a drag on the positive growth in the US private sector. While the broad economic impact in unclear, the direct effect is likely to shave 0.4% off US GDP growth in 2013. Continuing from the previous quarter, Moody's believes that the three most immediate risks are: i) the risk of an even deeper than currently expected recession in the euro area, accompanied by deeper credit contraction, potentially triggered by a further intensification of the sovereign debt crisis; ii) slower-than-expected recovery in major emerging markets following the recent slowdown; and iii) an escalation of geopolitical tensions, resulting in adverse economic developments.

The principal methodology used in this rating was "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's review incorporated the use of the Excel-based CMBS Conduit Model v 2.62 which is used for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) 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 (sf) 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 (sf) and B2 (sf), 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 underlying ratings is melded with the conduit model credit enhancement into an overall model result. Fusion loan credit enhancement is based on the credit assessment 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 assessments 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 26, the same as at Moody's prior review.

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 a review utilizing MOST® (Moody's Surveillance Trends) Reports and a proprietary program that highlights significant credit changes that have occurred in the last month as well as cumulative changes since the last full transaction review. On a periodic basis, Moody's also performs a full transaction review that involves a rating committee and a press release. Moody's prior transaction review is summarized in a press release dated July 25, 2012. Please see the ratings tab on the issuer / entity page on moodys.com for the last rating action and the ratings history.

DEAL PERFORMANCE

As of the October 5, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 2% to $1.46 billion from $1.48 billion at securitization. The Certificates are collateralized by 63 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans (excluding defeasance) representing 52% of the pool. The pool includes two loans with investment-grade credit assessments, representing 11% of the pool.

Four loans, representing 5% 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.

Currently there are no loans in special servicing and Moody's has not identified any troubled loans.

Moody's was provided with full-year 2012 and partial year 2013 operating results for 97% and 48% of the performing pool, respectively. Moody's weighted average LTV is 87% compared to 92% at last full review. Moody's net cash flow reflects a weighted average haircut of 12% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.4%.

Moody's actual and stressed DSCRs are 1.65X and 1.20X, respectively, compared to 1.57X and 1.14X 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 assessment is the Park City Center Loan ($50 million -- 10% of the pool). The loan is secured by a 1.2 million square foot retail center located in Lancaster, Pennsylvania. Major tenants include JC Penney, Bon Ton, and Sears. The property was 100% leased as of March 2013 compared to 97% in July 2012. Moody's credit assessment and stressed DSCR are Baa3 and 2.11X, respectively, compared to Baa3 and 2.08X at last review.

The top three performing conduit loans represent 20% of the pool. The largest loan is the Westfield Belden Village Loan ($100 million -- 7% of the pool). The loan is secured by a 419,400 square foot regional mall located 25 miles north of Akron in Canton, Ohio. Mall occupancy was 100% in December 2012. Moody's current LTV and stressed DSCR are 80% and 1.96X, respectively, compared to 82% and 1.87X at last review.

The second largest loan is the Oxmoor Center Loan ($92 million -- 6% of the pool). The loan is secured by a 941,000 square foot super-regional mall in the Louisville, Kentucky. The center is anchored by Macy's, Sears, Von Maur, Dick's Sporting Goods and Old Navy. The property was 97% leased as of December 2012 compared to 96% at last review. Moody's current LTV and stressed DSCR are 97% and 1.34X, respectively, compared to 98% and 1.35X at last review.

The third largest loan is the One BriarLake Plaza Loan ($83 million -- 6% of the pool). The loan is secured by a Class A office building located in Houston, Texas and includes a seven-story parking garage. The loan sponsor is Behringer Harvard REIT I, Inc. The property is currently 91% leased. The three largest tenants are Apache Corporation (35% of the net rentable area (NRA), lease expiration October 2018), Nexen Petroleum (10% NRA, lease expiration May 2017) and Microsoft (7% NRA, lease expiration May 2015). Moody's current LTV and stressed DSCR are 82% and 1.62X respectively, compared to 95% and 1.43X at last review.

REGULATORY DISCLOSURES

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

In conducting surveillance of this credit, Moody's considered performance data contained in servicer and remittance reports. Moody's obtains servicer reports on this transaction on a periodic basis, at least annually.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jeffrey Gilbane
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Michael Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's Affirms 13 CMBS Classes of MSC 2011-C3
No Related Data.
© 2021 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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