Approximately $279 Million of Structured Securities Affected
New York, March 23, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 13 classes
of Schooner Trust, Commercial Mortgage Pass-Through Certificates,
Series 2004-CF2 as follows:
A-1, Affirmed at Aaa (sf); previously on Sep 28,
2004 Definitive Rating Assigned Aaa (sf)
A-2, Affirmed at Aaa (sf); previously on Sep 28,
2004 Definitive Rating Assigned Aaa (sf)
X, Affirmed at Aaa (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Aaa (sf)
B, Affirmed at Aa2 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Aa2 (sf)
C, Affirmed at A2 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned A2 (sf)
D, Affirmed at Baa2 (sf); previously on Sep 28, 2004
Definitive Rating Assigned Baa2 (sf)
E, Affirmed at Baa3 (sf); previously on Sep 28, 2004
Definitive Rating Assigned Baa3 (sf)
F, Affirmed at Ba1 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Ba1 (sf)
G, Affirmed at Ba2 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Ba2 (sf)
H, Affirmed at Ba3 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Ba3 (sf)
J, Affirmed at B1 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned B1 (sf)
K, Affirmed at B2 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned B2 (sf)
L, Affirmed at B3 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned B3 (sf)
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 expected loss was 1.5%.
Moody's stressed scenario loss is 5.8% 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
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 methodologies used in this rating were "Moody's Approach
to Rating Canadian CMBS", published on May 26, 2000,
"CMBS: Moody's Approach to Rating Large Loan/Single
Borrower Transactions", published on July 7, 2000 and
"CMBS: Moody's Approach to Rating U.S.
Conduit Transactions", published on September 15, 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 paydown 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 16
compared to 18 at Moody's prior full 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 8, 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 did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
As of the March 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 22% to $283.8
million from $363.3 million at securitization. The
Certificates are collateralized by 52 mortgage loans ranging in size from
less than 1% to 13% of the pool, with the top ten
loans representing 58% of the pool. The pool contains two
loans with investment grade credit estimates that represent 13%
of the pool. Six loans, representing 8% of the pool,
have defeased and are collateralized with Canadian Government securities.
Three loans, representing 8% 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
The pool has not realized any losses since securitization. There
are no loans currently in special servicing.
Moody's was provided with full year 2009 operating results for 85%
of the pool. Moody's weighted average LTV is 71% compared
to 77% at Moody's prior 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 9.2%.
Moody's actual and stressed DSCRs are 1.46X and 1.46X,
respectively, compared to 1.42X and 1.36X 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 Daimler Chrysler Building
Loan ($26.2 million -- 9.2% of the pool),
which is secured by a 197,000 square foot (SF) Class A office and
retail building located in Windsor, Ontario. The property
was 88% leased as of April 2010 compared to 100% as of March
2009 and 100% at securitization. The largest tenant is Chrysler
Canada which leases approximately 67% of the property's net
rentable area (NRA) through August 2022. Although occupancy has
decreased, performance remains stable and the loan benefits from
amortization. Moody's current credit estimate and stressed DSCR
are Baa3 and 1.14X, respectively, compared to Baa3
and 1.11X at last review.
The second loan with credit estimate rating is the Confederation Mall
Loan ($10.5 million -- 3.7% of the pool),
which is secured by a 327,000 SF retail center located in Saskatoon,
Saskatchewan. The property was 94% leased as of November
2010 compared to 90% as of December 2009. Wal-Mart
vacated its space (148,647 SF -- 45% of the NRA) prior
to its January 2011 lease expiration. Canadian Tire has leased
most of the space vacated by Wal-Mart (129,600 SF --
40% of the NRA) as of March 2011 through March 2026. Moody's
does not anticipate the co-tenancy clauses pertaining to Wal-Mart
to have a material impact on the property's performance.
The loan is structured with a 25-year amortization schedule and
has amortized 6% since the last review. The loan is 100%
recourse to the borrower. Moody's current credit estimate
and stressed DSCR are Baa3 and 1.56X, respectively,
compared to Baa3 and 1.46X at last review.
The top three performing conduit loans represent 27% of the pool
balance. The largest loan is the PD Kanco Multifamily Portfolio
($36.4 million -- 12.8% of the pool),
which is secured by seven multifamily properties totaling 736 units located
in Ontario. The portfolio was 97% leased as of December
2009 compared to 94% as of December 2008. Moody's
LTV and stressed DSCR are 89% and 1.01X, respectively,
essentially the same as at last review.
The second largest loan is the Westmount Square Loan ($26 million
-- 9.2% of the pool), which is secured by a 330,000
SF Class A office and retail complex located in Montreal, Quebec.
The complex is approximately 75% office space and 25% retail
space. The property was 95% leased as of February 2010 compared
to 93% at securitization. The loan is structured with a
25-year amortization schedule and is 100% recourse to the
borrower. Performance has improved since securitization due to
increasing base rents. Moody's LTV and stressed DSCR are
68% and 1.54X, respectively, compared to 80%
and 1.32X at last review.
The third largest loan is the Stillwater Creek Retirement Community Loan
($15.3 million -- 5.4% of the pool),
which is secured by a 204-unit facility offering independent living,
assisted living and retirement care services located in Nepean,
Ontario. The property was 87% leased as of March 2010 compared
to 95% as of March 2009 and 98% at securitization.
Despite the decline in occupancy, performance remains stable.
Moody's LTV and stressed DSCR are 60% and 1.88X,
respectively, compared to 63% and 1.79X at last review.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Affirms 13 CMBS Classes of SCSC 2004-CF2
250 Greenwich Street
New York, NY 10007