Approximately $718 Million of Structured Securities Affected
New York, September 29, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 16 classes
of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2003-C7 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Nov 6, 2003 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Nov 6, 2003 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Dec 21,
2006 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Dec 21,
2006 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aa2 (sf); previously on Aug 21,
2008 Upgraded to Aa2 (sf)
Cl. E, Affirmed at A1 (sf); previously on Aug 21,
2008 Upgraded to A1 (sf)
Cl. F, Affirmed at A3 (sf); previously on Aug 21,
2008 Upgraded to A3 (sf)
Cl. G, Affirmed at Baa3 (sf); previously on Nov 11,
2010 Downgraded to Baa3 (sf)
Cl. H, Affirmed at B1 (sf); previously on Nov 11,
2010 Downgraded to B1 (sf)
Cl. J, Affirmed at B3 (sf); previously on Nov 11,
2010 Downgraded to B3 (sf)
Cl. K, Affirmed at Caa3 (sf); previously on Nov 11,
2010 Downgraded to Caa3 (sf)
Cl. L, Affirmed at Ca (sf); previously on Nov 11,
2010 Downgraded to Ca (sf)
Cl. M, Affirmed at Ca (sf); previously on Nov 11,
2010 Downgraded to Ca (sf)
Cl. N, Affirmed at C (sf); previously on Nov 11,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Nov 11,
2010 Downgraded to C (sf)
Cl. X-C, Affirmed at Aaa (sf); previously on
Nov 6, 2003 Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
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
5.4% of the current balance. At last review,
Moody's cumulative base expected loss was 5.1%.
Moody's stressed scenario loss is 8.2% 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.
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 current sluggish macroeconomic
environment and performance in the commercial real estate property markets.
While commercial real estate property markets are gaining momentum,
a consistent upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are continuing
to show signs of recovery through the first half of 2011, while
recovery in the non-core office and retail sectors are tied to
pace of recovery of the broader economy. Core office markets are
showing signs of recovery through lending and leasing activity.
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 as the most likely scenario through
2012, amidst ongoing individual, corporate and governmental
deleveraging, persistent unemployment, and government budget
considerations, however the downside risks to the outlook have risen
since last quarter.
The principal methodology used in this rating was "Moody's Approach to
Rating U.S. CMBS Conduit Transactions" published in
September 2000. 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 2.60 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 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 (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
credit estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the credit estimate 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 credit estimate 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 35
compared to 29 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 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 November 11, 2010.
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 September 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 29% to $718
million from $1.01 billion at securitization. The
Certificates are collateralized by 102 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten non-defeased loans representing 33% of the pool.
Eighteen loans, representing 25% of the pool, have
defeased and are secured by U.S. Government securities.
Defeasance at last review represented 13% of the pool.
Seventeen loans, representing 19% 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.
Three loans have been liquidated from the pool, resulting in a realized
loss of $4.9 million (22% loss severity overall).
Currently four loans, representing 8% of the pool,
are in special servicing. The largest specially serviced loan is
the Santa Clara County Office Loan ($32.9 million --
4.6%), which is secured by a 152,000 square
foot (SF) office property located in San Jose, California.
The loan was transferred into special servicing in January 2010 due to
the borrower's bankruptcy filing. The loan emerged from bankruptcy
in September 2010 when the mezzanine lender took control of the property.
The property is 100% leased to Santa Clara County through December
2012. Per the special servicer, the loan is expected to return
back to the master servicer within the next few weeks.
The remaining three specially serviced properties are secured by office
properties. Moody's estimates an aggregate $9.0 million
loss for the specially serviced loans (36% expected loss on average).
Moody's has assumed a high default probability for seven poorly
performing loans representing 17% of the pool and has estimated
an aggregate $22.0 million loss (18% expected loss
based on a 50% probability default) from these troubled loans.
Moody's was provided with full year 2010 operating results for 93%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 83% compared to 82%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 13% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.0%.
Excluding special serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.45X and 1.23X, respectively,
compared to 1.57X and 1.24X 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 top three performing conduit loans represent 13% of the pool
balance. The largest loan is the Regency Square Mall Loan ($43.9
million -- 6.1% of the pool), which represents
a 50% participation interest in a $87.8 million first
mortgage loan. The loan is secured by the borrower's interest in
a 1.5 million SF regional mall located in Jacksonville, Florida.
The loan sponsor is General Growth Properties, Inc. The mall
is anchored by Sears, Dillard's, Belk and J.C.
Penney. The center was 82% leased as of December 2010 compared
to 93% at last review. The drop in occupancy is due to several
national tenants vacating their spaces at the mall. Moody's considers
this loan to be a high default risk and has identified it as a troubled
loan. Moody's LTV and stressed DSCR are 136% and 0.74X,
respectively, compared to 98% and 0.96X at last review.
The second largest loan is the Columbia Place Mall Loan ($27.6
million -- 3.8% of the pool), which
is secured by the borrower's interest in a 1.1 million SF regional
mall located in Columbia, South Carolina. The center is anchored
by Sears and Macy's. The loan is currently on the watchlist due
to the property's declining performance which is a direct result of decreasing
occupancy and rental revenues. The property has lost two anchor
tenants (Dillard's and Steve and Barry's) since securitization and these
spaces are currently vacant. The loan sponsor is CBL & Associates
Properties, Inc. Moody's considers this loan to be a high
default risk and has identified it as a troubled loan. Moody's
LTV and stressed DSCR are 148% and 0.68X, respectively,
compared to 143% and 0.70X at last review.
The third largest loan is the Hollywest Promenade/99 Cents Loan ($23.6
million -- 3.3% of the pool), which
is secured by a 120,000 SF grocery anchored retail center (Hollywest
Promenade) located in Los Angeles, California and a 30,000
SF single tenant retail center (99 Cents Only Store) located in Las Vegas,
Nevada. Property performance remains stable and the loan is benefitting
from amortization. Moody's LTV and stressed DSCR are 78%
and 1.17X, respectively, compared to 80% and
1.15X at last review.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a 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 Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's 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 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.
Amit Rustgi
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
Sandra Ruffin
VP - Senior Credit Officer
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 16 CMBS Classes of WBCMT 2003-C7
