Approximately $686.6 million of Structured Securities Affected
New York, April 28, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 17 classes
of Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through
Certificates, Series 2004-TOP15 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Aug 4, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Aug 4, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Aug 4, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Aug 4, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
Aug 4, 2004 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aa2 (sf); previously on Jun 9,
2010 Confirmed at Aa2 (sf)
Cl. C, Affirmed at A3 (sf); previously on Jun 9,
2010 Downgraded to A3 (sf)
Cl. D, Affirmed at Baa1 (sf); previously on Jun 9,
2010 Downgraded to Baa1 (sf)
Cl. E, Affirmed at Baa3 (sf); previously on Jun 9,
2010 Downgraded to Baa3 (sf)
Cl. F, Affirmed at Ba1 (sf); previously on Jun 9,
2010 Downgraded to Ba1 (sf)
Cl. G, Affirmed at Ba3 (sf); previously on Jun 9,
2010 Downgraded to Ba3 (sf)
Cl. H, Affirmed at B2 (sf); previously on Jun 9,
2010 Downgraded to B2 (sf)
Cl. J, Affirmed at B3 (sf); previously on Jun 9,
2010 Downgraded to B3 (sf)
Cl. K, Affirmed at Caa2 (sf); previously on Jun 9,
2010 Downgraded to Caa2 (sf)
Cl. L, Affirmed at Caa3 (sf); previously on Jun 9,
2010 Downgraded to Caa3 (sf)
Cl. M, Affirmed at C (sf); previously on Jun 9,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Jun 9,
2010 Downgraded to C (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 2.2%
of the current balance. At last full review, Moody's cumulative
base expected loss was 2.7%. Moody's stressed scenario
loss is 4.9% 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 April 2005.
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 52
compared to 58 at Moody's prior full 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 June 9, 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 six months.
DEAL PERFORMANCE
As of the April 13, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 23% to $689.57
million from $889.75 million at securitization. The
Certificates are collateralized by 104 mortgage loans ranging in size
from less than 1% to 9% of the pool, with the top
ten loans representing 46% of the pool. Four loans,
representing 4.9% of the pool, have defeased and are
collateralized with U.S. Government securities, compared
to 4.6% at last review. Three loans, representing
28.7% of the pool, have investment grade credit estimates.
Twenty-four loans, representing 18% 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's (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.
Two loans have been liquidated from the pool since securitization,
resulting in an aggregate $1.4 million loss (11%
loss severity on average). Currently four loans, representing
2% of the pool, are in special servicing. The largest
specially serviced loan is the Aiken Exchange Loan ($7.4
million -- 1.1% of the pool), which
is secured by a 101,000 square foot retail center located in Aiken,
South Carolina. The loan was transferred to special servicing in
March 2010 for imminent default and is currently in the process of foreclosure.
The remaining three specially serviced loans are secured by a mix of multifamily,
retail and industrial properties. The master servicer has recognized
an aggregate $2.8 million appraisal reduction for the specially
serviced loans. Moody's has estimated an aggregate loss of $5.8
million (37% expected loss on average) for three of the specially
serviced loans.
Moody's has assumed a high default probability for two poorly performing
loans representing 2% of the pool and has estimated a $1.7
million loss (15% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 93% and 79% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 75% compared to 76% at last full 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%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCR are 1.72X and 1.53X, respectively,
compared to 1.71X and 1.47X at last full 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 stressed 9.25% rate applied to the outstanding
loan balance.
The largest loan with a credit estimate is the Grace Building Loan ($111.0
million -- 16.1% of the pool), which is secured
by a 1.5 million square foot Class A office building located in
New York City. The loan represents a 33.3% pari-passu
interest in a $333.2 million loan. There is also
a subordinate B Note of $28.5 million held outside the trust.
The loan sponsor is Brookfield Properties and Swig Investment Company.
The property was 90% leased as of June 2010. Performance
is in line with the previous review. Moody's current credit estimate
and stressed DSCR are Baa2 and 1.34X, respectively,
compared to Baa2 and 1.32X at last full review.
The second loan with a credit estimate is the GIC Office Portfolio Loan
($63.2 million -- 9.2% of the pool),
which is secured by 12 office buildings located in seven states and totaling
6.4 million square feet. The loan represents a 9.3%
pari-passu interest in a $680.6 million loan.
There is also a subordinate B Note of $121.5 million held
outside the trust. The portfolio was 71% leased as of March
2010 compared to 87% at last review. Moody's current credit
estimate and stressed DSCR are Baa3 and 1.43X, respectively,
compared to Baa3 and 1.42X at last full review.
The third loan with a credit estimate is the Inland Midwest Portfolio
Loan ($23.7 million -- 3.4%
of the pool), which is secured by three retail properties located
in Illinois and Indiana and totaling 287,000 square feet.
The portfolio was 95% leased as of December 2010, essentially
the same as at last review. One of the properties is a single tenant
retail property leased to CarMax through January 2021. The other
two properties are multi-tenant retail properties. Moody's
current credit estimate and stressed DSCR are Baa3 and 1.41X,
respectively, compared to Baa3 and 1.45X at last full review.
The top three performing conduit loans represent 9% of the pool
balance. The largest loan is the Village at Newtown Loan ($25.3
million -- 3.7% of the pool), which
is secured by a 177,000 square foot retail center located in Newtown
Township, Pennsylvania. The property was 92% leased
as of June 2010 compared to 90% at last full review. Property
performance has been relatively stable. Moody's LTV and stressed
DSCR are 82% and 1.15X, respectively, compared
to 81% and 1.27X at last full review.
The second largest loan is the Pavilions Apartments Loan ($19.0
million -- 2.8% of the pool), which
is secured by a 240 unit garden apartment complex located in Albuquerque,
New Mexico. The complex was 92% leased as of December 2010
compared to 90% at last review. Property performance remains
stable. Moody's LTV and stressed DSCR are 95% and 0.96X,
respectively, compared to 92% and 1.00X at last full
review.
The third largest loan is the Port Sacramento Industrial Loan ($17.8
million -- 2.6% of the pool), which
is secured by a 610,000 square foot industrial complex located in
West Sacramento, California. The complex is 100% leased
to C&S Logistics through June 2017. Moody's LTV and stressed
DSCR are 82% and 1.32X, respectively, compared
to 83% and 1.30X at last review.
New York
Caroline Chan
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
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
Moody's Affirms 17 CMBS Classes of MSC 2004-TOP15
