Approximately $426.9 Million of Structured Securities Affected
New York, March 31, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 18 classes
of Real Estate Asset Liquidity Trust, Commercial Mortgage Pass-Through
Certificates, Series 2005-2 as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Aaa (sf)
Cl. XP-1, Affirmed at Aaa (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Aaa (sf)
Cl. XP-2, Affirmed at Aaa (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Aaa (sf)
Cl. XC-1, Affirmed at Aaa (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Aaa (sf)
Cl. XC-2, Affirmed at Aaa (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aa2 (sf); previously on Nov 4,
2005 Definitive Rating Assigned Aa2 (sf)
Cl. C, Affirmed at A2 (sf); previously on Nov 4,
2005 Definitive Rating Assigned A2 (sf)
Cl. D-1, Affirmed at Baa2 (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Baa2 (sf)
Cl. D-2, Affirmed at Baa2 (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Baa2 (sf)
Cl. E-1, Affirmed at Baa3 (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Baa3 (sf)
Cl. E-2, Affirmed at Baa3 (sf); previously on
Nov 4, 2005 Definitive Rating Assigned Baa3 (sf)
Cl. F, Affirmed at Ba1 (sf); previously on Nov 4,
2005 Definitive Rating Assigned Ba1 (sf)
Cl. G, Affirmed at Ba2 (sf); previously on Nov 4,
2005 Definitive Rating Assigned Ba2 (sf)
Cl. H, Affirmed at Ba3 (sf); previously on Nov 4,
2005 Definitive Rating Assigned Ba3 (sf)
Cl. J, Affirmed at B2 (sf); previously on Apr 8,
2010 Downgraded to B2 (sf)
Cl. K, Affirmed at B3 (sf); previously on Apr 8,
2010 Downgraded to B3 (sf)
Cl. L, Affirmed at Caa1 (sf); previously on Apr 8,
2010 Downgraded to Caa1 (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
1.6% of the current balance. At last review,
Moody's cumulative base expected loss was 1.1%.
Moody's stressed scenario loss is 10.1% 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 stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2011;
we expect overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal deficits
and persistent unemployment levels.
The principal methodologies used in this rating were CMBS: " Moody's
Approach to Rating Canadian CMBS", published in May 2000 and Moody's
Approach to Rating Fusion Transactions" published in April 2005.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
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 23
compared to 30 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 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
six months.
DEAL PERFORMANCE
As of the March 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 30% to $432.9
million from $622.0 million at securitization. The
Certificates are collateralized by 64 mortgage loans ranging in size from
less than 1% to 8% of the pool, with the top ten loans
representing 52% of the pool. The pool contains four loans
with investment-grade credit estimates that represent 14%
of the pool. Two loans, representing 0.8% of
the pool, have defeased and are collateralized with Canadian Government
securities.
Currently, there are 21 loans, representing 25% of
the pool, 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.
To date, the pool has experienced a nominal loss of $170,000.
Currently, there is one loan in special servicing, representing
2.1% of the pool. Moody's does not currently
estimate a loss for this loan.
Moody's was provided with full year 2009 financials for 85%
of the pool. Moody's weighted average LTV is 86% compared
to 83% at Moody's prior review. Moody's net
cash flow reflects a weighted average haircut of 9% 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 1.41X and 1.25X,
respectively, compared to 1.45X and 1.28X 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 SRI Portfolio Loan ($22.0
million -- 5.1% of the pool), which is secured
by 190 stand-alone restaurants totaling 424,589 square feet
and located in seven provinces. The loan is also encumbered by
a $10 million B-note which is held outside the trust.
The loan's original maturity date of October 1, 2010 was extended
to February 2012. As part of the extension, the borrower
made a $33 million principal pay-down on the original $55
million loan. The largest geographic concentrations are Ontario
(43%) and Quebec (33%). The properties are subject
to eight 15-year master leases which expire in 2017 and 2018.
Moody's current credit estimate and stressed DSCR are Aaa and 4.47X,
respectively, compared to A1 and 1.86X at Moody's last
review.
The second loan with a credit estimate is the Toronto Congress Centre
Loan ($17.5 million -- 4.0% of the pool),
which is secured by a 500,000 square foot convention center located
in Mississauga, Ontario. The property is 100% leased
to an affiliate of the borrower through December 2018. Moody's
current credit estimate and stressed DSCR are Aa3 and 1.50X,
respectively, compared to Aa3, and 1.40X at Moody's
last review.
The third loan with a credit estimate is 1849 Yonge Street Loan ($13.3
million -- 3.1% of the pool), which is secured
by a 97,125 square foot office building located in downtown Toronto.
The property's tenant roster predominantly consists of medical office
suites. Moody's current credit estimate and stressed DSCR are Baa3
and 1.52X, respectively, compared to Baa3 and 1.46X
at Moody's last review.
The fourth loan with a credit estimate is Jutland Road Loan ($6.5
million -- 1.5% of the pool), which is secured
by an 87,908 square foot office building located in Victoria,
British Columbia. Ninety percent of the net rentable area (NRA)
is leased to agencies of the Canadian government through 2014.
As of March 2010, the property was 100% leased, the
same as at last review. The loan benefits from a 15-year
amortization schedule and has amortized an additional 7% since
last review. Moody's current credit estimate and stressed DSCR
are Baa1 and 1.81X, respectively, compared to Baa2,
and 1.69X at Moody's last review.
The top three conduit loans represent 21% of the pool balance.
The largest conduit loan is the AMEC Building Loan ($33.4
million -- 7.7% of the pool), which is secured
by a 222,291 square foot Class A office building located in downtown
Vancouver. AMEC, a project management/consulting firm,
leases 63% of the NRA through 2015. As of December 2009,
the property was 100% leased, essentially the same as at
last review. Moody's LTV and stressed DSCR are 67% and 1.37X,
respectively, compared to 72% and 1.27X at last review.
The second largest conduit loan is the Kitchener Portfolio Loan ($28.4
million -- 6.6% of the pool), which is secured
by two office properties totaling 400,219 square feet and located
in Kitchener, Ontario. As of October 2010, the properties
were 94% leased, the same as at last review. Property
performance has improved since last review due higher rental rates and
the loan has benefitted from an additional 3% in amortization since
last review. Moody's LTV and stressed DSCR are 70% and 1.46X,
respectively, compared to 76% and 1.35X at last review.
The third largest conduit loan is the InnVest Portfolio Loan ($28.4
million -- 6.6% of the pool), which is secured
by four Radisson hotels totaling 707 rooms and located in four distinct
markets. Performance has declined since 2007. The hotel's
occupancy rate and revenue per available room (RevPAR) for calendar year
2009 were 55% and $59, respectively, compared
to 60% at $67 for 2008. Moody's LTV and stressed
DSCR are 114% and 1.09X, respectively, compared
to 101% and 1.24X at last review.
New York
Juan Acosta
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 18 CMBS Classes of REALT 2005-2
