Approximately $978.8 Million of Structured Securities Affected
New York, March 09, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 19 classes
of Bear Stearns Commercial Mortgage Securities Trust, Commercial
Mortgage Pass-Through Certificates, Series 2004-PWR5
as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Nov 8, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Nov 8, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Nov 8, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-5, Affirmed at Aaa (sf); previously on
Nov 8, 2004 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aa2 (sf); previously on Nov 8,
2004 Definitive Rating Assigned Aa2 (sf)
Cl. C, Affirmed at Aa3 (sf); previously on Nov 8,
2004 Definitive Rating Assigned Aa3 (sf)
Cl. D, Affirmed at A2 (sf); previously on Nov 8,
2004 Definitive Rating Assigned A2 (sf)
Cl. E, Affirmed at A3 (sf); previously on Nov 8,
2004 Definitive Rating Assigned A3 (sf)
Cl. F, Affirmed at Baa3 (sf); previously on Apr 28,
2010 Downgraded to Baa3 (sf)
Cl. G, Affirmed at Ba1 (sf); previously on Apr 28,
2010 Downgraded to Ba1 (sf)
Cl. H, Affirmed at Ba3 (sf); previously on Apr 28,
2010 Downgraded to Ba3 (sf)
Cl. J, Affirmed at B2 (sf); previously on Apr 28,
2010 Downgraded to B2 (sf)
Cl. K, Affirmed at B3 (sf); previously on Apr 28,
2010 Downgraded to B3 (sf)
Cl. L, Affirmed at Caa1 (sf); previously on Apr 28,
2010 Downgraded to Caa1 (sf)
Cl. M, Affirmed at Caa2 (sf); previously on Apr 28,
2010 Downgraded to Caa2 (sf)
Cl. N, Affirmed at Caa3 (sf); previously on Apr 28,
2010 Downgraded to Caa3 (sf)
Cl. P, Affirmed at Ca (sf); previously on Apr 28,
2010 Downgraded to Ca (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Nov 8, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
Nov 8, 2004 Definitive Rating Assigned Aaa (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
2.5% of the current balance. At last review,
Moody's cumulative base expected loss was 2.3%.
Moody's stressed scenario loss is 7% 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. In addition, Moody's publishes a weekly summary of
structured finance credit, ratings and methodologies, available
to all registered users of our website, at www.moodys.com/SFQuickCheck.
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 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 28, 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 February 11, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 20% to $990.4
million from $1.2 billion at securitization. The
Certificates are collateralized by 119 mortgage loans ranging in size
from less than 1% to 7% of the pool, with the top
ten loans representing 41% of the pool. The pool contains
one loan with an investment grade credit estimate that represents 1%
of the pool. At the last full review, the New Hampshire Tower
Loan ($5.5 million -- 1% of the pool) had an
investment grade credit estimate. Due to decline in performance
the loan no longer has a credit estimate and is part of the conduit pool.
Ten loans, representing 20% of the pool, have defeased
and are collateralized with U.S. Government securities.
Twenty-nine loans, representing 17% 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.
Two loans have been liquidated from the pool, resulting in an aggregate
realized loss of $2.3 million (51% loss severity
overall). One loan, representing less than 1% of the
pool, is currently in special servicing. The master servicer
has recognized a $4.1 million appraisal reduction for the
specially serviced loan. Moody's has estimated an aggregate
$4.3 million loss (65% expected loss) for the specially
serviced loan.
Moody's has assumed a high default probability for seven poorly
performing loans representing 2% of the pool and has estimated
a $3.8 million aggregate loss (19% expected loss
based on a 53% probability default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 89% and 76% of the pool's loans,
respectively. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 81% compared to 82%
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%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.54X and 1.34X, respectively,
compared to 1.52X and 1.29X 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.
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,
the same level at Moody's prior review.
The loan with a credit estimate is the New Castle Marketplace Loan ($10.8
million -- 1.1% of the pool), which is secured
by a 300,000 square foot (SF) retail center located in New Castle,
Delaware. The property was 100% leased as of October 2010,
the same as at last review. The loan amortizes on a 15-year
schedule and has amortized 32% since last review. Performance
has been stable. Moody's current credit estimate and stressed DSCR
are Aaa and 3.2X, respectively, compared to Aaa and
2.4X at last review.
The top three performing conduit loans represent 17% of the pool
balance. The largest loan is the 3941 Fairview Park Drive Loan
($69.0 million -- 7.0% of the pool),
which is secured by a 353,000 SF Class A office building located
in Falls Church, Virginia. The property was 99% leased
as of September 2010, the same as at last review. The largest
tenants are General Dynamics Corporation which leases 48% of the
net rentable area (NRA) through March 2019 and Howrey LLP, which
leases 21% of the NRA through December 2016. Performance
has improved since securitization due to increasing base rent.
Moody's LTV and stressed DSCR are 77% and 1.19X,
respectively, compared to 84% and 1.09X at last review.
The second largest loan is The Summit Louisville Loan ($54.8
million -- 5.5% of the pool), which is secured
by a 341,000 SF retail complex located in Louisville, Kentucky.
The property was 98% leased as of September 2010, similar
to last review. This loan is interest only for its entire seven
year term. Moody's LTV and stressed DSCR are 89% and
1.09X, respectively, compared to 88% and 1.11X
at last review.
The third largest loan is the Reisterstown Plaza Loan ($45.8
million -- 4.6% of the pool), which is secured
by a 792,000 SF office and retail center located in Baltimore,
Maryland. The property was 82% leased as of September 2010,
the same as at last review. Moody's LTV and stressed DSCR
are 86% and 1.14X, respectively, compared to
96% and 1.01X at last review.
New York
Raymond Flores
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Keith Banhazl
Vice President - Senior Analyst
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 19 CMBS Classes of BSCMS 2004-PWR5
