Approximately $1.18 Billion of Structured Securities Affected
New York, April 12, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 19 classes
of LB-UBS Commercial Mortgage Trust 2005-C1, Commercial
Mortgage Pass-Through Certificates, Series 2005-C1
as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Feb 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Feb 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Feb 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Feb 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Feb 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at Aa2 (sf); previously on
Jul 29, 2010 Downgraded to Aa2 (sf)
Cl. B, Affirmed at Aa3 (sf); previously on Jul 29,
2010 Downgraded to Aa3 (sf)
Cl. C, Affirmed at A2 (sf); previously on Jul 29,
2010 Downgraded to A2 (sf)
Cl. D, Affirmed at A3 (sf); previously on Jul 29,
2010 Downgraded to A3 (sf)
Cl. E, Affirmed at Baa2 (sf); previously on Jul 29,
2010 Downgraded to Baa2 (sf)
Cl. F, Affirmed at Baa3 (sf); previously on Jul 29,
2010 Downgraded to Baa3 (sf)
Cl. G, Affirmed at Ba3 (sf); previously on Jul 29,
2010 Downgraded to Ba3 (sf)
Cl. H, Affirmed at B3 (sf); previously on Jul 29,
2010 Downgraded to B3 (sf)
Cl. J, Affirmed at Caa3 (sf); previously on Jul 29,
2010 Downgraded to Caa3 (sf)
Cl. K, Affirmed at Ca (sf); previously on Jul 29,
2010 Downgraded to Ca (sf)
Cl. L, Affirmed at C (sf); previously on Jul 29,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Jul 29,
2010 Downgraded to C (sf)
Cl. X-CL, Affirmed at Aaa (sf); previously on
Feb 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. X-CP, Affirmed at Aaa (sf); previously on
Feb 10, 2005 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
5.7% of the current balance. At last review,
Moody's cumulative base expected loss was 5.2%.
Moody's stressed scenario loss is 13.4% 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 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 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 Fusion Transactions", published on April
19, 2005 and "Moody's Approach to Rating Large Loan/Single Borrower
Transactions" published in July 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 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 16
compared to 17 at Moody's prior 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 July 29, 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 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 23% to $1.18
billion from $1.52 billion at securitization. The
Certificates are collateralized by 72 mortgage loans ranging in size from
less than 1% to 13% of the pool, with the top ten
loans representing 66% of the pool. The pool contains four
loans with investment grade credit estimates, representing 28%
of the pool.
Eighteen loans, representing 12% 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.
Five loans have been liquidated from the pool, resulting in a realized
loss of $6.6 million (18% loss severity overall).
Currently six loans, representing 7% of the pool, are
in special servicing. The largest specially serviced loan is the
Atlantic Building Loan ($28.0 million -- 2.4%
of the pool), which is secured by a 315,993 square foot (SF)
office building located in Philadelphia, Pennsylvania. The
loan was transferred to special servicing in April 2010 due to monetary
default. The borrower submitted a loan modification proposal that
was later rejected by the special servicer. The borrower subsequently
consented to receivership and foreclosure and a receiver was appointed
in February 2011. Foreclosure is expected to be completed by June
2011.
The remaining five specially serviced properties are secured by a mix
of property types. Moody's estimates an aggregate $40.7
million loss for the specially serviced loans (52% expected loss
on average).
Moody's has assumed a high default probability for five poorly performing
loans representing 2% of the pool and has estimated an aggregate
$4.2 million loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 81%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 92% compared to 97%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 7% 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 1.53X and 1.09X, respectively,
compared to 1.46X and 1.03X 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 11 West 42nd Street Loan
($154.5 million -- 13.1% of
the pool), which is secured by a 877,138 SF Class A office
building located in the Grand Central submarket of New York City.
The property is also encumbered by a $48.5 million mezzanine
loan. The largest tenants include CIT (17% of the net rentable
area (NRA); lease expiration October 2021) and New York University
(12% of the NRA; lease expiration September 2021).
As of January 2011 the property was 87% leased compared to 96%
at the prior review. Martha Stewart downsizing along with Syska
and Hennessey vacating its space at lease maturity attributed to the increase
in vacancy since the prior review. Moody's underlying rating and
stressed DSCR are Baa2 and 1.44X, respectively, compared
to Baa2 and 1.49X at last review.
The second largest loan with a credit estimate is the Mall Del Norte Loan
($113.4 million -- 9.6% of the
pool), which is secured by the borrower's interest in a 1.2
million SF regional mall (683,493 SF as collateral) located in Laredo,
Texas. The largest tenants include Dillard's, Inc.
(13% of the NRA; lease expiration December 2035), Sears,
Roebuck and Co (10% of the NRA; lease expiration December
2035) and JC Penny Co. Inc. (10% of the NRA;
lease expiration December 2035). As of January 2011 the property
was 99% leased, the same as at the prior review. The
loan is interest only for its entire 10 year term. Moody's underlying
rating and stressed DSCR are Baa3 and 1.38X, respectively,
compared to Baa3 and 1.36X at last review.
The third largest loan with a credit estimate is the IBM Gaithersburg
Loan ($46.4 million -- 3.9%
of the pool), which is secured by a 393,000 SF office building
located in Gaithersburg, Maryland. The building is 100%
leased to IBM Corporation (senior unsecured rating A1; stable outlook)
through March 2016 and functions as a mission critical data center.
The loan is interest only for its entire seven year term. Moody's
underlying rating and stressed DSCR are A1 and 1.47X, respectively,
the same as at last review.
The fourth largest loan with a credit estimate is the United States District
Courthouse Loan ($14.9 million-- 1.3%
of the pool), which is secured by a 46,813 SF office building
located in El Centro, California. The building is 100%
leased to the US Magistrate Courthouse through September 2019.
Moody's underlying rating and stressed DSCR are Aaa and 1.45X,
respectively, compared to Aaa and 1.49X at last review.
The top three conduit loans represent 28% of the pool. The
largest conduit loan is the 2100 Kalakaua Avenue Loan ($130.0
million -- 11.1% of the pool), which is secured
by a 92,671 SF anchored retail shopping center located in Honolulu,
Hawaii. The property is also encumbered by a $15.0
million mezzanine loan. The largest tenants include Gucci (20%
of the NRA; lease expiration November 2027), Chanel (20%
of the NRA; lease expiration October 2027) and Tiffany & Co.
(12% of the NRA; lease expiration October 2027). The
property was 85% leased as of January 2011, the same as the
prior review. The high end retail market in Hawaii is highly dependent
on Japanese tourism. Although performance has been stable since
securitization, Moody's anticipates that there may be a decline
in 2011 due to an expected drop in Japanese tourism. Moody's LTV
and stressed DSCR are 81% and 1.06X, respectively,
the same as at last review.
The second largest conduit loan is the Wilshire Rodeo Plaza Portfolio
Loan ($112.7 million -- 9.6%
of the pool), which is secured by a 208,145 SF office building
and a 56,855 SF anchored retail building located in Beverly Hills,
California. The largest tenants include United Talent Agency (30%
of the NRA; lease expiration August 2017), UBS Financial Services
(27% of the NRA; lease expiration February 2015) and Merrill
Lynch (14% of the NRA; lease expiration February 2015).
The property was 96% leased as of January 2011 compared to 97%
at the prior review. Moody's LTV and stressed DSCR are 104%
and 0.88X, respectively, compared to 111% and
0.83X at last review.
The third largest conduit loan is the Macquarie DDR Portfolio Loan ($85.0
million -- 7.2% of the pool), which
is secured by four retail properties located in Texas, Colorado
and South Carolina. The four community centers contain approximately
1.9 million SF (collateral is approximately 799,898 SF).
Approximately 136,715 SF of the portfolio is subject to ground leases.
The portfolio was 84% leased as of January 2011, essentially
the same as the prior review. Moody's LTV and stressed DSCR are
91% and 1.04X, respectively, compared to 102%
and 0.93X at last review.
New York
Amit Rustgi
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 19 CMBS Classes of LBUBS 2005-C1
