Approximately $1.2 Billion of Structured Securities Affected
New York, February 03, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 20 classes
of Banc of America, Commercial Mortgage Pass-Through Certificates,
Series 2005-2 as follows:
Cl. A-4, Affirmed at Aaa (sf); previously on
Jul 5, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Jul 5, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-5, Affirmed at Aaa (sf); previously on
Jul 5, 2005 Definitive Rating Assigned Aaa (sf)
Cl. X-C, Affirmed at Aaa (sf); previously on
Jul 5, 2005 Definitive Rating Assigned Aaa (sf)
Cl. X-P, Affirmed at Aaa (sf); previously on
Jul 5, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at Aaa (sf); previously on
Jul 5, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at Aaa (sf); previously on
Aug 27, 2009 Confirmed at Aaa (sf)
Cl. B, Affirmed at Aa2 (sf); previously on Aug 27,
2009 Confirmed at Aa2 (sf)
Cl. C, Affirmed at Aa3 (sf); previously on Aug 27,
2009 Confirmed at Aa3 (sf)
Cl. D, Affirmed at A3 (sf); previously on Aug 27,
2009 Downgraded to A3 (sf)
Cl. E, Affirmed at Baa1 (sf); previously on Aug 27,
2009 Downgraded to Baa1 (sf)
Cl. F, Affirmed at Baa2 (sf); previously on Aug 27,
2009 Downgraded to Baa2 (sf)
Cl. G, Affirmed at Baa3 (sf); previously on Aug 27,
2009 Downgraded to Baa3 (sf)
Cl. H, Affirmed at Ba2 (sf); previously on Aug 27,
2009 Downgraded to Ba2 (sf)
Cl. J, Affirmed at Ba3 (sf); previously on Aug 27,
2009 Downgraded to Ba3 (sf)
Cl. K, Affirmed at B1 (sf); previously on Aug 27,
2009 Downgraded to B1 (sf)
Cl. L, Affirmed at B2 (sf); previously on Aug 27,
2009 Downgraded to B2 (sf)
Cl. M, Affirmed at Caa2 (sf); previously on Aug 27,
2009 Downgraded to Caa2 (sf)
Cl. N, Affirmed at Caa2 (sf); previously on Aug 27,
2009 Downgraded to Caa2 (sf)
Cl. O, Affirmed at Caa3 (sf); previously on Aug 27,
2009 Downgraded to Caa3 (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
the current ratings.
Moody's rating action reflects a cumulative base expected loss of 3.2%
of the current balance. At last review, Moody's cumulative
base expected loss was 3.3%. Moody's stressed scenario
loss is 13.5% 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 methodology used in this rating was "CMBS: Moody's
Approach to Rating U.S. Conduit Transactions" published
in September 2000.
In addition to methodologies and research available on moodys.com,
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 August 27, 2009. 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 January 10, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 26% to $1.2
billion from $1.6 billion at securitization. The
Certificates are collateralized by 77 mortgage loans ranging in size from
less than 1% to 9% of the pool, with the top ten loans
representing 51% of the pool. Two loans, representing
3% of the pool, have defeased and are collateralized with
U.S. Government securities.
Twenty-two loans, representing 26% 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.
The trust has experienced an aggregate $12,573 loss since
securitization. Currently four loans, representing 2%
of the pool, are in special servicing. The largest specially
serviced loan is the Great Wall Mall Loan ($14.6 million
-- 1.2% of the pool), which is secured by 73,866
square foot (SF) anchored retail center located in Kent, Washington.
The loan was transferred to special servicing on December 31, 2010
and is currently in its grace period. The master servicer has recognized
an aggregate $772,808 appraisal reduction on two of the specially
serviced loans. Moody's has estimated an aggregate $9.1
million loss (37% expected loss on average) for the specially serviced
loans.
Moody's has assumed a high default probability for seven poorly performing
loans representing 13% of the pool. Moody's has estimated
a $8.9 million loss (18% expected loss based on a
50% probability default) from the troubled loans.
Moody's was provided with full year 2009 operating results for 99%
of the pool. Excluding troubled loans, Moody's weighted average
LTV 95% compared to 101% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 11%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.3%.
Excluding troubled loans, Moody's actual and stressed DSCRs are
1.60X and 1.11X, respectively, compared to 1.61X
and 1.01X 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 24
compared to 30 at Moody's prior review.
The top three performing conduit loans represent 24% of the pool.
The largest loan is the New York University Housing Loan ($110.0
million -- 9.1% of the pool), which is secured
by a 264-unit, 17-story student housing property located
in the Tribeca sub-market of New York City. The property
is 100% master leased to New York University. Performance
has increased since securitization due to a higher base rent. Moody's
LTV and stressed DSCR are 96% and 0.90X, respectively,
compared to 114% and 0.76X, at last review.
The second largest loan is the Canyon Ranch Loan ($95.0
million -- 7.8% of the pool), which is secured
by two resort hotels containing a total of 315 rooms. The resorts
are located in Arizona and Massachusetts. Performance has improved
over the trailing 12 months due to increases in occupancy and revenues.
Moody's LTV and stressed DSCR 80% and 1.42X, respectively,
compared to 87% and 1.30X at last review.
The third largest loan is the Regents Square I & II Loan ($88.6
million -- 7.3% of the pool), which
is secured by a 307,450 SF office portfolio located in the La Jolla
sub-market of San Diego, California. The property
was 73% leased as of July 2010 compared to 75% at last review.
Performance has declined due to an increase in vacancy and increases in
operating expenses. The loan is currently on the master servicer's
watchlist for low occupancy. Moody's has assumed a high default
probability for this loan. Moody's LTV and stressed DSCR 171%
and 0.59X, respectively, compared to 140% and
0.70X at last review.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information and confidential and proprietary Moody's Analytics
information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
New York
Robert Gilbane
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 20 CMBS Classes of BACM 2005-2
