Approximately $2.3 Billion of Structured Securities Affected
New York, April 22, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 21 classes
of Wachovia Bank Commercial Mortgage Securities Inc., Commercial
Mortgage Pass-Through Certificates, Series 2005-C17
as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
May 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
May 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-PB, Affirmed at Aaa (sf); previously on
May 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
May 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
May 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. X-P, Affirmed at Aaa (sf); previously on
May 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. X-C, Affirmed at Aaa (sf); previously on
May 10, 2005 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at Aa2 (sf); previously on
Jul 21, 2010 Downgraded to Aa2 (sf)
Cl. B, Affirmed at A2 (sf); previously on Jul 21,
2010 Downgraded to A2 (sf)
Cl. C, Affirmed at A3 (sf); previously on Jul 21,
2010 Downgraded to A3 (sf)
Cl. D, Affirmed at Baa2 (sf); previously on Jul 21,
2010 Downgraded to Baa2 (sf)
Cl. E, Affirmed at Ba1 (sf); previously on Jul 21,
2010 Downgraded to Ba1 (sf)
Cl. F, Affirmed at Ba3 (sf); previously on Jul 21,
2010 Downgraded to Ba3 (sf)
Cl. G, Affirmed at B3 (sf); previously on Jul 21,
2010 Downgraded to B3 (sf)
Cl. H, Affirmed at Caa2 (sf); previously on Jul 21,
2010 Downgraded to Caa2 (sf)
Cl. J, Affirmed at Caa3 (sf); previously on Jul 21,
2010 Downgraded to Caa3 (sf)
Cl. K, Affirmed at Ca (sf); previously on Jul 21,
2010 Downgraded to Ca (sf)
Cl. L, Affirmed at C (sf); previously on Jul 21,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Jul 21,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Jul 21,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Jul 21,
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
5.1% of the current balance. At last review,
Moody's cumulative base expected loss was 5.3%.
Moody's stressed scenario loss is 11.2% of the current
balance. The current cumulative base expected loss is slightly
higher than the prior review 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,
which is available on Moody's website at www.moodys.com.
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 pay down 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 42
compared to 41 at last 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 July 21, 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 received and took into account one or
more third party due diligence report(s) on the underlying assets or financial
instruments in this transaction and the due diligence report(s) had a
neutral impact on the ratings.
DEAL PERFORMANCE
As of the April 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 13% to $2.362
billion from $2.724 billion at securitization. The
Certificates are collateralized by 207 mortgage loans ranging in size
from less than 1% to 9% of the pool, with the top
ten loans representing 30% of the pool. Twenty-four
loans, representing 11% of the pool, have defeased
and are collateralized by U.S. Government securities.
The pool includes three loans, representing 6% of the pool,
with investment grade credit estimates.
The pool faces near-term refinancing risk as 13 loans, representing
9% of the pool, mature within the next twelve months.
Thirty-six loans, representing 16% 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.
Four loans have been liquidated from the pool since securitization,
resulting in a $6.8 million loss (average 14% loss
severity). The pool had experienced an aggregate $4.5
million loss at last review. Twenty-eight loans, representing
11% of the pool, are currently in special servicing.
The largest specially serviced loan is the Olympia Portfolio Loan ($56.4
million -- 2.4% of the pool), which is secured
by 23 loans secured by 22 anchored retail properties and two office properties
that are cross collateralized and cross defaulted and located in Florida
and Georgia. Seven of the loans, representing 26%
of the allocated loan balance, have defeased and are collateralized
by U.S. Government securities. Twenty of the properties,
representing 88% of the allocated loan balance, are anchored
by the Walgreen Company (senior unsecured rating A2, stable outlook).
This loan was transferred to special servicing March 2011 due to monetary
default.
The 27 remaining specially serviced loans are secured by a mix of property
types. The master servicer has recognized $51.8 million
in appraisal reductions for eight of the specially serviced loans.
Moody's has estimated an aggregate $50.2 million loss
(33% expected loss on average) for all of the specially serviced
loans.
As of the most recent remittance statement date, the transaction
has experienced unpaid accumulated interest shortfalls totaling $2.9
million affecting Classes M through P. Interest shortfalls are
caused by special servicing fees, appraisal reductions, extraordinary
trust expenses and interest payment reductions due to loan modifications.
Moody's has assumed a high default probability for 22 poorly performing
loans representing 10% of the pool and has estimated a $34.6
million loss (16% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 85%
of the pool and partial year 2010 results for 29% of the pool.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 90% versus 94% at last full review.
Moody's net cash flow reflects a weighted average haircut of 10.4%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.52X and 1.22X, respectively,
compared to 1.48X and 1.14X 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 Tharaldson Pool 1-B
Loan ($63.8 million -- 2.7% of the pool),
which is secured by the borrower's leasehold interest in 13 limited
service hotels located in Nevada, Texas, California,
Oklahoma, New York and Pennsylvania. Performance has been
stable since last review. The loan sponsor is Gary Tharaldson.
The loan benefits from a 20-year amortization schedule and has
amortized 3% since last review. Moody's credit estimate
and stressed DSCR are A2 and 2.08X, respectively compared
to A2 and 1.99X at last review.
The second largest loan with a credit estimate is the Tharaldson Pool
1-A Loan ($46.2 million -- 2.0%
of the pool), which is secured by fee interests in 14 limited service
hotels and fee interests in the land supporting an additional 13 limited
service hotels. Each land parcel is leased to borrowers in the
Tharaldson 1-B Pool, which is included in the trust.
Performance has been stable since last review. The loan sponsor
is Gary Tharaldson. The loan benefits from a 20-year amortization
schedule and has amortized 3% since last review. Moody's
credit estimate and stressed DSCR are A2 and 2.21X, respectively
compared to A2 and 1.87X at last review.
The third largest loan with a credit estimate is the 200 Varick Street
Loan ($27.0 million -- 1.1% of the pool),
which is secured by a 400,061 square foot (SF) Class B office building
located in the Hudson Square office submarket of New York City.
The largest tenant is Cardinia Real Estate LLC (57% of the net
rentable area (NRA) whose lease expires June 2020 and Nysarc, Inc.
(10% of the NRA) whose lease expires in 2019). As of September
2010, the property was 99% leased, the same as at last
review. The loan is interest-only for the entire 10-year
loan term. Moody's credit estimate and stressed DSCR are
Aa2 and 2.01X, respectively compared to Aa2 and 1.91X
at last review.
The top three performing conduit loans represent 17% of the pool
balance. The largest loan is the One and Two International Place
Loan ($202.5 million - 8.6% of the
pool) which represents a 50% pari passu interest in a $405.5
million first mortgage loan. The loan is secured by two Class A
office buildings totaling 1,852,501 SF, located in the
Financial District office submarket of Boston, Massachusetts.
The largest tenants include Easton Vance Management (17% of the
NRA) whose lease expires May 2024; Choate Hall and Stewart (10%
of the NRA) whose lease expires September 2015 and Proskauer Rose (4.1%
of the NRA) who lease also expires September 2015. Current occupancy
is 72% following the year-end 2010 lease expiration of Ropes
& Gray LLP (19% of the NRA) compared to 90% at last
review. Despite the drop in occupancy, performance has improved
since last review. Moody's LTV and stressed DSCR are 77%
and 1.16X, respectively compared to 81% and 1.1X
at last full review.
The second largest loan is the Digital Realty Trust Portfolio Loan ($140.6
million -- 6.0% of the pool) which is secured by six
office properties located in five states. The properties were 96%
leased as of September 2010 compared to 97% at last review.
Both net operating income (NOI) and occupancy have increased since securitization.
The loan sponsor is Digital Realty Trust, a publicly traded REIT.
Moody's LTV and stressed DSCR are 49% and 2.2X,
respectively, compared to 58% and 1.85X at last full
review.
The third largest loan is the MetroPlace III & IV Loan ($51.6
million -- 2.2% of the pool), which is secured
by two Class A office towers, totaling 325,328 SF, located
in Fairfax, Virginia. As of September 2010, the property
was 99% leased, the same as at last review. The largest
tenants include GSA-INS (31% of the NRA) who lease expires
February 2014; GSA-DEA (22% of the NRA) who lease expires
February 2015; and Lockheed Martin (21% of the NRA) who lease
expires January 2013. The property's NOI has increased steadily
since securitization. Moody's LTV and stressed DSCR are 72%
and 1.4X, respectively, compared to 77% and
1.3X at last review.
New York
Gregory Reed
Vice President - Senior 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 21 CMBS Classes of WBCMT 2005-C17
