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Rating Action:

Moody's Affirms Eight, Confirms Two and Downgrades 13 CMBS Classes of LB UBS 2004-C7

Global Credit Research - 14 Jul 2010

Approximately $968 Million of Structured Securities Affected

New York, July 14, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of eight classes, confirmed two classes and downgraded 13 classes of LB-UBS Commercial Mortgage Trust, Series 2004-C7. The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and poorly performing watchlisted loans and a decline in loan diversity.

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 the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf score of 7 compared to 13 at last review.

The confirmations and affirmations are due to key rating parameters, including Moody's loan to value (LTV) ratio and Moody's stressed DSCR remaining within acceptable ranges.

Moody's placed 15 classes of this transaction on review for possible downgrade on May 26, 2010. This action concludes the review.

The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions.

As of the June 17, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 32% to $968 million from $1.415 billion at securitization. The Certificates are collateralized by 81 mortgage loans ranging in size from less than 1% to 17% of the pool, with the top ten non-defeased loans representing 46% of the pool. Four loans, representing 21% of the pool, have defeased and are secured by United States Government securities. Six loans, representing 19% of the pool, have investment grade underlying ratings.

Eighteen loans, representing 21% 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; formerly Commercial Mortgage Securities Association) 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, resulting in a $6.2 million aggregate loss (46% loss severity on average). One loan, representing 0.1% of the pool, is currently in special servicing. The specially serviced loan is the Huszti Building Loan ($1.4 million), which is secured by a 15,000 square foot office building located in Milford, Michigan. The loan was transferred to special servicing on February 11, 2010 for imminent monetary default. Moody's is estimating a $565,000 loss for the property (40% loss severity).

Moody's has assumed a high default probability on 15 loans representing approximately 11% of the pool. These loans are on the watchlist due to declines in performance or mature within the next six months and have a Moody's stressed DSCR less than 1.0X. Moody's has estimated a $23.9 million aggregate loss (23% expected loss based on a 63% default probability) from these loans. Moody's rating action recognizes potential uncertainty around the timing and magnitude of losses from these troubled loans.

Moody's was provided with year-end and partial year 2009 operating statements for 81% and 17% of the conduit pool, respectively. Moody's weighted average LTV for the conduit pool is 96% compared to 100 % at last review.

Moody's conduit actual and stressed DSCRs are 1.36 X and 1.05X, respectively, compared to 1.43X and 1.02X 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 an underlying rating is the Montgomery Mall Loan ($86.9 million -- 9.0% of the pool), which is secured by a regional mall located in North Wales, Pennsylvania, approximately 20 miles northwest of Philadelphia. The property is anchored by Macys, Sears and Boscov's. Comparable inline sales for the year 2009 were $317 per square foot compared to $352 per square foot at last review. As of March 2010, the property was 91% leased compared to 95% at last review. Performance has declined since last review but has been partially mitigated by amortization. The loan has amortized 3% since last review. Moody's current underlying rating and stressed DSCR are A3 and 1.34X, respectively, compared to A1 and 1.58X at last review.

The second largest loan with an underlying rating is the World Apparel Center Loan ($70.2 million -- 7.3% of the pool), which represents a 33% participation interest in a $212.6 million first mortgage loan. The loan is secured by a 1.1 million square foot Class A office building located in the Times Square submarket of New York City. The building's largest tenants include Jones Apparel Group (25% of the net rentable area (NRA); lease expiration April 2012), JPMorgan Chase & Co. (6% NRA; lease expiration October 2016) and Alfred Dunner & Co. (5% NRA; lease expiration January 2017). As of December 2009, the property was 75% leased compared to 86% at last review. The loan was placed on the master servicer's watchlist in February 2010 as a result of increased vacancy. Moody's current underlying rating and stressed DSCR are Baa3 and 1.36X, respectively, compared to A2 and 1.46X at last review.

The remaining four loans with underlying ratings comprise 3% of the pool. The current underlying ratings for these loans are the same as at last review and securitization. The Kimco Portfolio - Enchanted Forest Loan ($11.2 million -- 1.2% of the pool) and Kimco Portfolio -- Wilkens Beltway Plaza Loan ($8.3 million -- 0.9% of the pool), are both secured by grocery anchored retail centers located in Ellicott City, Maryland and Baltimore, Maryland respectively. The loans have underlying ratings of Aa1 and stressed DSCR's of 2.44X and 2.31X respectively. The Palmetto Place Apartments Loan ($5.9 million -- 0.6% of the pool), is secured by a garden style apartment complex located in Miami, Florida. The loan has an underlying rating of Aaa and stressed DSCR greater than 4.00X. The Kimco Portfolio -- Perry Hall Super Fresh Loan ($5.6 million -- 0.6% of the pool) is secured by a grocery anchored retail center located in Perry Hall, Maryland. The loan has an underlying rating of Aa2 and stressed DSCR of 2.14X.

The three largest conduit loans represent 22% of the pool. The largest conduit loan is the 600 Third Avenue Loan ($168 million -- 17.4% of the pool),which is secured by a 529,800 square foot Class A office building located in the Grand Central/UN office submarket of New York City. Major tenants include Tru TV (27% NRA; lease expiration December 2010), L-3 Communications Corporation (15% NRA; lease expiration December 2018) and Sumitomo Corporation of America (9% NRA; lease expiration August 2014). As of March 2010, the property was 91% leased compared to 100% at last review. Although the property's occupancy has declined, performance has improved due to higher revenues and stable expenses. Moody's LTV and stressed DSCR are 106% and 0.87X, respectively, compared to 111% and 0.85X at last review.

The second largest conduit loan is the North Dekalb Mall Loan ($26.8 million - 2.8% of the pool), which is secured by a 628,700 square foot regional mall located in Decatur, Georgia. The property was built in 1965 and renovated in 2004. The mall is anchored by Macy's, Ross Dress for Less and AMC Theatres. The loan has been on the master servicer's watchlist since March 2007 as a result of performance declines. As of December 2009, the property was 94% leased compared to 98% at last review. Moody's analysis assumes a high default probability on this loan because of poor performance and it has been included in the loss estimates for troubled loans. Moody's LTV and stressed DSCR are 168% and 0.60X, respectively, compared to 174% and 0.57X at last review.

The third largest conduit loan is Guam Multifamily Loan ($21. 4 million -- 2.2% of the pool), which is secured by twelve multifamily properties and one retail center located in Yigo, Guam. The loan was placed on the master servicer's watchlist in April 2010 due to a decline in financial performance and concerns about deferred maintenance. The portfolio has a combined occupancy of 87%. Moody's LTV and stressed DSCR are 109% and 0.89X, respectively, compared to 92% and 1.02X at last review.

Moody's rating action is as follows:

Class A-3, $33,733,821, affirmed at Aaa; previously assigned Aaa on 11/9/2004

Class A-4, $60,000,000, affirmed at Aaa; previously assigned Aaa on 11/9/2004

Class A-5, $79,000,000, affirmed at Aaa; previously assigned Aaa on 11/9/2004

Class A-6, $561,636,000, affirmed at Aaa; previously assigned Aaa on 11/9/2004

Class A-1A, $85,648,425 affirmed at Aaa; previously assigned Aaa on 11/9/2004

Class X-CL, Notional, affirmed at Aaa; previously assigned Aaa on 11/9/2004

Class X-CP, Notional, affirmed at Aaa; previously assigned Aaa on 11/9/2004

Class X-OL, Notional, affirmed at Aaa; previously assigned Aaa on 11/9/2004

Class B, $10,614,000, confirmed at Aa1, previously placed on review for possible downgrade on 5/26/2010

Class C, $14,153,000, confirmed at Aa2, previously placed on review for possible downgrade on 5/26/2010

Class D, $15,921,000, downgraded to A1 from Aa3; previously placed on review for possible downgrade on 5/26/2010

Class E, $12,383,000, downgraded to A3 from A1; previously placed on review for possible downgrade on 5/26/2010

Class F, $14,153,000 downgraded to Baa2 from A2; previously placed on review for possible downgrade on 5/26/2010

Class G, $12,383,000, downgraded to Ba1 from A3; previously placed on review for possible downgrade on 5/26/2010

Class H, $12,384,000, downgraded to Ba2 from Baa1; previously placed on review for possible downgrade on 5/26/2010

Class J, $8,845,000, downgraded to B2 from Baa2; previously placed on review for possible downgrade on 5/26/2010

Class K, $17,691,000, downgraded to Caa2 from Baa3; previously placed on review for possible downgrade on 5/26/2010

Class L, $3,538,000, downgraded to Caa3 from Ba1; previously placed on review for possible downgrade on 5/26/2010

Class M, $5,307,000 downgraded to Ca from Ba2; previously placed on review for possible downgrade on 5/26/2010

Class N, $3,538,000, downgraded to C from Ba3; previously placed on review for possible downgrade on 5/26/2010

Class P, $1,769,000, downgraded to C from B2; previously placed on review for possible downgrade on 5/26/2010

Class Q, $3,538,000, downgraded to C from B3; previously placed on review for possible downgrade on 5/26/2010

Class S, $3,538,000, downgraded to C from Caa1; previously placed on review for possible downgrade on 5/26/2010

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 review is summarized in a press release dated September 4, 2008.

The principal methodology used in rating and monitoring this transaction is "CMBS: Moody's Approach to Rating Fusion Transactions" published on April 19, 2005. The methodology is available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. 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

New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms Eight, Confirms Two and Downgrades 13 CMBS Classes of LB UBS 2004-C7
No Related Data.
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