Approximately $103.9 Million of Structured Securities Affected
New York, March 23, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of five classes
of Asset Securitization Corporation, Commercial Mortgage Pass-Through
Certificates, Series 1996-D3 as follow:
Cl. A-2, Affirmed at Aaa (sf); previously on
Jan 3, 2005 Upgraded to Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Jan 3, 2005 Upgraded to Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Oct 24, 2006 Upgraded to Aaa (sf)
Cl. A-5, Affirmed at Aaa (sf); previously on
Oct 24, 2006 Upgraded to Aaa (sf)
Cl. A-CS2 Affirmed at Aaa (sf); previously on Oct 22,
2006 Assigned Aaa (sf)
RATINGS RATIONALE
The affirmations are due to key rating parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the Herfindahl Index (Herf), remaining within ranges
sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
1.6% of the current balance. Moody's stressed
scenario loss is 7.2% 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 methodologies used in this rating were: "CMBS:
Moody's Approach to Rating Fusion Transactions " published on April
19, 2005 and "CMBS: Moody's Approach to Rating Large Loan/Single
Borrower Transactions" published in July 7, 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 2 compared
to 3 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 May 20, 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 15, 2011 distribution date, the transaction's
aggregate certificate balance had decreased by 78% to $172.1
million from $782.6 million at securitization. The
Certificates are collateralized by 28 mortgage loans ranging in size from
less than 1% to 30% of the pool, with the top ten
loans representing 43% of the pool. Twelve loans,
representing 53% of the pool, have defeased and are collateralized
by U.S. Government securities.
There are currently no loans on the watchlist. Twelve loans have
been liquidated from the pool since securitization, resulting in
a realized loss of $25,841,018 (32% loss severity
overall). The pool contains one loan that is currently in special
servicing. The Silver Sands RV Resort Loan ($1.0
million -- 0.6% of the pool) is secured by a 178 unit
mobile home park located in Mesa, Arizona. The loan transferred
to special servicing in October 2007 due to monetary default and the borrower
subsequently declared bankruptcy. A new receiver was appointed
in July 2010 to oversee the marketing of the property for sale.
Moody's estimated a $598,626 loss (60% expected
loss based on a 100% probability of default) for the loan.
Moody's is not currently estimating losses for any other loans in
the pool.
Moody's was provided with full year 2009 operating results for 96%
of the pool. Excluding the specially serviced loan, Moody's
weighted average LTV is 63%. Moody's net cash flow
reflects a weighted average haircut of 6% to the most recently
available net operating income. Moody's value reflects a
weighted average capitalization rate of 10.1%.
Excluding the troubled loan, Moody's actual and stressed DSCRs
are 1.21X and 2.13X. 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 top three performing conduit loans represent 34% of the pool
balance. The largest loan is the Hyatt Riverwalk San Antonio Loan
($51.8 million -- 30.1% of the pool),
which is secured by a 631 unit full-service hotel property.
Performance declined significantly in 2009 from the prior year,
as net operating income fell 46%. Partial year 2010 financials
indicate performance that is in-line with 2009. The decline
in performance has been offset by amortization. The loan has amortized
27% since securitization and 4% since last review.
Moody's LTV and stressed DSCR are 67% and 1.78X, respectively,
compared to 72% and 1.42X at last review.
The second largest loan is the Bolsa Marketplace Loan ($4.0
million -- 2.3% of the pool), which is secured
by a 86,711 square foot retail center located in Westminster,
California. The property was 96% leased in December 2010,
the same at last review. Performance has been stable. Moody's
LTV and stressed DSCR are 45% and 2.29X, respectively,
compared to 43% and 2.00X at last review.
The third largest loan is the Monroe Gardens Loan ($2.9
million -- 1.7% of the pool), which is secured
by a 160 unit multifamily property located in Hillside, NJ.
The property was 96% leased in December 2010, the same as
at last review. Performance has been stable. Moody's LTV
and stressed DSCR are 45% and 2.27X, respectively,
compared to 45% and 1.98X at last review.
New York
Andrew Florio
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 Five CMBS Classes of ASC 1996-D3
