Approximately $696.0 Million of Structured Securities Affected
New York, May 05, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of four classes
and downgraded eight classes of Morgan Stanley Dean Witter Capital I Trust
2001-TOP3, Commercial Mortgage Pass-Through Certificates,
Series 2001-TOP3. The downgrades are due to higher expected
losses for the pool resulting from realized and anticipated losses from
specially serviced and highly leveraged loans and concerns about refinancing
risk associated with loans approaching maturity in an adverse environment.
Excluding defeased loans, 93 loans, representing 67%
of the pool, mature within the next two years. Ten of these
loans, representing 7% of the pool that have a Moody's stressed
debt service coverage ratio (DSCR) below 1.00X.
The affirmations are due to key rating parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl
Index (Herf), remaining within acceptable ranges.
Moody's placed eight classes of this transaction on review for possible
downgrade on March 25, 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 April 15, 2010 statement date, the transaction's
aggregate certificate balance has decreased 32% to $699.9
million from $1.0 billion at securitization. The
certificates are collateralized by 133 mortgage loans ranging in size
from less than 1% to 7% of the pool, with the top
ten non-defeased loans representing 32% of the pool.
The pool contains one loan, representing 5% of the pool,
with an investment grade underlying rating. Twenty loans,
representing 16% of the pool, have defeased and are secured
by U.S. Government securities. Defeasance at last
review represented 15% of the pool.
Twenty-seven 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; 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.
Five loans, representing 5% of the pool, are currently
in special servicing. The largest specially serviced loan is the
Detroit Center Tool Building ($13.7 million -- 2%
of the pool), which is secured by an industrial building located
in Sterling Heights, Michigan. The loan transferred into
special servicing in December 2009 because the building's sole tenant
vacated the property at the expiration of its lease. The loan is
in the process of foreclosure.
The remaining four specially serviced loans are secured by a mix of industrial,
retail and office properties. Moody's estimates an aggregate $22.5
million loss for all of the specially serviced loans (overall 59%
expected loss). The servicer has recognized an aggregate $6.2
million appraisal reduction for two of the specially serviced loans.
Moody's has assumed a high default probability for five loans representing
12% of the pool. These loans either mature within the next
two years and have a Moody's stressed DSCR less than 1.00X
or have experienced significant declines in performance. Moody's
has estimated an aggregate $6.0 million loss for these loans
(overall 25% expected loss based on a weighted average 57%
default probability). Moody's rating action recognizes potential
uncertainty around the timing and magnitude of loss from these troubled
Moody's was provided with full-year 2008 and partial-year
2009 operating results for 98% and 88%, respectively,
of the pool. Excluding specially serviced and troubled loans,
Moody's conduit weighted average LTV is 71% compared to 73%
at Moody's prior review.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.51X and 1.67X, respectively,
compared to 1.55X and 1.65X 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
the risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf is 40. The pool has a Herf of 41 compared
to 43 at Moody's prior review.
The loan with the underlying rating is the Federal Plaza Loan ($32.4
million - 4.6% of the pool), which is secured
by a 242,000 square foot anchored retail center located approximately
20 miles north of Washington, D.C. in Rockville,
Maryland. The center was 93% leased as of December 2009
compared to 96% at last review. Major tenants include T.J.Maxx
and Ross Dress for Less. Performance has been relatively stable
since last review. Moody's current underlying rating and stressed
DSCR are A3 and 1.70X compared to A3 and 1.77X at Moody's
The top three non-defeased conduit loans represent 15.1%
of the pool balance. The largest conduit loan is the 140 Kendrick
Street Loan ($50.8 million -- 7.3%
of the pool), which is secured by three office buildings located
in Needham, Massachusetts. The buildings total 381,000
square feet and are 100% leased to Parametric Technology Corporation
as its corporate headquarters through November 2012. The loan matures
in July 2013. Property performance has been stable since securitization.
Moody's valuation reflects a dark lit analysis and reflects weaker
market fundamentals than at last review. Moody's LTV and stressed
DSCR are 85% and 1.24X, respectively, compared
to 83% and 1.27X at last review.
The second conduit loan is the 111 Pine Street Loan ($31.2
million -- 4.5% of the pool), which
is secured by a 216,000 square foot office building located in the
Financial District of San Francisco, California. The property
was 81% leased as of December 2009, essentially the same
as last review. The largest tenant is First Republic Bank which
leases 49% of the property's net rentable area (NRA) through November
2010. The servicer has indicated that First Republic has negotiated
a ten-year renewal for the space. Financial performance
has declined slightly since last review and the property has significant
near-term lease expirations. The loan matures in June 2011.
Moody's has assumed a high probability of a maturity default due
to the property's significant near-term lease rollover exposure
and a soft San Francisco office market. Moody's LTV and stressed
DSCR are 100% and 1.06X, respectively, compared
to 92% and 1.15X at last review.
The third largest conduit loan is the York Galleria Loan ($23.7
million -- 3.4% of the pool), which
is secured by the borrower's interest in a 769,300 square foot regional
mall located in York, Pennsylvania. The loan represents a
50% pari pasu interest in a $47.4 million loan.
The mall is anchored by Sears, JC Penney, Boscov's and Bon
Ton. The inline space was 91% leased as of March 2010 compared
to 99% at last review. The loan matures in December 2010.
Moody's stressed the cash flow due to concerns about near term lease
rollover and a weak retail environment. Moody's LTV and stressed
DSCR are 86% and 1.26X, respectively, compared
82% and 1.32X at last review.
Moody's rating action is as follows:
-Class A-4, $557,235,583,
affirmed at Aaa; previously on 7/30/2001 assigned Aaa
-Class X-1, Notional, affirmed at Aaa;
previously on 7/30/2001 assigned Aaa
-Class B, $30,843,000, affirmed
at Aaa; previously on 7/9/2007 upgraded to Aaa from Aa1
-Class C, $28,273,000, downgraded
to A1 from Aa2; previously on 3/25/2010 placed on review for possible
-Class D, $12,852,000, downgraded
to A3 from A1; previously on 3/25/2010 placed on review for possible
-Class E, $17,992,000, downgraded
to Ba1 from Baa2; previously on 3/25/2010 placed on review for possible
-Class F, $11,566,000, downgraded
to B1 from Baa3; previously on 3/25/2010 placed on review for possible
-Class G, $11,566,000, downgraded
to Caa2 from Ba1; previously on 3/25/2010 placed on review for possible
-Class H, $10,281,000, downgraded
to Ca from Ba3; previously on 3/25/2010 placed on review for possible
-Class J, $8,996,000, downgraded
to C from B3; previously on 3/25/2010 placed on review for possible
-Class L, $5,140,000, downgraded
to C from Caa3; previously on 3/25/2010 placed on review for possible
-Class M, $1,339,369, affirmed at
C; previously on 3/25/2010 downgraded to C from Ca
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 June 4, 2009.
The principal methodology used in rating and monitoring this transaction
is "CMBS: Moody's Approach to Rating Fusion Transactions" published
on April 19. 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.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Affirms Four and Downgrades Eight CMBS Classes of MSDW 2001-TOP3
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service