Approximately $690 Million of Structured Securities Affected
New York, August 22, 2013 -- Moody's Investors Service affirmed the ratings of nine classes of Wells
Fargo Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2010-C1 as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Nov
19, 2010 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Nov
19, 2010 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed Aa2 (sf); previously on Nov 19,
2010 Definitive Rating Assigned Aa2 (sf)
Cl. C, Affirmed A2 (sf); previously on Nov 19,
2010 Definitive Rating Assigned A2 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Nov 19,
2010 Definitive Rating Assigned Baa3 (sf)
Cl. E, Affirmed Ba2 (sf); previously on Nov 19,
2010 Definitive Rating Assigned Ba2 (sf)
Cl. F, Affirmed B2 (sf); previously on Nov 19,
2010 Definitive Rating Assigned B2 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Nov
19, 2010 Definitive Rating Assigned Aaa (sf)
Cl. X-B, Affirmed Ba3 (sf); previously on Feb
22, 2012 Downgraded to Ba3 (sf)
RATINGS RATIONALE
The affirmations of the P&I classes 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. The ratings of the
IO Classes, Class X-A and X-B, are consistent
with the expected credit performance of their referenced classes and thus
are affirmed.
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for rated 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 rating action reflects a base expected loss of 1.8%
of the current balance. At last review, Moody's base
expected loss was 1.6%. Moody's provides a
current list of base losses for conduit and fusion CMBS transactions on
moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. From
time to time, Moody's may, if warranted, change these
expectations. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker than
Moody's had anticipated when the related securities ratings were issued.
Even so, a deviation from the expected range will not necessarily
result in a rating action nor does performance within expectations preclude
such actions. The decision to take (or not take) a rating action
is dependent on an assessment of a range of factors including, but
not exclusively, the performance metrics.
The methodologies used in this rating were "Moody's Approach to Rating
Fusion U.S. CMBS Transactions" published in April
2005 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) 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 (sf) 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 (sf) and B2 (sf), 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 assessments is melded with the conduit model credit enhancement
into an overall model result. Fusion loan credit enhancement is
based on the credit assessment 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 assessment level,
is incorporated for loans with similar credit assessments 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 11,
the same as 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 8.5 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 a review utilizing MOST®
(Moody's Surveillance Trends) Reports and a proprietary program that highlights
significant credit changes that have occurred in the last month as well
as cumulative changes since the last full transaction review. On
a periodic basis, Moody's also performs a full transaction
review that involves a rating committee and a press release. Moody's
prior transaction review is summarized in a press release dated September
13, 2012. Please see the ratings tab on the issuer / entity
page on moodys.com for the last rating action and the ratings history.
DEAL PERFORMANCE
As of the August 16, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 4% to $706
million from $736 million at securitization. The Certificates
are collateralized by 37 mortgage loans ranging in size from less than
1% to 25% of the pool with the top ten loans representing
64% of the pool. One loan, representing 1%
of the pool, has defeased and is secured by U.S. Government
securities. The pool contains four loans with investment grade
credit assessments, representing 39% of the pool.
Four loans, representing 9% 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.
No loans have been liquidated from the pool since securitization and there
are no loans in special servicing. Moody's has assumed a
high default probability for one poorly performing loan representing 1%
of the pool and has estimated a $1.6 million loss (20%
expected loss based on a 50% probability default) from this troubled
loan.
Moody's was provided with full year 2012 operating results for 98%
of the pool. Excluding the troubled loan, Moody's weighted
average LTV is 80% compared to 83% 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
9.4%.
Excluding the troubled loan, Moody's actual and stressed DSCRs
are 1.61X and 1.36X, respectively, compared
to 1.55X and 1.27X 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 assessment is the Dividend Capital Portfolio
Loan ($177.3 million -- 25.1%
of the pool), which is secured by a fee interest in 14 single tenant
properties located across nine states. The portfolio consists of
seven office properties, five industrial distribution centers,
one data center and one research and development facility. In aggregate,
the portfolio contains approximately 3.6 million square feet (SF).
As of March 2013 the portfolio was 97% leased compared to 100%
at last review. Moody's cash flow was stressed to reflect the risk
inherent with single tenant triple net leased properties. The loan
also benefits from amortization. Moody's current credit assessment
and stressed DSCR are Baa3 and 1.73X, respectively,
compared to Baa3 and 1.55X at last review.
The second largest loan with a credit assessment is the Salmon Run Mall
Loan ($52.7 million -- 7.5%
of the pool), which is secured by a regional mall containing approximately
671,766 SF located in Watertown, New York. Salmon Run
Mall is the only regional mall within the trade area and is eight miles
away from Fort Drum Army Base, which is the largest employer in
Northern New York. Anchor tenants include Sears, Burlington
Coat Factory, Gander Mountain, Dick's Sporting Goods and J.C.
Penney. As of December 2011 the property was 88% leased
versus 89% at last review. Financial performance improved
in 2012. Moody's current credit assessment and stressed DSCR are
A3 and 1.70X, respectively, compared to A3 and 1.58X
at last review.
The third largest loan with a credit assessment is the 19 West 34th Street
Loan ($25.0 million -- 3.5%
of the pool), which is secured by a 224,093 SF mixed use property
located directly across from the Empire State Building in New York,
New York. Constructed in 1907 (renovated in 1995), the property
contains both retail and office components. The main retail tenant,
Banana Republic, is currently operating under a sublease from Martin
Building Retail, an entity of the owner. As of December 2012,
the property was 99% leased, the same as at last review.
The loan is interest-only throughout the term. Moody's current
credit assessment and stressed DSCR are Aa2 and 1.97X, respectively,
compared to Aa2 and 1.88X at last review.
The fourth largest loan with a credit assessment is the Radisson Reagan
National Airport Loan ($19.3 million -- 2.7%
of the pool), which is secured by a 243-room full service
hotel located a quarter of a mile away from the Reagan National Airport
in Arlington, Virginia. This loan benefits from amortization.
Moody's current credit assessment and stressed DSCR are Baa3 and 1.96X,
respectively, compared to Baa3 and 1.94X at securitization.
The top three conduit loans represent 16% of the pool. The
largest loan is the Polaris Towne Center Loan ($44.4 million
-- 6.3% of the pool), which is secured
by a 443,264 SF anchored retail center located in Columbus,
Ohio. The property was 98% leased as of March 2013,
the same as at last review. Anchor tenants include Kroger and Best
Buy. The property also benefits from non-collateral shadow
anchors Target and Lowes. Moody's LTV and stressed DSCR are 64%
and 1.53X, respectively.
The second largest loan is the First Tennessee Plaza and Cedar Ridge Loan
($34.8 million -- 4.9% of the
pool), which is secured by two crossed-collateralized and
cross-defaulted loans on two separate office properties,
totaling 536,869 SF, located in Knoxville, Tennessee.
The largest property is First Tennessee Plaza, a 447,013 SF
high-rise office building located in downtown Knoxville.
The remaining collateral is represented by Cedar Ridge, a 89,856
SF office building located in suburban Knoxville. The loan is encumbered
with a $3.6 million junior participation interest held outside
of the trust. The portfolio was 80% leased as of March 2013
versus 76% leased as of December 2011. Moody's LTV and stressed
DSCR are 110% and 0.93X, respectively, compared
to 103% and 1.00X at last review.
The third largest loan is the Pepper Square I and II and Central Forest
Shopping Center Loan ($30.7 million -- 4.3%
of the pool), two crossed-collateralized and cross-defaulted
loans secured by separate retail properties, totaling 372,753
SF, located in Dallas, Texas. The portfolio's largest
tenants include Hobby Lobby, Stein Mart and Bally's Total Fitness.
The portfolio was 81% leased as of March 2013 compared to 86%
at last review. Moody's LTV and stressed DSCR are 86% and
1.22X, respectively, compared to 89% and 1.18X
at last review.
REGULATORY DISCLOSURES
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
In conducting surveillance of this credit, Moody's considered performance
data contained in servicer and remittance reports. Moody's obtains
servicer reports on this transaction on a periodic basis, at least
annually.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Tarun Bhan
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Michael Gerdes
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms Nine CMBS Classes of WFCM 2010-C1
