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Rating Action:

Moody's Affirms Nine Classes, Confirms One Class and Downgrades 16 CMBS Classes of WBCMT 2006-C23

Global Credit Research - 08 Jul 2010

Approximately $4.04 Billion of Structured Securities Affected

New York, July 08, 2010 -- Moody's Investors Service (Moody's) affirmed the rating of nine classes, confirmed one class and downgraded 16 classes of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2006-C23. The downgrades are due to higher expected losses for the pool resulting from anticipated losses from specially serviced and poorly performing watchlisted loans.

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

Moody's placed 17 classes of this transaction on review for possible downgrade on June 30, 2010. This action concludes the review. The rating action is the result of Moody's on-going surveillance of commercial backed securities (CMBS) transactions.

As of the June 16, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 2% to $4.1 billion from $4.2 billion at securitization. The Certificates are collateralized by 307 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 36% of the pool. Currently, there are two loans, representing 1% of the pool, with investment grade underlying ratings. Two loans, representing 0.4% of the pool, have defeased and are collateralized by U.S. Government securities.

Sixty-nine loans, representing 24% 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.

The pool has not experienced any losses to date; however, there are 15 loans, representing 10% of the pool, currently in special servicing. The largest specially serviced loan is the 1775 Broadway Office Loan ($248.7 million -- 6% of the pool), which is secured by a 703,000 square foot (SF) Class B office building located on 57th Street between 8th Avenue and Broadway in Manhattan. The loan was transferred to special servicing in January 2010 for imminent default and is now 90+ days delinquent. The sponsor is Joseph Moinian. The property's recent performance has been negatively impacted by a comprehensive renovation and repositioning project that is still underway. As of May 2010, the property was 23% leased compared to 96% at securitization. Given the strength of the midtown New York office market, the quality of the renovations that are underway and the competitive location of the building, Moody's is not currently estimating a loss and the loan is included in the conduit pool. Moody's valuation is based on the current market rent of $60/SF and a 20% vacancy factor. Moody's LTV and stressed DSCR are 126% and 0.73X, respectively, compared to 121% and 0.81X at last review.

The remaining 14 specially serviced loans are secured by a mix of property types. Moody's estimates an aggregate $90.6 million loss for 12 of the specially serviced loans (59% expected loss on average). The special servicer has recognized a cumulative $76 million appraisal reduction for 12 of the specially serviced loans.

Moody's has assumed a high default probability on 11 poorly performing loans representing 3% of the pool. Moody's has estimated an aggregate $31.5 million loss for these troubled loans (overall 29% expected loss based on a weighted average 58% default probability). Moody's rating action recognizes potential uncertainty around the timing and magnitude of loss from these troubled loans.

Moody's was provided with full-year 2008 and 2009 operating results for 89% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV ratio is 108% compared to 135% at Moody's prior review in February 2009. The prior review was part of Moody's first quarter 2009 rating sweep of 2006-2009 vintage conduit and fusion CMBS transactions.

Excluding specially serviced and troubled loans, Moody's actual and stressed DSCR are 1.24X and 0.93X, respectively, compared to 1.08X and 0.91X 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 score is 40. The pool has a Herf of 49 compared to 53 at last review.

The largest loan with an underlying rating is the Cavalier Country Club Apartment Loan ($26.2 million -- 0.6% of the pool), which is secured by a 32-building apartment complex. Comprised of 744 units, the complex is located in Newark, Delaware. As of December 2009, the property was 94% leased compared to 92% in 2008. The property's performance remains in-line with last review. The loan matures in January 2016 and is amortizing on a 360-month schedule. Moody's current underlying rating and stressed DSCR are Baa3 and 1.31X, respectively, compared to Baa3 and 1.28X at last review.

The second largest loan with an underlying rating is the 594 Broadway Loan ($24.0 million -- 0.6% of the pool), which is secured by a 12-story, 217,000 SF Class B office building located at the corner of Broadway and Houston Street in SoHo. As of May 2010, the property was 93% leased compared to 99% in 2008. The property is predominantly leased to small tenants that occupy no more than 5% of the net rentable area (NRA). Performance remains in-line with last review. The sponsor is Jeffrey Gural. The loan matures in February 2016 and is full term interest only. Moody's current underlying rating and stressed DSCR are A3 and 1.71X, respectively, compared to A3 and 1.65X at last review.

The top three conduit loans represent 16% of the outstanding pool balance. The largest conduit loan is the Prime Outlet Pool Loan ($305.3 million -- 7% of the pool), which is secured by ten outlet centers located across eight states. The total gross leasable area (GLA) is 3.5 million SF. The loan represents a 50% interest in a $610 million first mortgage loan. As of December 2009, the portfolio was 90% leased compared to 95% in 2008. The largest tenants are Vanity Fair Outlet (3.5% of the GLA; leases expire in 2014); The Gap (3% of the GLA; leases expire in 2013, 2014 and 2019) and Nike (2% of the GLA; lease expires in 2011). The portfolio's performance has improved significantly due to higher revenues. The loan matures in July 2016 and is amortizing on a 360-month schedule. The sponsor is Simon Property Group. Moody's LTV and stressed DSCR are 99% and 1.01X, respectively, compared to 126% and 0.81X at last review.

The second largest conduit loan is the 620 Avenue of the Americas Loan ($205 million -- 5% of the pool), which is secured by a 7-story, 670,000 SF mixed-use building located in the Flatiron/Chelsea sub-market of Manhattan. The loan is encumbered with a $30 million B-note and $30 million of mezzanine debt. As of January 2010, the property was 84% leased compared to 77% in April 2008. Filene's Basement, which occupied 6% of the NRA vacated when its leased expired in March 2010. The Gap, which is the largest office tenant, occupies 33% of the NRA and will vacate when its lease expires in November 2010. As a replacement, Local Union SEIU 32BJ has signed a lease to occupy 283,000 SF. Moody's cash flow analysis reflects an improvement in the property's performance due to the anticipated increase in occupancy. Moody's LTV and stressed DSCR are 119% and 0.77X, respectively, compared 131% and 0.74X at last review.

The third largest conduit loan is the Hyatt Center Loan ($163 million -- 4% of the pool), which is secured by a 49-story, 1.47 million SF, Class A office building located in the West Loop sub-market of Chicago. The loan represents a 50% interest in a $325 million first mortgage loan. In addition, the loan is encumbered with $75 million of mezzanine debt. The largest tenants are Mayer Brown LLP (27% of the NRA; lease expires in June 2020); the Hyatt Corporation (14% of the NRA; lease expires in January 2020) and Goldman Sachs (10% of the NRA; lease expires in March 2010). As of January 2010, the property was 93% leased, essentially the same as at last review. The property's performance has improved due to higher base revenues. Moody's LTV and stressed DSCR are is 110% and 0.84X, respectively, compared to 132% and 0.74X at last review.

Moody's rating action is as follows:

-Class A-1, $1,226,548, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class A-2, $137,307,000, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class A-3, $62,700,000, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class A-PB, $252,071,000, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class A-4, $1,280,716,000, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class A-5, $500,000,000, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class A-1A, $609,214,930, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class A-M, $422,986,000, confirmed at Aaa; previously placed on review for possible downgrade on 6/30/2010

-Class X-P, Notional, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class X-C, Notional, affirmed at Aaa; previously assigned Aaa on 3/13/2006

-Class A-J, $274,941,000, downgraded to A2 from Aa3; previously placed on review for possible downgrade on 6/30/2010

-Class B, $37,011,000, downgraded to A3 from A1; previously placed on review for possible downgrade on 6/30/2010

-Class C, $52,873,000, downgraded to Baa1 from A2; previously placed on for possible downgrade on 6/30/2010

-Class D, $37,011,000, downgraded to Baa2 from A3; previously placed on for for possible downgrade on 6/30/2010

-Class E, $31,724,000, downgraded to Baa3 from Baa1; previously placed on review for possible downgrade on 6/30/2010

-Class F, $42,299,000, downgraded to Ba1 from Baa2; previously placed on review for possible downgrade on 6/30/2010

-Class G, $52,873,000, downgraded to Ba2 from Baa3; previously placed on review for possible downgrade on 6/30/2010

-Class H, $52,873,000, downgrade to B2 from Ba2; previously placed on review for possible downgrade 6/30/2010

-Class J, $58,161,000, downgraded to Caa1 from B1; previously placed on review for possible downgrade 6/30/2010

-Class K, $52,873,000, downgraded to Caa3 from B3; previously placed on review for possible downgrade 6/30/2010

-Class L, $10,575,000, downgraded to Ca from Caa1; previously placed on review for possible downgrade 6/30/2010

-Class M, $21,149,000, downgraded to Ca from Caa1; previously placed on review for possible downgrade 6/30/2010

-Class N, $15,862,000, downgraded to C from Caa2; previously placed on review for possible downgrade 6/30/2010

-Class O, $10,575,000, downgraded to C from Caa2; previously placed on review for possible downgrade 6/30/2010

-Class P, $15,862,000, downgrade to C from Caa3; previously placed on review for possible downgrade 6/30/2010

-Class Q, $15,862,000, downgraded to C from Caa3; previously placed on review for possible downgrade 6/30/2010

Moody's monitors transactions on both a monthly basis through two sets of quantitative tools: MOST® (Moody's Surveillance Trends) and CMM on Trepp, and a periodic basis through a full review. Moody's prior review is summarized in a press release dated February 11, 2009.

The principal methodology used in rating and monitoring this transaction is "CMBS: Moody's Approach to Rating Fusion Transactions" published on April 19, 2005, which can be found at www.moodys.com in the Ratings Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this transaction 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 Nine Classes, Confirms One Class and Downgrades 16 CMBS Classes of WBCMT 2006-C23
No Related Data.
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