Approximately $253.8 Million of Structured Securities Affected
New York, December 02, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of nine classes
and downgraded five classes of Commercial Mortgage Asset Trust,
Commercial Mortgage Pass-Through Certificates, Series 1999-C2,
A-3, Affirmed at Aaa (sf); previously on Oct 26,
1999 Definitive Rating Assigned Aaa (sf)
X, Affirmed at Aaa (sf); previously on Oct 26, 1999 Definitive
Rating Assigned Aaa (sf)
B, Affirmed at Aaa (sf); previously on Feb 17, 2005 Upgraded
to Aaa (sf)
C, Affirmed at Aaa (sf); previously on Feb 17, 2005 Upgraded
to Aaa (sf)
D, Affirmed at Aaa (sf); previously on May 16, 2006 Upgraded
to Aaa (sf)
E, Downgraded to A3 (sf); previously on Dec 17, 2009
Downgraded to Aa3 (sf)
F, Downgraded to B1 (sf); previously on Dec 17, 2009
Downgraded to A3 (sf)
G, Downgraded to Caa1 (sf); previously on Dec 17, 2009
Downgraded to B1 (sf)
H, Downgraded to Ca (sf); previously on Dec 17, 2009
Downgraded to Caa1 (sf)
J, Downgraded to C (sf); previously on Dec 17, 2009 Downgraded
to Caa3 (sf)
K, Affirmed at C (sf); previously on Dec 17, 2009 Downgraded
to C (sf)
L, Affirmed at C (sf); previously on Dec 17, 2009 Downgraded
to C (sf)
M, Affirmed at C (sf); previously on Dec 17, 2009 Downgraded
to C (sf)
N, Affirmed at C (sf); previously on Dec 17, 2009 Downgraded
to C (sf)
The downgrades of five classes are due to higher expected losses for the
pool resulting from realized and anticipated losses from specially serviced
loans and interest shortfalls.
The affirmations 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.
Moody's rating action reflects a cumulative base expected loss of
12.6% of the current balance compared to 7.8%
at Moody's prior review. 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 stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010
and 2011; we expect overall a sluggish recovery in most of the world's
largest economies, returning to trend growth rate with elevated
fiscal deficits and persistent unemployment levels.
The principal methodology used in these ratings was "CMBS: Moody's
Approach to Rating Conduit Transactions" published in September 2000.
In addition to methodologies and research available on moodys.com,
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.
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 6,
the same as at last review.
In cases where the Herf falls below 20, Moody's generally
employs the large loan/single borrower methodology. Moody's
did not employ this methodology for this deal despite the low Herf Index
due to a significant increase in credit subordination since our last review
and the increased cash flow analysis stresses we used in our analysis.
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 December 17, 2009.
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
As of the November 17, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 67% to $253.8
million from $775.2 million at securitization. The
Certificates are collateralized by 23 mortgage loans ranging in size from
less than 1% to 14% of the pool, with the top ten
loans representing 58% of the pool. Nine loans, representing
41% of the pool, have defeased and are collateralized by
U.S. Government securities. The largest loan is a
credit tenant lease (CTL) loan.
Twelve loans have been liquidated from the pool since securitization,
resulting in an aggregate $34.9 million loss (42%
loss severity on average). Due to realized losses, classes
M through Q-2 have been eliminated entirely and class L has experienced
a 75% principal loss.
Currently, there are three loans in special servicing, representing
14% of the pool. The largest special serviced loan is the
Henry W. Oliver Building Loan ($29.5 million --
11.6% of the pool), which is secured by a 472,000
square foot, Class B office building in Pittsburgh, Pennsylvania.
The loan was transferred to special servicing in October 2009 for imminent
default. As of September 2010, the property was 31%
leased compared to 91% at last review. The spike in vacancy
is mostly attributed to the largest tenant, which occupied 53%
of the net rentable area (NRA), vacating the premises when its lease
expired in December 2009. The special servicer has engaged legal
counsel to initiate foreclosure.
The remaining specially serviced loans are secured by single-tenant
retail properties that were previously occupied by Circuit City.
The properties are vacant due to the tenant rejecting the leases as part
of its bankruptcy filing. The loans are real estate owned (REO).
The master servicer has recognized appraisal reductions totaling $28.8
million for the specially serviced loans. Moody's has estimated
a $29.5 million loss (82% expected loss on average)
from these loans.
Based on the most recent remittance statement, Classes F through
L have experienced cumulative interest shortfalls totaling $2.3
million. Interest shortfalls increased to Class F in November due
to the servicer recognizing appraisal entitlement reductions (ASERs) on
the specially serviced loans, based on recent appraisal reductions.
Moody's anticipates that the pool will continue to experience interest
shortfalls because of the exposure to specially serviced loans.
Interest shortfalls are caused by special servicing fees, including
workout and liquidation fees, ASERs and extraordinary trust expenses.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 100% and 42% of the conduit pool, respectively.
Excluding specially serviced, Moody's weighted average LTV
is 80% compared to 70% 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 10.6%.
Excluding specially serviced loans, Moody's actual and stressed
DSCRs are 1.23X and 1.53X, respectively, compared
to 1.36X and 1.75X 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 top three conduit loans represent 23% of the pool. The
largest conduit loan is the Westin Denver Tabor Center Loan ($35.3
million -- 14% of the pool), which is secured
by a 430-room full-service hotel located in downtown Denver,
Colorado. The hotel is part of an upscale mixed-use complex
that includes a 570,000 square foot office building and an urban
mall. The loan sponsor is Host Marriott. Moody's LTV and
stressed DSCR are 64% and 1.96X, respectively,
compared to 63% and 2.06X at last review.
The second largest conduit loan is the Geneva Crossing Loan ($11.8
million -- 3.3% of the pool), which
is secured by a 123,000 square foot unanchored retail center located
in Carol Stream, Illinois. As of August 2010, the property
was 97% leased compared to 92% at last review. Performance
has improved due to a 21% increase in net operating income since
last review. Moody's LTV and stressed DSCR are 87% and 1.19X,
respectively, compared to 101% and 1.01X at last review.
The third largest loan is the Auerbach Retail Portfolio ($10.7
million -- 4.2% of the pool), which
is secured by two retail properties located in California. As of
October 2010, the properties were 100%, the same as
at last review. Performance remains stable. Moody's LTV
and stressed DSCR are 82% and 1.34X, respectively,
compared to 83% and 1.33X at last review.
The CTL component consists of the Accor/Motel 6 Portfolio Loan ($35.7
million --14% of the pool), which is secured
by 14 limited service hotels operating under the Motel 6 flag and located
throughout Illinois, Indiana, Massachusetts, Pennsylvania.
Tennessee and Oregon. Property performance has declined since last
review as hotels have been impacted by the downturn in the tourism industry.
The loan sponsor is Accor S.A. On July 2, 2010,
Moody's withdrew Accor S.A.'s Prime-3 commercial
paper rating due to business reasons. For the purpose of rating
this component of the subject transaction, Moody's developed an
internal view of the credit quality of the company.The loan is
on the master servicer's watch list for low debt service.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Structured Finance Group
Moody's Investors Service
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Affirms Nine and Downgrades Five CMBS Classes of CMAT 1999-C2
250 Greenwich Street
New York, NY 10007