Approximately $11.0 Million of Structured Securities Affected
New York, March 30, 2011 -- Moody's Investors Service (Moody's) affirmed the rating of one class of
DLJ Commercial Mortgage Corp., Commercial Mortgage Pass-Through
Certificates, Series 1996-CF1 as follows:
B-4, Affirmed at B1 (sf); previously on May 20,
2010 Upgraded to B1 (sf)
The affirmation is due to key rating parameters, including Moody's
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 class is sufficient to maintain its current rating.
Moody's rating action reflects a cumulative base expected loss of
3.3% of the current balance. At last review,
Moody's cumulative base expected loss was 2.0%.
Moody's stressed scenario loss is 14.1% 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
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 rating of this class.
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 Conduit Transactions" published in September
2000 and "CMBS: Moody's Approach to Rating Large Loan
Transactions" published in 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 1 compared
to 2 at Moody's prior review.
In cases where the Herf falls below 20, Moody's employs also
the large loan/single borrower methodology. This methodology uses
the excel-based Large Loan Model v 8.0. 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
As of the March 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 97% to $13.8
million from $470 million at securitization. The Certificates
are collateralized by two mortgage loans representing 3% and 97%
of the pool.
One loan, representing 3% of the pool is 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. Moody's
has not assumed a probability of default for the watchlisted loan at this
Seven loans have been liquidated from the pool, resulting in an
aggregate $17.1 million realized loss (52% loss severity
on average), the same as at last review. Currently there
are no loans in special servicing.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 100% of the pool. Moody's weighted average
LTV is 29% compared to 47% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 20%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 10.5%.
Moody's actual and stressed DSCRs are 1.40X and 4.29X,
respectively, compared to 1.34X and 2.42X 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 in the pool is the Maccabees Office Center Loan ($13.4
million - 97.2% of the pool), which is secured
by a 335,000 square foot (SF) office building located in Southfield,
Michigan. The property was 96% leased as of December 2010,
the same as at last review. The two largest tenants are Royal Maccabees
Life Insurance (45% of the net rentable area (NRA); lease
expiration December 2013) and W. B Doner (31% of the NRA;
lease expiration May 2013). Property performance has been stable.
However, Moody's is concerned about potential future income volatility
as leases for approximately 75% of the NRA expire before the January
12, 2017 loan maturity. Moody's LTV and stressed DSCR are
30% and 3.79X, respectively, compared to 29%
and 3.94X at last review.
The second loan is the Jackson Creek Shopping Center Loan ($393,159
million -- 2.8%), which is secured by a 171,028
SF anchored community shopping center located in Bloomington, Indiana.
The loan has a maturity date of January 12, 2012. Moody's
LTV and stressed DSCR are 5% and >4.00, respectively,
compared to 10.4% and >4.00 at last review.
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 One CMBS Class of DLJ 1996-CF1
250 Greenwich Street
New York, NY 10007