Approximately $55 Million of Notional Structured Securities Affected
New York, October 27, 2016 -- Moody's Investors Service has affirmed the rating of one class of GMAC
Commercial Mortgage Securities Inc., Mortgage Pass-Through
Certificates, Series 1998-C2 as follows:
Cl. X, Affirmed Caa2 (sf); previously on Dec 11,
2015 Affirmed Caa2 (sf)
RATINGS RATIONALE
The rating of the IO class, Class X, was affirmed based on
the credit performance (or the weighted average rating factor or WARF)
of its referenced classes The IO class is the only outstanding Moody's
rated class in this transaction.
Moody's rating action reflects a base expected loss of 6.0%
of the current balance, compared to 5.8% at Moody's
last review. Moody's base expected loss plus realized losses is
now 2.6% of the original pooled balance, unchanged
from the last review. Moody's provides a current list of base expected
losses for conduit and fusion CMBS transactions on moodys.com at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:
The rating of an IO class is based on the credit performance of its referenced
classes. An IO class may be upgraded based on a lower weighted
average rating factor or WARF due to an overall improvement in the credit
quality of its reference classes. An IO class may be downgraded
based on a higher WARF due to a decline in the credit quality of its reference
classes, paydowns of higher quality reference classes or non-payment
of interest. Classes that have paid off through loan paydowns or
amortization are not included in the WARF calculation. Classes
that have experienced losses are grossed up for losses and included in
the WARF calculation, even if Moody's has withdrawn the rating.
METHODOLOGY UNDERLYING THE RATING ACTION
The methodologies used in these ratings were "Moody's Approach to Rating
Large Loan and Single Asset/Single Borrower CMBS " published in October
2015, and "Moody's Approach to Rating Credit Tenant Lease
and Comparable Lease Financings" published in October 2016. Please
see the Rating Methodologies page on www.moodys.com for
a copy of these methodologies.
DESCRIPTION OF MODELS USED
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 5,
the same as at prior review.
Due to the low Herf, Moody's used the excel-based Large
Loan Model 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 and property type. These aggregated proceeds are then
further adjusted for any pooling benefits associated with loan level diversity,
other concentrations and correlations.
Moody's currently uses a Gaussian copula model, incorporated in
its CDO rating model CDOROM, to generate a portfolio loss distribution
to assess the ratings for a pool of CTL ratings.
DEAL PERFORMANCE
As of the October 17, 2016 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $55
million from $2.53 billion at securitization. The
Certificates are collateralized by 37 mortgage loans ranging in size from
less than 1% to 30% of the pool, with the top ten
loans representing 58% of the pool. Nine loans, representing
32% of the pool have defeased and are secured by US Government
securities.
Six loans, representing 41% 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.
Forty-four loans have been liquidated from the pool, resulting
in an aggregate realized loss of $63 million (36% loss severity
on average). Two loans, representing 3% of the pool,
are currently in special servicing. The specially serviced loans
are secured by a mix of property types. Moody's estimates a small
loss for the specially serviced loans.
Moody's has assumed a high default probability for one poorly performing
loan representing 3% of the pool. The loan is a B Hope Note
associated with the Georgetown Plaza Shopping Center. Moody's
has estimated a full loss for the B Note. The collateral and the
A Note are discussed in further detail below.
Moody's was provided with full year 2015 and full or partial year 2016
operating results for 88% and 69% of the pool, respectively.
Moody's weighted average conduit LTV is 60% compared to 51%
at Moody's prior review. Moody's conduit component
excludes loans with credit assessments, defeased and CTL loans and
specially serviced and troubled loans. Moody's net cash flow
(NCF) reflects a weighted average haircut of 9.1% to the
most recently available net operating income (NOI). Moody's
value reflects a weighted average capitalization rate of 10.2%.
Moody's actual and stressed conduit DSCRs are 1.12X and 2.74X,
respectively, compared to 1.91X and 2.63X at prior
review. Moody's actual DSCR is based on Moody's 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 41% of the pool balance.
The largest loan is the D'Amato Portfolio Loan ($16 million
-- 30% of the pool), which is secured by 37
industrial and retail properties in Milford, Connecticut and Westerly,
Rhode Island totaling 720,000 square feet. The properties
were 94% leased as of June 2016, up from 90% the prior
year. Moody's LTV and stressed DSCR are 55% and 2.00X,
respectively, compared to 60% and 1.85X at prior review.
The second largest loan is the Georgetown Plaza Shopping Center --
A note Loan ($4 million -- 6% of the pool),
which is secured by a 110,000 square foot retail property in Indianapolis,
Indiana. Following a stint in special servicing, the loan
was modified in March 2015 to include an A/B note split, a change
from amortizing to interest-only, and the loan maturity was
extended to July 2017. The B Note was identified as a troubled
loan above. The property was 79% leased as of June 2016,
compared to 68% leased the prior year. Moody's LTV and stressed
DSCR for the A Note are 162% and 0.73X, respectively,
compared to 163% and 0.73X at prior review.
The third largest loan is the Columbus Georgia Apartments Loan ($3
million -- 5% of the pool), which is secured
by four multifamily properties totaling 280 units, located in Columbus,
Georgia. The property occupancies ranged from 88% to 100%
as of June 2016. The loan is fully amortizing. Moody's LTV
and stressed DSCR are 36% and 3.02X, respectively,
compared to 44% and 2.43X at prior review.
The CTL component consists of ten loans, totaling 10% of
the pool, secured by properties leased to seven tenants.
The largest exposures are CVS Health ($3 million -- 6%
of the pool; senior unsecured rating: Baa1 -- stable outlook)
and Walgreen Co. ($839,000 -- 1.5%
of the pool; senior unsecured rating: Baa2 -- ratings
under review for possible downgrade). The bottom-dollar
weighted average rating factor (WARF) for this pool is 1,843 compared
to 2,126 at last review. WARF is a measure of the overall
quality of a pool of diverse credits. The bottom-dollar
WARF is a measure of the default probability within the pool.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
In rating this transaction, Moody's CDOROM™ is used to model
the expected loss for each tranche. Moody's CDOROM™
is a Monte Carlo simulation tool which takes each underlying asset default
probability as input. Each underlying asset default behavior is
then modeled individually with a standard multi-factor model incorporating
both intra- and inter-industry correlation. The correlation
structure is based on a Gaussian copula. Each Monte Carlo scenario
simulates defaults and if applicable, recovery rates, to derive
losses on a portfolio. For a synthetic transaction, the model
then allocates losses to the tranches in reverse order of priority to
derive the loss on the tranches. By repeating this process and
averaging over the number of simulations, Moody's can derive
the expected loss on the tranches. For a cash transaction,
the portfolio loss, or default, distribution produced by Moody's
CDOROM™ may be input into a separate cash flow model in accordance
with its priority of payment to determine each tranche's expected
loss.
Moody's did not use any stress scenario simulations in its analysis.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Wesley Flamer-Binion
Asst Vice President - 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
Matthew Halpern
AVP-Analyst/Manager
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
