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Rating Action:

Moody's Affirms Seven and Upgrades Eight Classes of BSCMS 2004-PWR5

Global Credit Research - 16 May 2014

Approximately $534 Million of Structured Securities Affected

New York, May 16, 2014 -- Moody's Investors Service has affirmed the ratings on seven classes and upgraded the ratings on eight classes in Bear Stearns Commercial Mortgage Securities Trust, Commercial Mortgage Pass-Through Certificates, Series 2004-PWR5 as follows:

Cl. A-5, Affirmed Aaa (sf); previously on Jun 6, 2013 Affirmed Aaa (sf)

Cl. B, Affirmed Aaa (sf); previously on Jun 6, 2013 Upgraded to Aaa (sf)

Cl. C, Upgraded to Aaa (sf); previously on Jun 6, 2013 Upgraded to Aa1 (sf)

Cl. D, Upgraded to Aa2 (sf); previously on Jun 6, 2013 Upgraded to A1 (sf)

Cl. E, Upgraded to Aa3 (sf); previously on Jun 6, 2013 Upgraded to A2 (sf)

Cl. F, Upgraded to Baa1 (sf); previously on Jun 6, 2013 Affirmed Baa3 (sf)

Cl. G, Upgraded to Baa2 (sf); previously on Jun 6, 2013 Affirmed Ba1 (sf)

Cl. H, Upgraded to Ba1 (sf); previously on Jun 6, 2013 Affirmed Ba3 (sf)

Cl. J, Upgraded to B1 (sf); previously on Jun 6, 2013 Affirmed B2 (sf)

Cl. K, Upgraded to B2 (sf); previously on Jun 6, 2013 Affirmed B3 (sf)

Cl. L, Affirmed Caa1 (sf); previously on Jun 6, 2013 Affirmed Caa1 (sf)

Cl. M, Affirmed Caa2 (sf); previously on Jun 6, 2013 Affirmed Caa2 (sf)

Cl. N, Affirmed Caa3 (sf); previously on Jun 6, 2013 Affirmed Caa3 (sf)

Cl. P, Affirmed C (sf); previously on Jun 6, 2013 Downgraded to C (sf)

Cl. X-1, Affirmed Ba3 (sf); previously on Jun 6, 2013 Affirmed Ba3 (sf)

RATINGS RATIONALE

The ratings on two P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on four P&I classes were affirmed based on Moody's expected loss.

The rating on the IO class was affirmed based on the credit performance (or the weighted average rating factor or WARF) of the referenced classes.

The ratings on the P&I classes were upgraded primarily due to an increase in credit support since Moody's last review, resulting from paydowns and amortization, as well as Moody's expectation of additional increases in credit support resulting from the payoff of loans approaching maturity that are well positioned for refinance. The pool has paid down by 30% since Moody's last review. In addition, loans constituting 68% of the pool that have debt yields exceeding 12.0% are scheduled to mature within the next five months.

Moody's rating action reflects a base expected loss of 2.5% of the current balance, compared to 2.8% at Moody's last review. Moody's base expected loss plus realized losses is now 2.2% of the original pooled balance, compared to 2.7% at the last review. Moody's provides a current list of base expected losses for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.

FACTORS THAT WOULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING:

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected.

Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance.

Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls.

METHODOLOGY UNDERLYING THE RATING ACTION

The principal methodology used in this rating was "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

DESCRIPTION OF MODELS USED

Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses 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 Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan-level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on 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, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction.

Moody's uses a variation of Herf to measure the diversity of loan sizes, 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 22, compared to 34 at Moody's last review.

DEAL PERFORMANCE

As of the April 11, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 57% to $535 million from $1.23 billion at securitization. The certificates are collateralized by 73 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten loans constituting 38% of the pool. One loan, constituting 1.4% of the pool, has an investment-grade structured credit assessment. Seven loans, constituting 24% of the pool, have defeased and are secured by US government securities.

Twenty-two loans, constituting 21% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance.

Eight loans have been liquidated from the pool, resulting in an aggregate realized loss of $13.5 million (for an average loss severity of 48%). One loan, constituting 1% of the pool, is currently in special servicing. The only loan in special servicing is the North Orchard Plaza loan (for $3.3 million 0.6% of the pool), which is secured by two retail buildings located 25 miles northwest of Detroit. There have been no advances to date and the current resolution strategy will be dual tracked with receiver sale or foreclosure.

Moody's estimates an aggregate $0.4 million loss for the specially serviced loans (12% expected loss on average).

Moody's has assumed a high default probability for nine poorly performing loans, constituting 8% of the pool, and has estimated an aggregate loss of $6.5 million (a 15% expected loss based on a 50% probability default) from these troubled loans.

Moody's received full year 2012 operating results for 100% of the pool, and full or partial year 2013 operating results for 89%. Moody's weighted average conduit LTV is 76%, compared to 78% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 13% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.3%.

Moody's actual and stressed conduit DSCRs are 1.46X and 1.53X, respectively, compared to 1.44X and 1.46X at the last 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% stress rate the agency applied to the loan balance.

The loan with a structured credit assessment is the New Castle Marketplace Loan ($7.4 million -- 1.4% of the pool), which is secured by 11 retail and restaurant buildings on one property. The property is fully leased as of June 2013, same as prior five reviews. Moody's structured credit assessment and stressed DSCR are aaa (sca.pd) and > 4.00X, respectively, the same as at the last review.

The top three conduit loans represent 20% of the pool balance. The largest loan is the 2941 Fairview Park Drive Loan ($65 million -- 12% of the pool), which is secured by a 15-story, 350,000 SF Class A suburban office tower located in the Washington, DC suburbs. The building is part of the larger Fairview Office Park, a master-planned business park which spans over 200 acres. The current occupancy is 84% but in place leases are 23% higher than the market average. Moody's LTV and stressed DSCR are 78% and 1.17X, respectively, compared to 92% and 1X at the last review.

The second largest loan is the Scitor Corporation Loan ($22.5 million -- 4.2% of the pool), which is secured by a 159,000 SF office property in Northern Virginia, near Washington-Dulles Airport. The building is 100% occupied by Scitor Corporation, a defense and aerospace firm. The loan is sponsored by Duke Realty Corporation. Moody's LTV and stressed DSCR are 108% and 0.95X, respectively, compared to 105% and 0.98X at the last review.

The third largest loan is the West Bloomfield Medical Building Loan ($21 million -- 4% of the pool), which is secured by a 135,000 SF medical office property in the northern suburbs of Detroit. The property was 96% leased at year end 2013, unchanged from the prior review. The loan benefits from amortization and stable performance. Moody's LTV and stressed DSCR are 75% and 1.37X, respectively, compared to 82% and 1.25X at the last review.

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.

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.

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.

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 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.

Sini Gomes
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 Seven and Upgrades Eight Classes of BSCMS 2004-PWR5
No Related Data.

 

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