Approximately $227.6 Million of Structured Securities Affected
New York, May 12, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of six
classes, confirmed one class and downgraded six classes of LB-UBS
Commercial Mortgage Trust 2000-C3, Commercial Mortgage Pass-Through
Certificates, Series 2000-C3. The downgrades are due
to higher losses for the pool resulting from realized and anticipated
losses from specially serviced and highly leveraged watchlisted loans
and refinance risk associated with loans approaching maturity.
Twenty nine loans, representing 93% of the pool, have
either passed their anticipated repayment dates (ARD) or have matured.
Twenty of the loans, representing 52% of the pool,
have a Moody's stressed debt service coverage ratio (DSCR) less
The affirmations and confirmation are due to key rating parameters,
including Moody's loan to value (LTV) ratio and Moody's DSCR remaining
within acceptable ranges. The decline in loan concentration,
as measured by the Herfindahl (Index), has been mitigated by increased
credit support due to loan payoffs and amortization. The pool's
balance has declined by 74% since last review.
Moody's placed seven classes of this transaction on review for possible
downgrade on April 8, 2010. This action concludes the review.
The rating action is the result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions.
As of the April 16, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 82% to $235.4
million from $1.3 billion at securitization. The
Certificates are collateralized by 36 mortgage loans ranging in size from
less than 1% to 11% of the pool, with the top ten
loans representing 65% of the pool. Two loans, representing
5% of the pool, have defeased and are secured by U.S.
Government securities. Defeasance at last review represented 34%
of the pool.
The pool includes a credit tenant lease (CTL) component, which represents
3% of the pool. There are no loans with underlying ratings.
At last review, three loans, representing 29% of the
pool, had investment grade underlying ratings. However,
two of the loans have defeased or paid off and the third loan, Sangertown
Square, has experienced a decline in performance and is currently
in special servicing due to a balloon default.
Seven loans, representing 20% 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.
Thirteen loans have been liquidated from the pool, resulting in
a $5.4 million loss (18% loss severity on average).
There are 21 loans, representing 72% of the pool, currently
in special servicing. The largest specially serviced loan is the
Sangertown Square Loan ($55.1 million -- 11.3%
of the pool), which is secured by a 855,000 square foot regional
mall located in New Hartford (Oneida County), New York. The
mall is anchored by Sears, JC Penney and Macy's. The loan
was transferred to special servicing in December 2009 due to imminent
default and has passed its December 2009 ARD. The borrower is seeking
a loan modification and extension. Moody's LTV and stressed
DSCR are 75% and 1.37X, respectively, compared
to 62% and 1.61X at last review.
The second largest specially serviced loan is the Southern Company Center
Loan ($33.9 million -- 6.6% of the pool),
which is secured by a 336,000 square office building located in
downtown Atlanta, Georgia. The loan was transferred to special
servicing in November 2006 when the building lost its largest tenant,
Southern Company Service. The property was 60% leased as
of August 2009.
The remaining 19 specially serviced loans are secured by a mix of office,
industrial, retail, and multifamily properties. Moody's
estimates a $59.2 million aggregate loss for all the specially
serviced loans (50% loss severity on average). The special
servicer has recognized an aggregate $10.9 million appraisal
reduction for two of the specially serviced loans.
Moody's has assumed a high default probability on two loans representing
approximately 4% of the pool. These loans are either on
the watchlist due to declines in performance or mature within the next
36 months and have a Moody's stressed DSCR less than 1.0X.
Moody's has estimated an aggregate $3.2 million loss
from these loans (overall 38% expected loss based on a weighted
average 75% default probability). Moody's rating action
recognizes potential uncertainty around the timing and magnitude of losses
from these troubled loans.
Based on the most recent remittance statement, Classes L through
P have experienced cumulative interest shortfalls totaling $3.0
million. Moody's anticipates that the pool will continue
to experience interest shortfalls because of the high exposure to specially
serviced loans. Interest shortfalls are caused by special servicing
fees, including workout and liquidation fees, appraisal subordinate
entitlement reductions (ASERs) and extraordinary trust expenses.
Moody's was provided with full and partial-year 2009 operating
results for 93% of the pool. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 78%,
essentially the same as at last review.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.48X and 1.37X, respectively,
essentially the same as 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 8,
compared to 31 at last review. The decline in Herf has been mitigated
by increased credit support.
The three largest conduit loans represent 13% of the pool.
The largest conduit loan is the Pepper Square Shopping Center Loan ($16.3
million -- 6.9% of the pool), which is secured
by a 192,000 square foot retail shopping center located in Dallas,
Texas. The center is anchored by Stein Mart and was 90%
leased as of September 2009. The loan is on the master servicer's
watchlist because it passed it February 2010 ARD. Moody's
LTV and stressed DSCR are 93% and 1.16X, respectively,
compared to 90% and 1.2X at last review.
The second largest loan is the Central Forest Shopping Center Loan ($8.7
million -- 3.7% of the pool), which is secured
by a 95,000 square foot retail center located in Dallas, Texas.
The property is anchored by Office Depot and was 82% leased as
of September 2009. The loan is on the master servicer's watchlist
because it passed its February 2010 ARD. Moody's LTV and
stressed DSCR are 91% and 1.19X, respectively,
compared to 75% and 1.37X at last review.
The third largest loan is Mooresville Festival Shopping Center Loan ($6.4
million -- 2.7% of the pool), which is secured
by an 160,000 square foot retail center located in Mooresville,
North Carolina. The property is anchored by Kohl's Department
store and was 99% leased as of December 2009. The loan is
on the master servicer's watchlist because it passed its January
2010 ARD. Moody's LTV and stressed DSCR are 77% and
1.41X, respectively, compared to 79% and 1.37%
at last review.
The CTL component includes three loans secured by 3 properties leased
under bondable leases. The CTL exposures are Walgreen Co.
($4.3 million -- 2.0% of the pool;
Moody's senior unsecured rating A2, stable outlook) and CVS/Caremark
Corp. ($2.2 million -- 0.9%;
Moody's senior unsecured rating Baa2, stable outlook).
Moody's rating action is as follows:
-Class X, Notional, affirmed at Aaa; previously
assigned Aaa on 5/18/2000
-Class B, $48,024,715, affirmed
at Aaa; previously upgraded to Aaa from Aa2 on 7/11/2005
-Class C, $48,964,000, affirmed
at Aaa; upgraded to Aaa from Aa1on 11/7/2006
-Class D, $19,585,000, affirmed
at Aaa; upgraded to Aaa from Aa3 on 11/7/2006
-Class E, $13,057,000, affirmed
at Aa2; upgraded to Aa2 from A2 on 11/7/2006
-Class F, $13,057,000, affirmed
at A1; upgraded to A1 from Baa1 on 11/7/2006
-Class G, $11,751,000, confirmed
at A2; previously placed on review for possible downgrade on 4/8/2010
-Class H, $20,891,000, downgraded
to B2 from Baa2; previously placed on review for possible downgrade
-Class J, $16,322,000, downgraded
to Caa3 from Ba1; previously placed on review for possible downgrade
-Class K, $9,792,000 downgraded to C from
Ba3; previously placed on review for possible downgrade on 4/8/2010
-Class L, $10,466,000, downgraded
to C from B2; previously placed on review for possible downgrade
-Class M, $11,751,000, downgraded
to C from Caa1; previously placed on review for possible downgrade
-Class N, $3,917,000, downgraded
to C from Caa3; previously placed on review for possible downgrade
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 on a periodic basis through
a comprehensive review. Moody's prior review is summarized
in a press release dated February 7, 2008.
Due to the pool's low Herf score, two principal methodologies were
used in monitoring this transaction: "CMBS: Moody's Approach
to Rating U.S. Conduit Transactions" published on September
15, 2000 and "CMBS: Moody's Approach to Rating Large Loan/Single
Borrower Transactions" published on July 7, 2000. These publications
are available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab.
In addition to these two methodologies, Moody's also used its credit-tenant
lease financing rating methodology (CTL approach) for evaluating the CTL
component. Under Moody's CTL approach, the rating of a transaction's
certificates is primarily based on the senior unsecured debt rating (or
the corporate family rating) of the tenant, usually an investment
grade rated company, leasing the real estate collateral supporting
the bonds. The tenant's credit rating is the key factor in determining
the probability of default on the underlying lease. The lease generally
is "bondable", which means it is an absolute net lease, yielding
fixed rent paid to the trust through a lock-box, sufficient
under all circumstances to pay in full all interest and principal of the
loan. The leased property should be owned by a bankruptcy-remote,
special purpose borrower, which grants a first lien mortgage and
assignment of rents to the securitization trust. The dark value
of the collateral, which assumes that the property is vacant or
"dark", is then examined; and the dark value must be sufficient,
assuming a bankruptcy of the tenant and rejection of the lease,
to support the expected loss consistent with the certificates' rating.
The certificates' rating will change as the senior unsecured debt rating
(or the corporate family rating) of the tenant may change. Moody's
also considers the overall structure and legal integrity of the transaction.
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,
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's Affirms Six, Confirms One and Downgrades Six CMBS Classes of LB-UBS 2000-C3
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service