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Rating Action:

Moody's Affirms Six, Confirms One and Downgrades Six CMBS Classes of LB-UBS 2000-C3

Global Credit Research - 12 May 2010

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 than 1.00X.

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 on 4/8/2010

-Class J, $16,322,000, downgraded to Caa3 from Ba1; previously placed on review for possible downgrade on 4/8/2010

-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 on 4/8/2010

-Class M, $11,751,000, downgraded to C from Caa1; previously placed on review for possible downgrade on 4/8/2010

-Class N, $3,917,000, downgraded to C from Caa3; previously placed on review for possible downgrade on 4/8/2010

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, at www.moodys.com/SFQuickCheck.

New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms Six, Confirms One and Downgrades Six CMBS Classes of LB-UBS 2000-C3
No Related Data.
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