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Rating Action:

Moody's Affirms Six, Confirms Three and Downgrades Eight CMBS Classes of BSCMS 2004-TOP14

12 Nov 2009

Approximately $626.8 Million of Structured Securities Affected

New York, November 12, 2009 -- Moody's Investors Service (Moody's) affirmed the ratings of six classes, confirmed three and downgraded eight classes of Bear Stearns Commercial Mortgage Securities Trust 2004-TOP 14, Commercial Mortgage Pass-Through Certificates, Series 2004-TOP14. The downgrades are due to higher expected losses for the pool resulting from increased leverage, increased credit quality dispersion and an estimated loss from a specially serviced loan. The affirmations and confirmations are due to the increase in defeasance and amortization, as well as the maintenance or improvement in two key rating parameters for the pool -- Moody's loan to value (LTV) ratio and stressed debt service coverage ratio (DSCR).

On August 11, 2009, Moody's placed 19 classes on review for possible downgrade due to the credit uncertainty surrounding Maguire Properties Inc. (Maguire), the sponsor of the U.S. Bank Tower Loan (10% of the outstanding deal balance). Despite the loss of two major tenants at the property, the asset is still generating sufficient income to cover debt service; however, Moody's remains concerned about the availability of funds for future leasing costs. This action concludes that review. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions.

As of the October 13, 2009 distribution date, the transaction's aggregate certificate balance has decreased by 30% to $626.8 million from $895.5 million at securitization. The Certificates are collateralized by 98 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 35% of the pool. The pool contains three loans, representing 7% of the pool, with investment grade underlying ratings. Six loans, representing 12% of the pool, have defeased and are collateralized with U.S. Government securities, an increase over the three loans, representing 7% of the pool, that were defeased at our last review.

Seventeen loans, representing 15% 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 Commercial Mortgage Securities Association's (CMSA) 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.

One loan has been liquidated from the pool resulting in a minimal loss. One loan, representing less than 1% of the pool, is currently in special servicing. Moody's is estimating a $2.1 million loss from the specially serviced loan (47% loss severity).

Moody's was provided with partial or full-year 2008 operating results for 98% of the pool. Moody's weighted average LTV ratio for the conduit component, excluding the specially serviced loan, is 83% compared to 79% at Moody's prior review.

Moody's stressed DSCR for the conduit component is 1.36X, essentially the same as at last review. Moody's stressed DSCR is based on Moody's net cash flow (NCF) and a 9.25% stressed rate applied to the loan balance.

Moody's uses a variation of the Herfindahl index (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, excluding defeased loans and loans with underlying ratings, has a Herf of 29 compared to 31 at last review.

The largest loan with an underlying rating is Greenville Place Apartments Loan ($19.3 million -- 3.1% of the pool) which is secured by a 519-unit apartment building located in Greenville, Delaware. The property was 73% occupied as of July 2009 compared to 93% at last review. Moody's current underlying rating and stressed DSCR are Baa3 and 1.49X, respectively, compared to Baa2 and 1.52X at last review.

The second largest loan with an underlying rating is the 12 E 22nd Street Loan ($12.8 million -- 2.0% of the pool), which is secured by an 89-unit apartment building located in New York City. The property was 100% occupied as of March 2009, similar to last review. Moody's current underlying rating and stressed DSCR are Aa1 and 1.9X, respectively, compared to Aa1 and 1.69X at last review.

The third largest loan with an underlying rating is Lincoln Tower Cooperative Loan ($12.1 million -- 1.9% of the pool), which is secured by a 387-unit residential co-op located in the upper west side submarket of New York City. Moody's current underlying rating and stressed DSCR are Aaa and 4.36X, respectively, compared to Aaa and 5.26X at last review.

The three largest conduit loans represent 20% of the outstanding pool balance. The largest conduit loan is the U.S. Bank Tower Loan Loan ($64.7 million -- 10% of the pool), which represents a pari passu interest in a $260 million first mortgage loan. The loan is secured by an office tower with 1.4 million square feet of net rentable area (NRA) and an accompanying parking garage in downtown Los Angeles, California. The loan sponsor is Maguire. The property was 88% occupied as of year-end 2008. The property's largest tenant, Latham & Watkins (20% of the NRA) has provided notice to the borrower that it intends to vacate the premises at its December 2009 lease expiration. Furthermore, the lease for the second largest tenant, Sempra Energy (16% of the NRA) expires in June 2010. Sempra has already vacated a sizable portion of its space although it has sublet much of it to other tenants. Even with the anticipated decline in cash flow when these two tenants vacate, Moody's projects that the property will still generate cash flow in excess of debt service. However, given the softness in the Los Angeles office market, new tenants will likely be paying lower rents than are currently in place. In addition, due to Maguire's current financial issues, Moody's is concerned about the availability of funds for leasing costs. The servicer has indicated that Maguire has experienced some success in re-leasing a portion of the Latham & Watkins space. The loan is interest-only for the entire term. Moody's LTV and stressed DSCR are 103% and 0.97X, respectively, compared to 76% and 1.24X at last review.

The second largest conduit loan is the Memorial Drive Loan ($39.7 million -- 6.3% of the pool), which is secured by a 129,000 square foot biotech lab/office building located in Cambridge, Massachusetts. The property was 73% occupied as of September 2009 compared to 53% at last review and 89% at securitization. The largest tenant is Cerulean which occupies 11% of the premises through February 2013. The property has experienced relatively low occupancy levels since securitization. Moody's LTV and stressed DSCR are 130% and 0.79X, respectively, compared to 119% and 0.88X at last review.

The third largest conduit loan is the 1401 & 1501 Nolan Ryan Expressway Loan ($20.3 million -- 3.2% of the pool), which is secured by a 234,000 square foot office property located in Arlington, Texas. The property is 100% leased to the Siemes Dematic Postal Automation L.P (SDPA), a member of the Siemens AG family, through January 2014. Although property performance has been stable, Moody's analysis reflects a downward adjustment to the property's net operating income due to the weakness of the Arlington office market and concerns about the property's occupancy by a single tenant. The loan has amortized 3% since last review. Moody's LTV and stressed DSCR are 90% and 1.08X, respectively, compared to 80% and 1.14X at last review.

Moody's rating action is as follows:

-Class A-3, $76,973,947, affirmed at Aaa; previously assigned Aaa on 5/10/2004

-Class A-4, $442,061,000, affirmed at Aaa; previously assigned Aaa on 5/10/2004

-Class X-1, Notional, affirmed at Aaa; previously assigned Aaa on 5/10/2004

-Class X-2, Notional, affirmed at Aaa; previously assigned Aaa on 5/10/2004

-Class B, $23,482,000, affirmed at Aa2; previously assigned Aa2 on 5/10/2004

-Class C, $7,827,000, affirmed at Aa3; previously assigned Aa3 on 5/10/2004

-Class D, $17,890,000, confirmed at A2; previously placed on review for possible downgrade on 8/11/2009

-Class E, $8,945,000, confirmed at A3; previously placed on review for possible downgrade on 8/11/2009

-Class F, $10,064,000, confirmed at Baa1; previously placed on review for possible downgrade on 8/11/2009

-Class G, $5,591,000, downgraded to Baa3 from Baa2; previously placed on review for possible downgrade on 8/11/2009

-Class H, $7,827,000, downgraded to Ba2 from Baa3; previously placed on review for possible downgrade on 8/11/2009

-Class J, $4,472,000, downgraded to B1 from Ba1; previously placed on review for possible downgrade on 8/11/2009

-Class K, $4,473,000, downgraded to B2 from Ba2; previously placed on review for possible downgrade on 8/11/2009

-Class L, $2,236,000, downgraded to B3 from Ba3; previously placed on review for possible downgrade on 8/11/2009

-Class M, $2,236,000, downgraded to Caa1 from B1; previously placed on review for possible downgrade on 8/11/2009

-Class N, $2,237,000, downgraded to Caa2 from B2; previously placed on review for possible downgrade on 8/11/2009

-Class O, $2,236,000, downgraded to Caa3 from B3; previously placed on review for possible downgrade on 8/11/2009

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 a periodic basis through a full review. Moody's prior review is summarized in a press release dated January 10, 2008.

The principal methodology used in rating and monitoring this transaction is "CMBS: Moody's Approach to Rating Fusion Transactions" published on April 19, 2005, which can be found at www.moodys.com in the Ratings Methodologies sub-directory under the Research & Ratings tab. 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 Three and Downgrades Eight CMBS Classes of BSCMS 2004-TOP14
No Related Data.
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