Approximately $1.3 Billion of Structured Securities Affected
New York, March 04, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of six classes
and downgraded 13 classes of Credit Suisse First Boston Mortgage Securities
Corp., Commercial Mortgage Pass-Through Certificates,
Series 2004-C3. The downgrades are due to higher expected
losses for the pool resulting from anticipated losses from specially serviced
loans and concerns about refinancing risk associated with loans approaching
maturity in an adverse environment. Fourteen non-defeased
loans, representing 8% of the pool, mature within the
next 24 months. Eight of these loans, representing 6%
of the pool, have a Moody's stressed debt service coverage
ratio (DSCR) less than 1.00X.
The affirmations are due to key rating parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl
Index (Herf), remaining within acceptable ranges. In addition,
the certificates benefit from increased subordination due to loan paydowns
and principal amortization. The pool balance has declined by 18%
since Moody's last review.
On February 17, 2010 Moody's placed 13 classes of this transaction
on review for possible downgrade due to potential losses from specially
serviced and other poorly performing loans. This action concludes
our review of the transaction. The rating action is the result
of Moody's on-going surveillance of commercial mortgage backed
securities (CMBS) transactions.
As of the February 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 21% to $1.30
billion from $1.64 billion at securitization. The
Certificates are collateralized by 157 mortgage loans ranging in size
from less than 1% to 11% of the pool, with the top
ten loans representing 34% of the pool. Twenty-four
loans, representing 26% of the pool, have defeased
and are secured by U.S. Government securities. Defeasance
at last review represented 23% of the pool.
Twenty-seven loans, representing 12% 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.
Five loans have been liquidated from the pool, resulting in an aggregate
$16.4 million realized loss (48% loss severity on
average). Twenty loans, representing 13% of the pool,
are currently in special servicing. The largest specially serviced
loan is the Fountain Valley Town Center Loan ($23.7 million
-- 1.8% of the pool), which is secured by a 220,000
square foot community retail center located in Fountain Valley,
California. The loan was transferred to special servicing in August
2009 for imminent default and defaulted on its balloon payment on October
1, 2009. The loan is now current and the borrower is negotiating
a loan extension. The remaining 19 properties are secured by a
mix of property types. Moody's estimates an aggregate $55.7
million loss for 18 of the specially serviced loans (38% loss severity
on average). At last review, five loans, representing
2% of the pool, were in special servicing.
In addition to recognizing losses from specially serviced loans,
Moody's has assumed a high default probability on four poorly performing
loans representing 5% of the pool. Moody's estimates
a $19.3 million aggregate loss for these troubled loans
(30% loss severity on average based on 75% probability of
default). Moody's rating action recognizes potential uncertainty
around the timing and magnitude of loss from these troubled loans.
Moody's was provided with full-year 2008 and partial year 2009
operating results for 96% and 69% of the non-defeased
pool, respectively. Excluding specially serviced and troubled
loans, Moody's weighted average LTV ratio is 90% compared
to 92% at Moody's prior full review.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCR are 1.41X and 1.19X, respectively,
compared to 1.31X and 1.13X 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 26,
compared to 38 at last review.
The top three loans represent 18% of the pool. The largest
loan is the Pacific Design Center Loan ($145.0 million --
11.1% of the pool), which is secured by a 916,000
square foot office and design showroom complex located in West Hollywood,
California. In addition to the showroom and office space,
the property also houses a 384-seat theater and screening room,
conference facilities, a two-story gallery leased to the
Museum of Contemporary Art, a fitness facility and two restaurants.
The property was 82% leased as of June 2009 compared to 89%
at last review. Although the property's performance has improved
since securitization, it has not yet achieved the increased cashflow
projected at securitization. Moody's LTV and stressed DSCR are
85% and 1.28X, respectively, compared to 81%
and 1.27X at last review.
The second largest loan is the Centerpointe Mall Loan ($44.1
million -- 3.4% of the pool), which is secured
by a 774,000 square foot retail center located in Grand Rapids,
Michigan. The largest tenants are Menard, Inc (11%
of the NRA, lease expiration July 2013), Toys "R"
Us (6%, lease expiration January 2014), and Jo-Ann
Fabrics & Craft (5%, lease expiration January 2020).
The center was 70% leased as of October 2009 compared to 88%
at securitization. The loan is on the servicer's watchlist due
to low DSCR and occupancy. Performance has deteriorated significantly
since last review due to several tenants, including Klingman Furniture,
Steve & Barry's and Linen 'N Things, vacating the
property in 2008. The property's net operating income has
declined more than 40% since securitization. Although the
loan is current, Moody's assumes a high probability of default
(75%) based on the property's inferior market position relative
to its current capital structure. Moody's LTV and stressed DSCR
are 160% and 0.68X, respectively, compared to
104% and 1.04X at last review.
The third largest loan is the BC Wood Portfolio Loan ($41.9
million -- 3.2% of the pool), which is secured
by four shopping centers totaling 893,000 square feet located in
Louisville, Lexington, and Paris, Kentucky. The
portfolio was 88% leased as of December 2008 compared to 91%
at securitization. Performance has declined due to lower occupancy
and increased expenses. Moody's LTV and stressed DSCR are 96%
and 1.1X, respectively, compared to 88% and
1.17X at last review.
Moody's rating action is as follows:
-Class A-3, $58,309,659,
affirmed at Aaa; previously assigned at Aaa on 10/25/2004
-Class A-4, $102,918,000,
affirmed at Aaa; previously assigned at Aaa on 10/25/2004
-Class A-5, $694,474,000,
affirmed at Aaa; previously assigned at Aaa on 10/25/2004
-Class A-1A, $239,915,996,
affirmed at Aaa; previously assigned at Aaa on 10/25/2004
-Class A-X, Notional, affirmed at Aaa;
previously assigned at Aaa on 10/25/2004
-Class A-SP, Notional, affirmed at Aaa;
previously assigned at Aaa on 10/25/2004
-Class B, $45,084,000, downgraded
to Aa3 from Aa2; previously placed on review for possible downgrade
on 2/17/2010
-Class C, $14,345,000, downgraded
to A2 from Aa3; previously placed on review for possible downgrade
on 2/17/2010
-Class D, $28,690,000, downgraded
to Baa1 from A2; previously placed on review for possible downgrade
on 2/17/2010
-Class E, $16,395,000, downgraded
to Ba1 from A3; previously placed on review for possible downgrade
on 2/17/2010
-Class F, $20,493,000, downgraded
to B3 from Baa1; previously placed on review for possible downgrade
on 2/17/2010
-Class G, $16,394,000, downgraded
to Caa2 from Baa2; previously placed on review for possible downgrade
on 2/17/2010
-Class H, $22,542,000, downgraded
to Ca from Baa3; previously placed on review for possible downgrade
on 2/17/2010
-Class J, $8,198,000, downgraded
to C from Ba1; previously placed on review for possible downgrade
on 2/17/2010
-Class K, $6,147,000, downgraded
to C from Ba2; previously placed on review for possible downgrade
on 2/17/2010
-Class L, $8,198,000, downgraded
to C from Ba3; previously placed on review for possible downgrade
on 2/17/2010
-Class M, $6,148,000, downgraded
to C from B1; previously placed on review for possible downgrade
on 2/17/2010
-Class N, $6,147,000, downgraded
to C from Caa1; previously placed on review for possible downgrade
on 2/17/2010
-Class O, $2,050,000, downgraded
to C from Caa2; previously placed on review for possible downgrade
on 2/17/2010
Moody's monitors transactions on a monthly basis through two sets of quantitative
tools -- MOST® (Moody's Surveillance Trends) and CMM
(Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior review is summarized
in a press release dated March 10, 2008.
The principal methodology used in rating and monitoring this transaction
is "CMBS: Moody's Approach to Rating U.S. Conduit
Transactions" published September 15, 2000, which is available
on www.moodys.com in the Rating 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 and Downgrades 13 CMBS Classes of CSFB 2004-C3
