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Rating Action:

Moody's Affirms Ten Classes of CSMC 2006-C5

07 Aug 2014

Approximately $2.3 Billion of Structured Securities Affected

New York, August 07, 2014 -- Moody's Investors Service has affirmed the ratings on ten classes of CSFB Commercial Mortgage Trust 2006-C5 as follows:

Cl. A-1-A, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf)

Cl. A-3, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf)

Cl. A-AB, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf)

Cl. A-M, Affirmed Baa2 (sf); previously on Oct 3, 2013 Affirmed Baa2 (sf)

Cl. A-J, Affirmed Caa1 (sf); previously on Oct 3, 2013 Downgraded to Caa1 (sf)

Cl. B, Affirmed Caa2 (sf); previously on Oct 3, 2013 Downgraded to Caa2 (sf)

Cl. C, Affirmed Ca (sf); previously on Oct 3, 2013 Downgraded to Ca (sf)

Cl. D, Affirmed C (sf); previously on Oct 3, 2013 Downgraded to C (sf)

Cl. E, Affirmed C (sf); previously on Oct 3, 2013 Affirmed C (sf)

Cl. A-X, Affirmed B1 (sf); previously on Oct 3, 2013 Downgraded to B1 (sf)

RATINGS RATIONALE

The ratings on the four investment grade 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 the five below investment grade P&I classes were affirmed because the ratings are consistent with Moody's expected loss.

The rating on the IO class (Class A-X) was affirmed based on the credit performance (or the weighted average rating factor) of its referenced classes.

Moody's rating action reflects a base expected loss of 8.4% of the current balance compared to 13.0% at Moody's last review. Realized losses have increased to 8.3% of the original pooled balance compared to 4.1% at last review and Moody's base expected loss plus realized losses is now 14.0% of the original pooled balance compared to 14.6% 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://www.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 U.S. CMBS Conduit Transactions" published in September 2000. 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 44 compared to 45 at Moody's last review.

DEAL PERFORMANCE

As of the July 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 32% to $2.3 billion from $3.4 billion at securitization. The certificates are collateralized by 237 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans constituting 39% of the pool. Four loans, constituting 2% of the pool, have defeased and are secured by US government securities.

Seventy-one loans, constituting 22% 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.

Fifty-seven loans have been liquidated from the pool, resulting in an aggregate realized loss of $283 million (for an average loss severity of 59%). Nineteen loans, constituting 12% of the pool, are currently in special servicing. The largest specially serviced loan is the Best Western President Loan ($77.7 million -- 3.3% of the pool), which is secured by a 334-key hotel in Manhattan, New York. The loan transferred to special servicing in March 2013 due to imminent payment default, however, the loan has remained current on its payments. The special servicer has indicated that the borrower has requested a possible loan modification, as well as approval to convert the hotel to a more upscale brand. The Lender is currently evaluating the requests.

The second largest exposure in special servicing is the West Covina Portfolio ($75.6 million -- 3.2% of the pool) which is comprised of two cross-collateralized and cross-defaulted loans. The West Covina Village Community Shopping Center Loan is secured by a 229,000 square foot (SF) anchored retail center and the Wells Fargo Bank Tower Loan is secured by a 215,000 SF suburban office building, both located in West Covina, California. The loans initially transferred to special servicing in June 2009 due to delinquent payments and a modification closed in May 2013. The modification for both loans included (a) a one-year extension of the maturity date; (b) capitalization of lender expenses; (c) interest-only payment for the remainder of the term and (d) implementation of a hard lockbox. The loans were returned to the master servicer in 2013 but were subsequently transferred back to the special servicer in June 2014 due to the Wells Fargo Bank Tower being 60 days delinquent.

The remaining 16 specially serviced loans are secured by a mix of property types. Moody's estimates an aggregate $111.9 million loss for the specially serviced loans (41% expected loss on average).

Moody's has assumed a high default probability for 27 poorly performing loans, constituting 6.6% of the pool, and has estimated an aggregate loss of $25.1 million from these troubled loans.

Moody's received full year 2013 operating results for 93% of the pool. Moody's weighted average conduit LTV is 102% compared to 109% at Moody's last review. Moody's conduit component excludes defeased, specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 14% 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 1.29X and 1.03X, respectively, compared to 1.23X and 0.95X 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 top three performing conduit loans represent 19% of the pool balance. The largest conduit loan is the 720 Fifth Avenue Loan ($165.0 million -- 7.1% of the pool), which is secured by a 121,100 SF mixed-use (retail and office) property located in the Fifth Avenue retail submarket of Manhattan. The property was 90% leased as of October 2013 compared to 92% at last review. The largest tenant is Abercrombie & Fitch (54% of net rentable area (NRA), with various lease expiration dates from 2019 through 2022). The loan is interest-only throughout the term and matures November 2016. Moody's LTV and stressed DSCR are 124% and 0.74X, respectively, compared to 125% and 0.74X at last review.

The second largest conduit loan is the HGSI Headquarters Loan ($141.9 million -- 6.1% of the pool), which is secured by a 635,000 SF office property located in Rockville, Maryland. The property is 100% leased to Human Genome Sciences, Inc. through May 2026 and serves as its corporate headquarters. Property performance is consistent with Moody's original projections. Moody's stressed the cash flow with a lit/dark analysis given the single tenant occupancy of the property. Moody's LTV and stressed DSCR are 105% and 0.95X, respectively, compared to 106% and 0.94X at last review.

The third largest conduit loan is the 280 Park Avenue Loan ($138.6 million -- 6.0% of the pool), which represents a participation interest in a $433 million senior mortgage loan. The loan is secured by a 1.2 million SF office property in Midtown Manhattan near Grand Central Terminal. The loan is on the watchlist for poor performance, as occupancy has remained well below market levels for several years. As of June 2014 the property was 57% leased compared to 60% in September 2013. Two tenants, together representing approximately 12% of property NRA, vacated at their lease expirations in January 2014, however, approximately 92,000 SF of this space was leased to new tenants at higher rents. The borrower reports strong leasing activity for the property following a major renovation which included an overhaul of the lobby. Moody's LTV and stressed DSCR are 83% and 1.11X, respectively.

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.

Matthew Halpern
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

Keith Banhazl
Senior Vice President
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 Ten Classes of CSMC 2006-C5
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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