Moody's Affirms Ten Classes of Merrill Lynch Floating Trust Pass-Through Certificates, Series 2006-1
Approximately $1.3 Billion of Structured Securities Affected
New York, October 09, 2008 -- Moody's Investors Service affirmed the ratings of ten classes of
Merrill Lynch Floating Trust Pass-Through Certificates, Series
2006-1 as follows:
-Class A-1, $650,119,103,
affirmed at Aaa
-Class A-2, $527,680,000,
affirmed at Aaa
-Class B, $55,373,000, affirmed
-Class C, $48,860,000, affirmed
-Class D, $32,573,000, affirmed
-Class X-1A, Notional Amount, affirmed at Aaa
-Class X-1B, Notional Amount, affirmed at Aaa
-Class X-3A, Notional Amount, affirmed at Aaa
-Class X-3B, Notional Amount, affirmed at Aaa
-Class X-3C, Notional Amount, affirmed at Aaa
Moody's is affirming all classes based on the stable performance
of the loans in the pool.
The Certificates are collateralized by three whole loans, six senior
participation interests and one pari passu participation. The loans
range in size form 0.9% to 46.6% of the pool
balance based on current principal balances. As of the September
15, 2008 distribution date, the transaction's aggregate
certificate balance has decreased by approximately 35.8%
to $1.7 billion from $2.6 billion at securitization
as a result of the payoff of five loans initially in the pool, amortization
associated with the Lord & Taylor Portfolio Loan and partial releases
associated with the Phoenix Inns Portfolio loan and the Trizec Portfolio
Loan. Subsequent to the September 15, 2008 distribution date,
the Portals III Loan ($93.2 million) was paid off resulting
in an additional 3.8% decrease in pool balance from securitization.
Moody's current weighted average loan to value ("LTV")
ratio is 63.8%, compared to 62.7% at
Moody's last review in September, 2007 and 66.3%
The Lord & Taylor Portfolio Loan ($780.4 million --
49.4%) provided financing for the acquisition of the Lord
& Taylor department store chain from Federated Department Stores.
The portfolio consists of 37 cross-collateralized and cross-defaulted
properties containing a total of 5.85 million square feet.
Twenty-two of the properties are owned in fee and 15 are leasehold
interests. The properties, which are 100% leased to
Lord & Taylor, are located in eight different states and Washington
D.C. Included in the portfolio is the Lord & Taylor
flagship store which is located on Fifth Avenue in New York City in an
11-story building containing 676,042 square feet.
The Lord & Taylor portfolio had average sales of $215 per square
foot for the trailing 12-month period ending January, 2008
compared to $214 per square foot at securitization. Moody's
has concerns regarding the future performance of retailers in general,
in view of current global economic conditions, and will continue
to monitor the performance of the Lord & Taylor Portfolio Loan given
its significant share of this deal.
The Lord & Taylor Portfolio Loan matures on October 11, 2008
with three 12-month extension option periods. There is scheduled
amortization of $71,483 per month. In addition,
there is mezzanine debt in the amount of $225.0 million.
The loan sponsor is NRDC Equity Partners which is a partnership between
principals of Apollo Real Estate Advisors and National Realty and Development
Corp. Moody's LTV ratio is 75.2%, compared
to 75.4% at securitization.
The Trizec Portfolio Mortgage Loan ($505.8 million --
43.8%) is a pari passu participation in a $595.1
million whole loan. The cross-collateralized and cross-defaulted
mortgages consist of land and improvements on 22 separate office buildings
with total net rentable area of 7.9 million square feet.
The properties are located in five different metropolitan areas:
Los Angeles, California (10 properties -- 3.2 million
square feet); San Diego, California (3 properties -- 1.4
square feet); Jersey City, New Jersey (1 property -- 1.1
million square feet); Washington D.C. (6 properties
-- 1.4 million square feet); and Houston, Texas
(2 properties -- 0.8 million square feet). As of June
2008, the portfolio had a weighted average occupancy rate of 87.3%,
compared to 85.7% at securitization.
The interest-only Trizec Portfolio Mortgage Loan matures on October
11, 2008 with three 12-month extension options. There
is additional trust mezzanine debt in the amount of $470.4
million. The loan sponsors are Brookfield Properties Corporation
and Blackstone Real Estate Partners, L.L.P.
Moody's LTV ratio is 43.8%, compared to 39.8%
at Moody's last review and at securitization. Moody's
current underlying rating is Aaa, the same as at securitization.
The Royal Holiday Portfolio Loan ($65.0 million --
4.1%) is secured by five full-service hotels and
one limited-service hotel located in five different Mexican resort
locations: Cancun, Cozumel, Acapulco, Los Cabos
and Ixtapa. At securitization, several of the hotels were
undergoing full renovations and expansions and were also converting to
all-inclusive rate structures. Moody's estimates 2008
RevPAR of $49.51, compared to $56.64
The $103.0 million Royal Holiday Portfolio Loan includes
a $38.0 million non-trust junior component.
The interest-only loan matures in October, 2009 with two
12-month extension options. The loan sponsor is Grupo Costamex,
S.A. de C.V. Moody's LTV ratio is 78.4%,
compared to 75.2% at securitization.
Brookdale Senior Living Portfolio ($64.0 million --
4.1 %) is secured by five independent and assisted living
facilities located in California (3 facilities), Washington (1)
and Ohio (1). The portfolio contains 813 total beds of which 314
are independent living, 402 are assisted living and 97 are set aside
for persons with Alzheimer's. All five of the properties
are "private pay".
The $95.0 million Brookdale Senior Living Portfolio mortgage
loan includes a $31.0 million non-trust junior component.
There is also $29.5 million in mezzanine financing.
The interest-only loan matures in May, 2009 with two 12-month
extension options. The loan sponsor is Brookdale Living Communities,
Inc. Moody's LTV ratio is 65.1%, compared
to 65.5% at Moody's last review and at securitization.
Moody's current underlying rating is Baa3, the same as at
The RLJ Hotel Portfolio ($60.0 million -- 3.8%)
is secured by ten hotel properties in six different markets in Oregon,
Arizona and Washington with a total of 1,144 rooms. Eight
of the hotels are limited service and two are extended stay. Hotel
flags include Fairfield Inn & Suites by Marriott (6 properties),
Courtyard by Marriott (1), Holiday Inn (1) and Residence Inn by
Marriott (2). At securitization, approximately $20.0
million had been recently spent for renovations, including the conversion
of all Fairfield Inns to Fairfield Inn and Suites. RevPAR for the
trailing 12-month period ending March, 2008 was $78.04,
compared to $68.75 at securitization.
The interest-only RLJ Hotel Portfolio loan matures in July,
2009 with two 12-month extension options. There is also
$32.0 million in mezzanine debt. The loan sponsor
is RLJ Lodging Fund II, L.P. and RLJ Lodging Fund
II (PF #1), L.P. Moody's LTV ratio is 63.6%,
compared to 68.8% at Moody's last review and at securitization.
Moody's underlying rating is Baa2, the same as Moody's
last review, and compared to Baa3 at securitization.
Moody's periodically completes full reviews in addition to monitoring
transactions on a monthly basis. Moody's prior full review is summarized
in a press release dated October 4, 2007.
Moody's has published rating methodologies outlining our analytical approach
to surveillance and our approach to rating large loan/single borrower
transactions. In addition, Moody's has published numerous
articles outlining our ratings approach to the various property types
customarily deposited within these transactions along with other articles
on credit issues unique to CMBS. The major rating methodologies
employed in analyzing this transaction include:
US CMBS: Moody's Approach to Surveillance of Large Loan Transactions,
March 8, 2006 -- this paper details a brief review
of Moody's new issue ratings approach, the specific steps in a surveillance
review of a large loan deal, additional methods of evaluation,
a discussion of pro rata pay and rake classes, information on the
impact of paydowns and credit drift on ratings, a discussion of
pool diversity and leverage adjustments, and an indication of the
equivalency of surveillance and new issue ratings;
CMBS: Moody's Approach to Rating Large Loan/Single Borrower
Transactions, July 7, 2000 -- this paper defines
large loans, details Moody's large loan rating approach, discusses
target LTV levels and how changes in credit risk impact LTV levels,
speaks to how Moody's determines an assets credit risk profile,
comments on pooling and diversity benefits along with structural and legal
issues and borrower quality, and provides supplementary information
on the impact of changes in amortization schedules, capitalization
rates for different property types, and the information requirements
for ratings these types of deals;
CMBS: Moody's Approach to Rating Floating Rate Transactions,
May 12, 2000 -- this paper discusses the market drivers
behind floating rate deals, Moody's CMBS floating rate methodology,
how interest rate volatility impacts credit risk, how to calculate
the floating rate credit enhancement adjustment, and the potential
credit benefits of interest rate caps; and
Positive and Negative Pooling: Moody's Approach to Tranching
Large Loan CMBS, December 18, 2001 -- this paper
provides an evaluation of how diversity affects the bond capital structure
leading to a rationale for positive and negative pooling, discusses
the Monte Carlo simulation approach, and indicates some general
ratings guidelines based on simulation results.
These methodologies are available on Moodys.com. The analysis
of this transaction is consistent with Moody's published rating methodologies.
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service