Approximately $765.6 Million of Structured Securities Affected
New York, February 09, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of ten classes
and downgraded the ratings of nine classes of GMAC 2004-C2,
Commercial Mortgage Securities Inc., Commercial Mortgage
Pass-Through Certificates, Series 2004-C2 as follows:
Cl. A-1A, Affirmed at Aaa (sf); previously on
Aug 16, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Aug 16, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Aug 16, 2004 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Aug 16, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on
Aug 16, 2004 Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on
Aug 16, 2004 Definitive Rating Assigned Aaa (sf)
Cl. B, Downgraded to Aa2 (sf); previously on Feb 3,
2011 Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to A2 (sf); previously on Feb 3,
2011 Aa3 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Baa2 (sf); previously on Feb 3,
2011 A3 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Ba1 (sf); previously on Feb 3,
2011 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to B1 (sf); previously on Feb 3,
2011 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to Caa2 (sf); previously on Feb 3,
2011 B2 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Ca (sf); previously on Feb 3,
2011 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to C (sf); previously on Feb 3,
2011 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to C (sf); previously on Feb 3,
2011 Ca (sf) Placed Under Review for Possible Downgrade
Cl. L, Affirmed at C (sf); previously on Feb 11,
2010 Downgraded to C (sf)
Cl. M, Affirmed at C (sf); previously on Feb 11,
2010 Downgraded to C (sf)
Cl. N, Affirmed at C (sf); previously on Feb 11,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Feb 11,
2010 Downgraded to C (sf)
RATINGS RATIONALE
The downgrades of Classes F through K are due to higher expected losses
for the pool resulting from anticipated losses from specially serviced
loans and troubled loans. The affirmations are due to key parameters,
including Moody's loan to value (LTV) ratio, Moody's
stressed debt service coverage ratio (DSCR) and the Herfindahl Index (Herf),
remaining within acceptable ranges. Based on our current base expected
loss, the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
On February 3, 2011, Moody's placed nine classes on
review for possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
8.3% of the current balance. At last review,
Moody's cumulative base loss was 5.6%. Moody's
stressed scenario loss is 10.8% of the current balance.
Moody's provides a current list of base and stress scenario losses
for conduit and fusion CMBS transactions on moodys.com at http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for investment grade classes could decline below the current levels.
If future performance materially declines, the expected level of
credit enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these
expectations. Performance that falls outside an acceptable range
of the key parameters may indicate that the collateral's credit
quality is stronger or weaker than Moody's had anticipated during
the current review. Even so, deviation from the expected
range will not necessarily result in a rating action. There may
be mitigating or offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to amortization
and loan payoffs or a decline in subordination due to realized losses.
Primary sources of assumption uncertainty are the current stressed macroeconomic
environment and continuing weakness in the commercial real estate and
lending markets. Moody's currently views the commercial real
estate market as stressed with further performance declines expected in
the industrial, office, and retail sectors. Hotel performance
has begun to rebound, albeit off a very weak base. Multifamily
has also begun to rebound reflecting an improved supply / demand relationship.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2011;
we expect overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal deficits
and persistent unemployment levels.
The principal methodologies used in this rating were "CMBS: Moody's
Approach to Rating Fusion Transactions" published in July 2000 and "CMBS:
Moody's Approach to Rating Large Loans/Single Borrower Transaction"
published in July 2000.
In addition to methodologies and research, 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.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR,
and Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit
model results at the B2 level are driven by a pay down analysis based
on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity,
is a primary determinant of pool level diversity and has a greater impact
on senior certificates. Other concentrations and correlations may
be considered in our analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, 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, the credit enhancement for loans with investment-grade
credit estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the underlying rating of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the underlying rating level, is
incorporated for loans with similar credit estimates in the same transaction.
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
risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 17
compared to 18 at last review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel based Large Loan Model v 8.0 and then reconciles and weights
the results from the two models in formulating a rating recommendation.
The large loan model derives credit enhancement levels based on an aggregation
of adjusted loan level proceeds derived from Moody's loan level LTV ratios.
Major adjustments to determining proceeds include leverage, loan
structure, property type, and sponsorship. These aggregated
proceeds are then further adjusted for any pooling benefits associated
with loan level diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that considers
both quantitative and qualitative factors. Therefore, the
rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. 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 full review
is summarized in a press release dated February 11, 2010.
Please see the ratings tab on the issuer / entity page on moodys.com
for the last rating action and the ratings history.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had a neutral
impact on the ratings.
DEAL PERFORMANCE
As of the January 10, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 17% to $773.4
million from $933.7 million at securitization. The
Certificates are collateralized by 64 mortgage loans ranging in size from
less than 1% to 10% of the pool, with the top ten
loans representing 52% of the pool. Seven loans, representing
26% of the pool, have defeased and are collateralized by
U.S. Government securities. The pool also contains
two loans, representing 15% of the pool with investment grade
credit estimates compared to three loans, representing 25%
of the pool at last review. The 111 Eighth Avenue Loan ($79.9
million -- 10.3% of the pool) formerly had a credit
estimate but has since defeased after the recent sale to Google in December
2010. Six loans, representing 26% of the pool,
have defeased and are collateralized with U.S. Government
securities. Defeasance at last review represented 16% of
the pool.
Ten loans, representing 9.0% 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) 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.
Four loans have been liquidated from the pool since securitization,
resulting in a $4.6 million loss (19% loss severity
overall). There are currently seven loans, representing 18%
of the pool, in special servicing. The largest specially
serviced loan is the Parmatown Shopping Center Loan ($63.4
million -- 8.2% of the pool), which is secured
by an 861,207 square foot (SF) enclosed regional shopping mall located
in Parma, Ohio. The loan was recently transferred to special
servicing due to imminent default. The mall's owner,
Forest City Ratner, indicated that they are willing to turn over
the property to the lender. The mall includes Macy's,
JC Penney, Wal-mart and Dick's Sporting Goods as anchor
tenants. Financial performance has declined since last review,
consistent with lower total mall occupancy. In-line mall
tenant vacancy is now 34% with 73 vacant in-line mall tenant
vacancies.
The second largest specially serviced loan is the Providence Biltmore
Hotel ($22.4 million -- 2.9% of the pool),
which is secured by a 290-room full service hotel located in downtown
Providence, Rhode Island. The loan was recently transferred
back to special servicing after a recent loan modification was completed
in February 2010 following monetary default in 2009. The property's
performance has declined since last review due to low occupancy and increased
expenses.
The third largest specially serviced loan is the Turnbury Park Apartments
Loan ($15.3 million -- 2.0% of the pool),
which is secured by a 161-unit apartment complex located in Canton,
Michigan. The loan was transferred to special servicing in July
2009 due to imminent default. The property's leasing performance
has improved from 83% leased at last review to 88% leased
as of June 2010 yet the property remains delinquent. The remaining
four specially serviced loans are secured by a mix of property types.
The master servicer has recognized appraisal reductions totaling $33
million from specially serviced loans. Moody's has estimated
an aggregate $56.5 million loss (41% expected loss
on average) for all of the specially serviced loans.
Moody's has assumed a high default probability for one poorly performing
loan representing 2.0% of the pool and has estimated a $2.3
million loss (15% expected loss based on a 50% probability
default) from this troubled loan.
Based on the most recent remittance statement, Classes L through
P have experienced cumulative interest shortfalls totaling $1.6
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 year 2009 and partial year 2010 operating
results for 76% and 56%, respectively, of the
pool's non-defeased loans. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 84%
compared to 94% at Moody's prior review. Moody's
net cash flow reflects a weighted average haircut of 13.0%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.44X and 1.25X, respectively,
compared to 1.31X and 1.12X 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.
The top three performing conduit loans represent 11% of the pool
balance. The largest loan is the Military Circle Mall Loan ($56.0
million -- 7.2% of the pool), which is secured
by a 740,788 SF enclosed regional shopping mall located in Norfolk,
Virginia. Anchor tenants include JC Penney, Macy's,
Sears and Cinemark Theater. Financial performance has improved
since last review. The property was 94% leased as of December
2010; the same as at last review. The loan has also amortized
2% since last review. Moody's LTV and stressed DSCR
are 82% and 1.26X, respectively, compared to
88% and 1.17X at last review.
The second largest loan is the Escondido Village Shopping Center Loan
($17.4 million -- 2.3% of the pool),
which is secured by a 191,629 SF retail center located north of
San Diego in Escondido, California. Financial performance
has improved since last review due to higher occupancy. The center
was 99% leased as September 2010 versus 93% at last review.
The loan has amortized 2% since last review. Moody's
LTV and stressed DSCR are 79% and 1.27X, respectively,
compared to 95% and 1.04X at last review.
The third largest loan is the Stonybrook Apartments Loan ($14.4
million -- 1.9% of the pool), which is secured
by a 258-unit apartment complex located in Deptford, New
Jersey. Financial performance has improved slightly since last
review due to higher occupancy. The property was 90% leased
as of September 2010 versus 88% at last review. This loan
has amortized 2% since last review. The loan is on the Master
Servicer's watchlist due to a lower occupancy and lower DSCR.
Moody's LTV and stressed DSCR are 97% and 0.95X,
respectively, compared to 100% and 0.92X at last review.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's Analytics
information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Gregory Reed
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms Ten and Downgrades Nine CMBS Classes of GMAC 2004-C2
