Approximately $620 Million of Structured Securities Affected
New York, March 09, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of 16 classes
of First Union National Bank Commercial Mortgage Trust Commercial Mortgage
Trust Commercial Mortgage Pass-Through Certificates, Series
2001-C4 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Dec 20, 2001 Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Jun 2,
2005 Upgraded to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Jun 2,
2005 Upgraded to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Sep 25,
2006 Upgraded to Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Sep 25,
2006 Upgraded to Aaa (sf)
Cl. F, Affirmed at Aaa (sf); previously on Jul 9,
2007 Upgraded to Aaa (sf)
Cl. G, Affirmed at Aaa (sf); previously on Jul 9,
2007 Upgraded to Aaa (sf)
Cl. H, Affirmed at Aa1 (sf); previously on Sep 25,
2008 Upgraded to Aa1 (sf)
Cl. J, Affirmed at A1 (sf); previously on Aug 9,
2007 Upgraded to A1 (sf)
Cl. K, Affirmed at A3 (sf); previously on Aug 9,
2007 Upgraded to A3 (sf)
Cl. L, Affirmed at Ba1 (sf); previously on Sep 25,
2006 Upgraded to Ba1 (sf)
Cl. M, Affirmed at Ba3 (sf); previously on Dec 20,
2001 Definitive Rating Assigned Ba3 (sf)
Cl. N, Affirmed at B1 (sf); previously on Dec 20,
2001 Definitive Rating Assigned B1 (sf)
Cl. O, Affirmed at B2 (sf); previously on Dec 20,
2001 Definitive Rating Assigned B2 (sf)
Cl. P, Affirmed at B3 (sf); previously on Dec 20,
2001 Definitive Rating Assigned B3 (sf)
Cl. IO-I, Affirmed at Aaa (sf); previously on
Dec 20, 2001 Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
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.
Moody's rating action reflects a cumulative base expected loss of 3%
of the current balance. At last review, Moody's cumulative
base expected loss was 2%. Moody's stressed scenario loss
is 9% 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://www.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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011 The hotel and multifamily sectors are continuing to show
signs of recovery, while recovery in the office and retail sectors
will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating Conduit Transactions" published in September 2000.
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/SF.QuickCheck.
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 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 August 9, 2007. Please
see the ratings tab on the issuer / entity page on moodys.com for
the last rating action and the ratings history.
DEAL PERFORMANCE
As of the February 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 37% to $620
million from $978 million at securitization. The Certificates
are collateralized by 106 mortgage loans ranging in size from less than
1% to 5% of the pool, with the top ten loans representing
30% of the pool. Twenty-six loans, representing
25% of the pool has defeased and is collateralized with U.S.
Government securities. The pool has significant near-term
refinance risk, as loans representing 75% of the pool mature
within the next 24 months.
Thirty-six loans, representing 36% 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.
10 loans have been liquidated from the pool since securitization,
resulting in an aggregate realized loss of $4.8 million
(9% loss severity overall). At last review the pool had
realized a $1.4 million loss. One loan, representing
less than 1% of the pool, is currently in special servicing.
Moody's has assumed a high default probability for five poorly performing
loans representing 12% of the pool and has estimated a $11
million aggregate loss (20% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 91%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 80% compared to 83% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 10% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.27X and 1.33X, respectively,
compared to 1.31X and 1.35X 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
risk of multiple notch downgrades under adverse circumstances.
The credit neutral Herf score is 40. The pool has a Herf of 39,
compared to 45 at last review.
The top three loans represent 14% of the pool balance. The
largest loan is the Overlook at Great Notch Loan ($31 million --
5%), which is secured by a 415,000 square foot Class
A office building located in Little Falls (Passaic County), New
Jersey. Performance has declined considerably since last review.
This decline can be attributed to a major tenant (ACS, 25%
of net rentable area (NRA)) surrendering 10% of their lease and
renewing the remaining 25% at a reduced rate, as well as
another tenant (7% of of the NRA) delinquent on its rent.
The loan matures in 2011. Moody's is concerned about refinance
risk associated with this loan due to its near-term maturity and
decline in performance. Moody's LTV and stressed DSCR are 133%
and 0.81X respectively, compared to 96% and 1.12X
at last review.
The second largest loan is the Orland Park Place Loan ($30 million
-- 5%), which is secured by a 421,000
square foot power center located approximately 25 miles southwest of Chicago
in Orland, Illinois. Current occupancy is 98% which
is in line with last review, and the majority of tenants are on
long term leases. Overall financial performance is in line with
the previous review and securitization. The loan matures in 2011.
Moody's LTV and stressed DSCR is 80% and 1.25X respectively,
compared to 89% and 1.12X at last review.
The third largest conduit loan is the Chesterbrook Office Building Loan
($25 million -- 4%), which is secured
by a 171,000 square foot Class A office building located in Berwyn,
Pennsylvania, 20 miles northwest of the Philadelphia central business
district. Property performance has declined since last review,
largely due to increased vacancy, lower rental levels for recent
leases, and increased expenses. The previous majority tenant,
Nationwide (58% of the NRA) was replaced by True Position at a
lower rental rate. In addition, a tenant which leased 11%
of the NRA was evicted in 2009 and the space is still vacant. There
are several lease proposals under discussion. The property was
80% leased as of September 2010 compared to 100% at last
review. Repair and maintenance costs have also increased over several
winters due to the increased costs for ice and snow removal, contributing
to the poor performance. The loan matures in 2012. Moody's
LTV and stressed DSCR is 83% and 1.28X respectively,
compared to 71% and 1.49X at last review.
New York
Brad Kamedulski
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Keith Banhazl
Vice President - Senior Analyst
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 The CMBS Ratings of FUNB 2001-C4
