Approximately $19.4 Million of Structured Securities Affected
New York, May 23, 2018 -- Moody's Investors Service, ("Moody's") has
affirmed the ratings on three classes in Wachovia Bank Commercial Mortgage
Trust 2003-C7, Commercial Mortgage Pass-Through Certificates,
Series 2003-C7 as follows:
Cl. F, Affirmed Aaa (sf); previously on Jun 1,
2017 Upgraded to Aaa (sf)
Cl. G, Affirmed B1 (sf); previously on Jun 1,
2017 Upgraded to B1 (sf)
Cl. H, Affirmed C (sf); previously on Jun 1, 2017
Affirmed C (sf)
RATINGS RATIONALE
The ratings on the P&I classes, Classes F and G, 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 rating on the P&I class, Class H, was affirmed because
the rating is consistent with Moody's realized losses. Class
H has already experienced a 71% realized loss as result of previously
liquidated loans.
Moody's rating action reflects a base expected loss of 0% of the
current pooled balance, the same as at Moody's last review.
Moody's does not anticipate losses from the remaining collateral
in the current environment. However, over the remaining life
of the transaction, losses may emerge from macro stresses to the
environment and changes in collateral performance. Our ratings
reflect the potential for future losses under varying levels of stress.
Moody's base expected loss plus realized losses is now 6.6%
of the original pooled balance, compared to 6.5% 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 RATINGS:
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 these ratings was "Moody's
Approach to Rating Large Loan and Single Asset/Single Borrower CMBS"
published in July 2017. Please see the Rating Methodologies page
on www.moodys.com for a copy of this methodology.
DEAL PERFORMANCE
As of the May 15, 2018 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $19.4
million from $1 billion at securitization. The certificates
are collateralized by 14 mortgage loans ranging in size from less than
1% to 37% of the pool. Four loans, constituting
22.3% of the pool, have defeased and are secured by
US government securities.
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 three,
compared to five at Moody's last review.
Three loans, constituting 11.7% 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.
Six loans have been liquidated from the pool, resulting in an aggregate
realized loss of $66.5 million (for an average loss severity
of 70.5%). There are currently no loans in special
servicing.
Moody's received full year 2016 operating results for 90% of the
pool, and full or partial year 2017 operating results for 100%
of the pool (excluding specially serviced and defeased loans).
Moody's weighted average conduit LTV is 56.7%,
compared to 53.5% at Moody's last review. Moody's
conduit component excludes loans with structured credit assessments,
defeased and CTL loans, and specially serviced and troubled loans.
Moody's net cash flow (NCF) reflects a weighted average haircut
of 31.9% to the most recently available net operating income
(NOI). Moody's value reflects a weighted average capitalization
rate of 9.12%.
Moody's actual and stressed conduit DSCRs are 1.12X and 2.30X,
respectively, compared to 1.19X and 2.13X 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 conduit loans represent 60.1% of the pool
balance. The largest loan is the Plaza de Laredo Loan ($7.2
million -- 37% of the pool), which is secured
by a retail property located in Laredo, Texas, approximately
2.5 hours south of San Antonio near the border of Mexico.
The property is shadow anchored by Walmart and the top three tenants at
the property are Home Depot (49.4% of NRA; lease expiration
August 2021), Academy Sports & Outdoors (25.6%
of NRA; lease expiration July 2018), and Office Depot (10.3%
of NRA; lease expiration December 2018). As per the December
2017 rent roll, the property was 99.7% leased.
The loan has amortized 37% since securitization and is scheduled
to mature in October 2023. Moody's LTV and stressed DSCR are 57.9%
and 1.73X, respectively, compared to 61.4%
and 1.63X at the last review.
The second largest loan is the Clearwater and Ocala, Florida Loan
(formerly known as the Florida Eckerd Portfolio Loan) ($2.3
million -- 11.9% of the pool), which was originally
secured by two cross-collateralized and cross-defaulted
single-tenant Eckerd stores in Clearwater and Ocala, Florida.
The property in Clearwater is now leased to Main Street Thrift Shop and
the property in Ocala is leased to Dollar Tree. Performance has
remained stable and the loan has amortized 60% since securitization.
The loan is scheduled to mature in September 2023. Moody's LTV
and stressed DSCR are 46.3% and 2.1X, respectively,
compared to 53.3% and 1.82X at the last review.
The third largest loan is the Sorrento Place I & II Loan ($2.2
million -- 11.2% of the pool), which is secured
by a 72-unit multifamily property located in Fargo, North
Dakota. The subject property consists of two, three-story
garden style apartments with a mixture of one, two and three bedroom
units, along with single and double car garages. The property
was 81% occupied as of December 2017, compared to 90%
occupied as of December 2016. The loan has amortized 26.3%
since securitization and is scheduled to mature in July 2018. Moody's
stressed the cash flow given occupancy declines and potential refinance
risk. Moody's LTV and stressed DSCR are 101.2% and
0.93X, respectively, compared to 63.7%
and 1.48X at the last review.
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.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Ruby Kaur
Associate Lead Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Gregory Reed
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
