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Rating Action:

Moody's Affirms Three and Downgrades 11 CMBS Classes of SOVC 2007-C1

21 Jul 2010

Approximately $869.2 Million of Structured Securities Affected

New York, July 21, 2010 -- Moody's Investors Service (Moody's) affirmed the ratings of three classes and downgraded 11 classes of Sovereign Commercial Mortgage Securities Trust Commercial Mortgage Pass-Through Certificates, Series 2007-C1. The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from specially serviced and poorly performing watchlisted loans and concerns about refinance risk associated with loans maturing in an adverse economic environment. One hundred and twenty eight loans mature within the next 36 months. Twenty-two of these loans, representing 12% of the pool, have a Moody's stressed debt service coverage ratio (DSCR) less than 1.0X.

The affirmations are due to key rating parameters, including Moody's loan to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl Index (Herf) remaining within acceptable ranges.

Moody's placed 11 classes of this transaction on review for possible downgrade on July 14, 2010. This action concludes the review.

The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities (CMBS) transactions.

As of the June 22, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 14% to $869.2 million from $1.0 billion at securitization. The Certificates are collateralized by 224 mortgage loans ranging in size from less than 1% to 4% of the pool, with the top ten loans representing 21% of the pool. The pool does not contain any defeased loans or loans with underlying ratings.

Eighty- seven loans, representing 34% 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; formerly Commercial Mortgage Securities Association) 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.

Fifteen loans have been liquidated from the pool, resulting in an aggregate $11.9 million loss (35% loss severity on average). Currently five loans, representing 4% of the pool, are in special servicing. The largest specially serviced loan is The Marina Palms Apartments Loan ($17.4 million -- 2.0% of the pool), which is secured by a 229-unit apartment complex located in Bradenton, Florida. The loan was transferred to special servicing in September 2008 due to payment default. Foreclosure proceedings are underway. The remaining four loans are secured by multifamily and mixed use properties. Moody's estimates a $10.6 million aggregate loss from the specially serviced loans (35% loss severity on average).

Moody's has assumed a high default probability on 30 loans representing approximately 12% of the pool. These loans are on the watchlist due to declines in performance or mature within the next six months and have a Moody's stressed DSCR less than 1.0X. Moody's has estimated a $23.9 million loss from these loans (23% expected loss based on an overall 46% default probability). Moody's rating action recognizes potential uncertainty around the timing and magnitude of losses from these troubled loans.

As of the most recent remittance date, the transaction has experienced unpaid accumulated interest shortfalls totaling $438,349, affecting Classes F through N. Interest shortfalls are caused by special servicing fees, appraisal reductions, extraordinary trust expenses and loan modifications.

Moody's was provided with full and partial-year 2009 operating results for 83% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 104% compared to 127% at Moody's last review in February 2009. The last review was part of the first quarter 2009 ratings sweep of 2006-2009 vintage conduit and fusion CMBS transactions.

Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.47X and 1.21X, respectively, compared to 1.20X and 0.96X 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 the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 87 compared to 114 at last review.

The three largest conduit loans represent 10% of the pool. The largest conduit loan is the West New York Portfolio Loan ($35.7 million -- 4.1% of the pool), which is secured by a portfolio consisting of 34 multifamily, retail and office properties located in West New York and Union City, New Jersey. The portfolio was 98% leased, similar to securitization. Performance has been stable since last review. Moody's LTV and stressed DSCR are 141% and 0.97X, respectively, essentially the same as at last review.

The second largest loan is the Franklin Towne Center Loan ($29.9 million -- 3.4% of the pool), which is secured by a retail center located in Franklin Township, New Jersey. The center is master leased to Stop & Shop through October 2030, with a corporate guarantee from Koninklijke Ahold NV (LT issuer rating Baa3, positive outlook). The center is currently 100% leased to 24 tenants. Moody's LTV and stressed DSCR are 125% and 0.86X, respectively, compared to 147% and 0.77X at last review.

The third largest loan is the 1 Pine Tree Boulevard Loan ($19.6 million -- 2.3% of the pool), which is secured by a 324 unit multifamily property located in Old Bridge, New Jersey. Although the property was 100% leased as of December 2009, performance has declined due to rental concessions and increased expenses. The loan is currently on the watchlist due to decline in NOI. Moody's LTV and stressed DSCR are 132% and 0.74X, respectively, compared to 126% and 0.81X at last review.

Moody's rating action is as follows:

-Class A-1A, $450,841,615, affirmed at Aaa; previously assigned Aaa on 7/4/2007

-Class A-2, $227,222,671, affirmed at Aaa; previously assigned Aaa on 7/4/2007

-Class X, Notional, affirmed at Aaa; previously assigned Aaa on 7/4/2007

-Class A-J, $105,205,000, downgraded to Baa1 from A1; previously placed on review for possible downgrade on 7/14/2010

-Class B, $15,211,000 downgraded to Ba1 from A3; previously placed on review for possible downgrade on 7/14/2010

-Class C, $17,745,000, downgraded to B2 from Baa3; previously placed on review for possible downgrade on 7/14/2010

-Class D, $20,281,000, downgraded to Caa2 from Ba3; previously placed on review for possible downgrade on 7/14/2010

-Class E, $10,140,000, downgraded to Caa3 from B1; previously placed on review for possible downgrade on 7/14/2010

-Class F, $7,605,000, downgraded to Ca from B3; previously placed on review for possible downgrade on 7/14/2010

-Class G, $2,535,000, downgraded to Ca from Caa2; previously placed on review for possible downgrade on 7/14/2010

-Class H, $2,535,000, downgraded to C from Caa2; previously placed on review for possible downgrade on 7/14/2010

-Class J, $3,803,000, downgraded to C from Caa3; previously placed on review for possible downgrade on 7/14/2010

-Class K, $2,535,000, downgraded to C from Caa3; previously placed on review for possible downgrade on 7/14/2010

-Class L, $3, 590,527, downgraded to C from Caa3; previously placed on review for possible downgrade on 7/14/2010

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 review is summarized in a press release dated February 6, 2009.

The principal methodology used in monitoring this transaction: "CMBS: Moody's Approach to Rating U.S. Conduit Transactions" published on September 15, 2000 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this transaction can also be found in the Rating Methodologies sub-directory on Moody's website. 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/SFQuickCheck.

New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms Three and Downgrades 11 CMBS Classes of SOVC 2007-C1
No Related Data.
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