Approximately $11.7 million of Structured Securities Affected
New York, March 31, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of two classes
of GMAC Commercial Mortgage Securities, Inc., Mortgage
Pass-Through Certificates, Series 1998-C2 as follows:
Cl. E, Affirmed at Aaa (sf); previously on Dec 8,
2006 Upgraded to Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Sep 3,
1998 Assigned Aaa (sf)
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 9.3%
of the current balance. At last full review, Moody's cumulative
base expected loss was 17.5%. Moody's stressed scenario
loss is 12.8% 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 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 rating GMACC 1998-C2 "CMBS:
Moody's Approach to Rating U.S. Conduit Transactions"
published in September 2000, and "CMBS: Moody's Approach to
Rating Credit Tenant Lease (CTL) Backed Transactions" published in October
2, 1998. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found on Moody's
website.
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 paydown
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.
For deals that include a pool of credit tenant loans, Moody's
currently uses a Gaussian copula model, incorporated in its public
CDO rating model CDOROMv2.8 to generate a portfolio loss distribution
to derive credit enhancement levels for CTL component. Under Moody's
CTL approach, the rating of a transaction's certificates is
primarily based on the senior unsecured debt rating (or the corporate
family rating) of the tenant, usually an investment grade rated
company, leasing the real estate collateral supporting the bonds.
This tenant's credit rating is the key factor in determining the
probability of default on the underlying lease. The lease generally
is "bondable", which means it is an absolute net lease,
yielding fixed rent paid to the trust through a lock-box,
sufficient under all circumstances to pay in full all interest and principal
of the loan. The leased property should be owned by a bankruptcy-remote,
special purpose borrower, which grants a first lien mortgage and
assignment of rents to the securitization trust. The dark value
of the collateral, which assumes the property is vacant or "dark",
is then examined to determine a recovery rate upon a loan's default.
Moody's also considers the overall structure and legal integrity
of the 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 24
compared to 33 at Moody's prior full review.
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 May 26, 2010. 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 March 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 92% to $215.94
million from $2.53 billion at securitization. The
Certificates are collateralized by 69 mortgage loans ranging in size from
less than 1% to 9% of the pool, with the top ten loans
representing 19% of the pool. The pool includes a credit
tenant lease (CTL) component, representing 11% of the pool.
Twelve loans, representing 35% of the pool, have defeased
and are collateralized with U.S. Government securities,
compared to 33% at last review.
Fifteen loans, representing 22% 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.
Thirty-eight loans have been liquidated from the pool since securitization,
resulting in an aggregate $50.1 million loss (30%
loss severity on average). Currently eight loans, representing
14% of the pool, are in special servicing. The largest
specially serviced loan is Georgetown Plaza Shopping Center ($5.3
million -- 2.4% of the pool). This loan transferred
into special servicing in May 2008 as the result of the borrower not being
able to refinance before loan maturity. The master servicer has
recognized appraisal reductions totaling $13.8 million for
the specially serviced loans. Moody's has estimated an aggregate
loss of $17.5 million (59% 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 1% of the pool and has estimated a $331,000
loss (20% expected loss based on a 50% probability default)
from this troubled loan.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 80% and 34% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 61% compared to 59% at last full review.
Moody's net cash flow reflects a weighted average haircut of 12%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 10%.
Excluding specially serviced and troubled loans, Moody's actual
DSCR is 1.44X compared to 1.52X at last full review.
Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's
actual debt service.
The top three performing conduit loans represent 16% of the pool
balance. The largest loan is the D'Amato Portfolio Loan ($20.3
million -- 9.4% of the pool), which is a loan
secured by 37 industrial and retail properties located in Connecticut
and Rhode Island. The property was 92% leased as of December
2010 compared to 87% at last full review. The loan has been
on the master servicer's watchlist since October 2009. due
to lvolatility in rent payments. However, property performance
remains stable. The loan has paid down 29% since securitization.
Moody's LTV and stressed DSCR are 70% and 1.59X, respectively,
compared to 66% and 1.65X at last full review.
The second largest loan is the Saratoga Apartments Loan ($10.4
million -- 4.8% of the pool), which is secured
by a 183-unit multifamily property located in Washington,
DC. The property was 97% leased as of September 2010 compared
to 93% at last full review. Moody's LTV and stressed DSCR
are 38% and 2.64X, respectively, compared to
37% and 2.75X at last full review.
The third largest loan is the Hickory Manor Apartments Loan ($4.0
million -- 1.8% of the pool), which is secured
by a secured by a 152-unit apartment complex located in Antioch,
Tennessee. The property was 95% leased as of December 2010
compared to 88% at last full review. Despite the increase
in occupancy, property performance has declined and the loan is
currently on the master servicer's watchlist due to a decline in
DSCR. Moody's LTV and stressed DSCR are 109% and 0.95X,
respectively, compared to 103% and 1.00X at last full
review.
The CTL component includes 13 loans ($23.3 million --
10.8%) secured by properties leased to six tenants under
bondable leases. The largest exposures are Walgreens ($10.9
million -- 47% of the CTL component; senior
unsecured rating: A2 -- stable outlook), CSV
($6.6 million -- 28% of the CTL component;
senior unsecured rating: Baa2 -- stable outlook) and
Shop N' Save ($3.2 million -- 14% of the
CTL component). Moody's has issued a public debt rating for tenants
leasing properties representing 82% of the CTL pool and completed
updated credit estimates for the non-Moody's rated reference obligations.
The bottom-dollar WARF is a measure of the default probability
within the pool. Moody's modeled a bottom-dollar WARF of
812 compared to 610 at last review.
New York
Caroline Chan
Associate 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 Two CMBS Classes of GMACC 1998-C2
