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Announcement:

Moody's Confirms One CRE CDO Class of Capital Trust RE CDO 2004-1 Ltd.

30 Sep 2010

Approximately $47.9 Million of Structured Securities Affected

New York, September 30, 2010 -- Moody's has confirmed one class of Notes issued by Capital Trust RE CDO 2004-1 Ltd. due to the rate of paydown of the Class A-1 Notes. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO) transactions.

Moody's rating action is as follows:

Cl. A-1, Confirmed at Aaa (sf); previously on Feb 26, 2010 Aaa (sf) Placed Under Review for Possible Downgrade

Capital Trust RE CDO 2004-1 Ltd. is a CRE CDO transaction backed by a portfolio B-Notes (62.3% of the pool balance), mezzanine loans (18.5%), commercial mortgage backed securities (CMBS) (10.6%) and one defeased loan (8.6%). As of the September 16, 2010 Trustee report, the aggregate Note balance of the transaction has decreased to $271.5 million from $324.1 million at issuance, with the paydown directed to the Class A-1 Notes, as a result of amortization of the collateral, recoveries from impaired collateral and interest redirected as a result of the failing of the Class A/B Over-collateralization Test.

There are nine assets with par balance of $80.1 million (30.1% of the current pool balance) that are considered impaired collateral interests as of the September 16, 2010 Trustee report. Five of these assets (64.7% of the impaired collateral balance) are B-Notes and four asset are CMBS (35.3%). There have been $14.5 million of losses from the liquidation of three loans to date. Moody's does expect additional losses to occur from the impaired collateral interests.

Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals.

WARF is a primary measure of the credit quality of a CRE CDO pool. We have completed updated credit estimates for the non-Moody's rated reference obligations. For non-CUSIP collateral, Moody's is eliminating the additional default probability stress applied to corporate debt in CDOROM® v2.6 as we expect the underlying non-CUSIP collateral to experience lower default rates and higher recovery compared to corporate debt due to the nature of the secured real estate collateral. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 8,977 compared to 7,580 at last review. The distribution of current ratings and updated credit estimates is as follows: Aaa-Aa3 (8.6% compared to 0.0% at last review), Ba1-Ba3 (0.0% compared to 4.5% at last review), B1-B3 (0.0% compared to 4.0% at last review) and Caa1-C (91.4% compared to 91.5% at last review).

WAL acts to adjust the probability of default of the reference obligations in the pool for time. Moody's modeled to a WAL of 1.1 years compared to 2.1 years at last review.

WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a fixed WARR of 8.6% compared to 20.2% at last review.

MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the collateral pool (i.e. the measure of diversity). For non-CUSIP collateral, Moody's is reducing the maximum over concentration stress applied to correlation factors due to the diversity of tenants, property types, and geographic locations inherent in the pooled transactions. Moody's modeled a MAC of 17.4% compared to 28.9% at last review.

Moody's review incorporated CDOROM® v2.6, one of Moody's CDO rating models, which was released on May 27, 2010.

The cash flow model, CDOEdge® v3.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal.

Changes in any one or combination of key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in assumptions of any one key parameter may be offset by a change in one or more of the other key parameters. Rated notes are particularly sensitive to changes in recovery rate assumptions. While the base recovery assumption is entirely due to the defeased loan and the action is to confirm the current Aaa (sf) rating, we decreased the recovery rate to 5%. Reducing the recovery rate assumption from 8.6% to 5.0% would result in a rating movement on the rated tranche of 6 notches downward.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics. 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 a majority of property sectors. 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 2010 and 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 rating Capital Trust RE CDO 2004-1 Ltd. were "U.S. CMBS: Moody's Approach to Rating Static CDOs Backed by Commercial Real Estate Securities" published in June 2004", and "Moody's Approach to Rating SF CDOs" published in August 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Further information on Moody's analysis of this transaction is available on www.moodys.com. 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
Milan Parikh
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Deryk Meherik
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.

Moody's Confirms One CRE CDO Class of Capital Trust RE CDO 2004-1 Ltd.
No Related Data.
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