Approximately $678.4 Million of Structured Securities Affected
New York, February 25, 2010 -- Moody's Investors Service (Moody's) confirmed the ratings of three
classes, affirmed seven classes and downgraded six pooled classes
and one non-pooled class of Credit Suisse First Boston Mortgage
Securities Corp., Commercial Mortgage Pass-Through
Certificates, Series 2003-CK2. The downgrades of the
pooled classes are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and watchlisted
loans and concerns about loans approaching maturity in an adverse environment.
Sixty-one loans, representing 69% of the non-defeased
pool, mature within the next 36 months. Thirteen of these
loans, representing 11% of the non-defeased pool,
have a Moody's stressed debt service coverage (DSCR) less than 1.0X.
Class GLC is a non-pooled, or rake, class supported
by a B-note on Great Lakes Crossing, a 1.1 million
square foot shopping center located in Auburn Hills, Michigan.
This class was downgraded due to a decline in the center's performance.
The confirmations and affirmations are due to key rating parameters,
including Moody's loan to value (LTV) ratio and stressed DSCR remaining
within acceptable ranges. Although loan diversity, as measured
by the Herfindahl Index (Herf) has declined since last review, this
is offset by a significant increase in subordination from paydowns and
loan amortization.
On February 17, 2010 Moody's placed ten classes of this transaction
on review for possible downgrade due to potential losses from specially
serviced and other poorly performing loans. This action concludes
our review of this transaction. The rating action is the result
of Moody's on-going surveillance of commercial mortgage backed
securities (CMBS) transactions.
As of the January 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 31% to $678.4
million from $988.2 million at securitization. The
Certificates are collateralized by 81 mortgage loans ranging in size from
less than 1% to 12% of the pool, with the top ten
non-defeased loans representing 42% of the pool.
Ten loans, representing 19% of the pool, have defeased
and are secured by U.S. Government securities. At
last review, the Great Lakes Crossing Loan had an investment grade
underlying rating. Due to a decline in property performance this
loan no longer has an underlying rating and is analyzed as part of the
conduit pool.
Thirteen loans, representing 10% 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 Commercial
Mortgage Securities Association's (CMSA) 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.
Six loans have been liquidated from the trust, resulting in an aggregate
$8.1 million loss (40% severity on average).
There are four loans, representing 10% of the pool,
currently in special servicing. The largest specially serviced
loan is the 2300 Imperial Building Loan ($26.5 million --
3.9% of the pool), which is secured by a 157,225
square foot office building located in El Segundo, California.
The loan was transferred to special servicing in November 2009 due to
payment default. The property was 48% leased as of September
2009.
The second largest specially serviced loan is the Michigan Commercial
Portfolio Loan ($25.5 million -- 3.7%
of the pool), which is secured by a portfolio of 16 Class B office
buildings and one retail building, all located in and around Lansing,
Michigan. The loan was transferred to special servicing in May
2008 due to imminent monetary default and is now 90+ days delinquent.
The property was 77% leased as of June 2009.
The remaining two specially serviced loans are secured by office and retail
properties. Moody's estimates a $30.3 million aggregate
loss for the specially serviced loans (47% loss severity on average).
In addition to recognizing losses from specially serviced loans,
Moody's has assumed a high default probability on four loans (3.2%
of the pool) that are currently on the servicer's watch list and
one loan (3.5% of the pool) with significant refinance risk.
Moody's estimates a $7.3 million loss for these troubled
loans (15% loss severity on average). Moody's rating
action recognizes potential uncertainty around the timing and magnitude
of loss from these troubled loans.
Moody's was provided with full-year 2008 and partial 2009 operating
results for 85% and 86% of the non-defeased portion
of the pool, respectively. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 85% compared
to 91% at Moody's prior review.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.44X and 1.25X, respectively,
compared to 1.41X and 1.15X 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 21
compared to 40 at last review.
The loan that previously had an underlying rating is the Great Lakes Crossing
Loan ($78.1 million -- 11.5% of the pool),
which represents a 59% participation interest in a $132.3
million first mortgage loan. The loan is secured by the borrower's
interest in a 1.1 million square foot value oriented shopping center
located approximately 30 miles north of Detroit in Auburn Hills,
Michigan. The center is anchored by Burlington Coat Factory,
Sports Authority, Bed Bath & Beyond, T.J.
Maxx and Marshalls. The center is also encumbered by a B-note
which is the security for the non-pooled Class GLC. As of
October 2009, the center was 82% leased compared to 86%
at last review and 91% at securitization. Occupancy,
tenant sales and property performance have all exhibited downward trends
since last review and securitization. The decline in performance
has resulted in increased leverage and the loan no longer has an underlying
rating. Moody's LTV and stressed DSCR for the A-note
are 82% and 1.23X, respectively, compared to
69% and 2.54X at last review.
The three largest performing conduit loans represent 23% of the
pool. The largest conduit loan is the Museum Square Loan ($51.3
million -- 7.5% of the pool), which is secured
by a 522,362 square foot office property located in Los Angeles,
California. The property was 89% leased as of October 2009.
Performance has improved since last review due to increased revenues,
stable expenses and amortization. The loan has amortized by 5%
since last review. Moody's LTV and stressed DSCR are 74%
and 1.47X, respectively, compared to 88% and
1.20X at last review.
The second largest conduit loan is the Carl Zeiss Building Loan ($25
million -- 3.7% of the pool), which is secured
by a 201,620 square foot office building located in Dublin,
California. The building is 100% leased to Carl Zeiss Meditec,
Inc. through September 2019. The borrower did not refinance
the loan on the September 2009 anticipated repayment date (ARD).
Although property performance has been stable, Moody's valuation
incorporates a stressed cash flow to reflect the decline in the market
conditions since last review. Based on Torto Wheaton fourth quarter
2009 report for the Dublin submarket, average asking rents and vacancy
were $16.33 per square foot (PSF) and 23%,
respectively, compared to $21.10 PSF and 22%
at least review. Moody's LTV and stressed DSCR are 119%
and 0.89X, respectively, compared to 94% and
1.12X at last review.
The third largest conduit loan is the BAE Systems Building Loan ($24
million -- 3.5% of the pool), which is secured
by a 133,806 square foot office building located in Reston,
Virginia. The building is 100% leased to BAE Systems (BAE)
through October 2012. The loan also matures in October 2012.
Although property performance has been stable, Moody's valuation
incorporates a stressed cash flow to reflect the decline in the market
conditions since last review. Based on Torto Wheaton fourth quarter
2009 market report for the Reston submarket, average asking rents
and vacancy were $27.82 PSF and 17%, respectively,
compared to $29.00 PSF and 11% at least review.
BAE's rent is approximately 13% above current market rent.
Moody's LTV and stressed DSCR are 118% and 0.87X,
respectively, compared to 100% and 1.03X at last review.
Moody's rating action is as follows:
-Class A-3, $108,342,509,
affirmed at Aaa; previously on April 11, 2003 assigned Aaa
-Class A-4, $364,293,000,
affirmed at Aaa; previously on April 11, 2003 assigned Aaa
-Class A-X, Notional, affirmed at Aaa;
previously on April 11, 2003 assigned Aaa
-Class A-SP, Notional, affirmed at Aaa;
previously on April 11, 2003 assigned Aaa
-Class B, $32,118,000, affirmed
at Aaa; previously on August 2, 2006 upgraded to Aaa
-Class C, $12,353,000, affirmed
at Aaa; previously on August 2, 2006 upgraded to Aaa
-Class D, $29,647,000, affirmed
at Aaa; previously on December 20, 2007 upgraded to Aaa
-Class E, $12,353,000, confirmed
at Aaa; previously on February 17, 2010, placed on review
for possible downgrade
-Class F, $12,353,000, confirmed
at Aa2; previously on February 17, 2010, placed on review
for possible downgrade
-Class G, $19,764,000, confirmed
at A2; previously on February 17, 2010, placed on review
for possible downgrade
-Class H, $14,824,000, downgraded
to Baa3 from Baa2; previously on February 17, 2010, placed
on review for possible downgrade
-Class J, $17,294,000, downgraded
to B1 from Ba1; previously on February 17, 2010, placed
on review for possible downgrade
-Class K, $17,294,000, downgraded
to Caa3 from Ba2; previously on February 17, 2010, placed
on review for possible downgrade
-Class L, $4,941,000, downgraded
to Ca from Ba3; previously on February 17, 2010, placed
on review for possible downgrade
-Class N, $6,176,000, downgraded
to C from B2; previously on February 17, 2010, placed
on review for possible downgrade
-Class O, $4,941,000, downgraded
to C from B3; previously on February 17, 2010, placed
on review for possible downgrade
-Class GLC, $3,230,863, downgraded
to Ba3 from Baa3; previously on February 17, 2010, placed
on review for possible downgrade
Moody's monitors transactions on both a monthly basis through two
sets of quantitative tools -- MOST® (Moody's Surveillance
Trends) and CMM on Trepp -- and on a periodic basis through
a comprehensive review. Moody's prior review is summarized
in a press release dated September 25, 2008.
The principal methodology used in monitoring this transaction was "CMBS:
Moody's Approach to Rating U.S. Conduit Transactions" published
on September 15, 2000 and is 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
Michael M. Gerdes
Senior Vice President
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 Confirms Three CMBS Classes, Affirms Seven Classes and Downgrades Seven Classes of CSFB 2003-CK2