Approximately $1.32 billion of Structured Securities Affected
New York, December 09, 2010 -- Moody's Investors Service (Moody's) downgraded 11 and affirmed the ratings
of four classes of Wachovia Bank Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 2007-WHALE
8. Moody's rating action is as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Downgraded to A2 (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. X-1B, Affirmed at Aaa (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. B, Downgraded to Baa1 (sf); previously on Mar 4,
2009 Downgraded to Aa2 (sf)
Cl. LXR-1, Downgraded to B2 (sf); previously
on Mar 4, 2009 Downgraded to Ba2 (sf)
Cl. LXR-2, Downgraded to Caa1 (sf); previously
on Mar 4, 2009 Downgraded to Ba3 (sf)
Cl. AP-1, Downgraded to B2 (sf); previously on
Mar 4, 2009 Downgraded to Ba2 (sf)
Cl. AP-2, Downgraded to B3 (sf); previously on
Mar 4, 2009 Downgraded to Ba3 (sf)
Cl. AP-3, Downgraded to Caa1 (sf); previously
on Mar 4, 2009 Downgraded to B1 (sf)
Cl. AP-4, Downgraded to Caa2 (sf); previously
on Mar 4, 2009 Downgraded to B2 (sf)
Cl. LP-3, Downgraded to Caa3 (sf); previously
on Mar 4, 2009 Downgraded to B1 (sf)
Cl. HH-1, Affirmed at B1 (sf); previously on
Oct 21, 2010 Downgraded to B1 (sf)
Cl. FSN-1, Downgraded to Caa3 (sf); previously
on Mar 4, 2009 Downgraded to Caa2 (sf)
Cl. FSN-2, Downgraded to Ca (sf); previously
on Mar 4, 2009 Downgraded to Caa3 (sf)
Cl. MH-1, Affirmed at B1 (sf); previously on
Oct 21, 2010 Downgraded to B1 (sf)
RATINGS RATIONALE
The downgrade is due to higher expected losses for the trust resulting
from anticipated losses from appraisal reductions, specially serviced
and watchlisted loans, and interest shortfalls.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio and Moody's stressed debt service coverage ratio
(DSCR) remaining within acceptable ranges. Moody's does not
rate pooled classes C, D, E, F, G, H,
J, K, and L which provide additional credit support for the
pool.
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 previous 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 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 the industrial,
office, and retail sectors. Hotel performance has begun to
rebound, albeit off a very weak base. Multifamily has also
begun to rebound reflecting an improved supply / demand relationship.
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 these ratings were "Moody's Approach
to Rating Large Loan/Single Borrower Transactions" published in July 2000.
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.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.0. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds derived
from Moody's loan level LTV ratios. Major adjustments to determining
proceeds include leverage, loan structure, property type,
and sponsorship. These aggregated proceeds are then further adjusted
for any pooling benefits associated with loan level diversity, other
concentrations and correlations.
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 March 4, 2009. The
previous full review was part of Moody's first quarter 2009 ratings sweep
and incorporated assumptions for capitalization rates and stressed cash
flows that were outlined in "Rating Methodology Update: US CMBS
Conduit and Fusion Review Prompted by Declining Property Values and Rising
Delinquencies" dated February 5, 2009. Please see the ratings
tab on the issuer / entity page on moodys.com for the last rating
action and the ratings history.
Moody's Investors Service did not receive or take into account a third-party
due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past six months.
DEAL PERFORMANCE
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased to $1.66 billion
from $1.68 billion at last review. The Certificates
are collateralized by nine floating rate whole loans and senior interests
in whole loans. Two loans (Hudson Hotel Loan and Mondrian Hotel
Loan) have pari-passu portions in Citibank Commercial Mortgage
Trust Commercial Mortgage Pass-Through Certificates, Series
2007-FL3 transaction. The loans range in size from 2%
to 64% of the pooled balance, with the top three loans representing
80% of the pool. All of the loans have additional debt in
the form of a non-pooled or rake bond within the trust, B
note or mezzanine debt outside of the trust. The current low interest
rate environment coupled with low loan spreads have helped the loans'
performance through the last two years, but high leverage continues
to be a cause for concern.
The largest loan in the pool is secured by fee interests in LXR Hospitality
Pool Loan ($948 million, or 64% of the pooled balance
plus $124 million of rake bonds within the trust). The hotel
portfolio includes 12 properties located in Puerto Rico, FL,
CA, AZ, Jamaica and NY. The Park Shore Waikiki asset
located in Hawaii was released. The sponsor is The Blackstone Group.
There is additional debt in the form of non-trust junior component
and mezzanine debt outside the trust.
US Hotels suffered significant declines in operating performance during
the last two years. However they reached a turning point in late
2009/early 2010, and are showing signs of growth. Luxury
and urban properties are showing particularly strong improvement compared
to other segments.
For the year-to-date period ending September 2010,
the LXR Hospitality Pool Loan achieved an EBITDA of $47 million,
down 16% from $53 million achieved in the same time period
in 2009. The decline was largely due to lower performance in the
three Puerto Rico assets and the Rose Hall Resort & Country Club located
in Jamaica. Typically, Caribbean assets will cater to leisure
travelers from the US, and discretionary income spending has been
cut back significantly in the last two years. The weighted average
LTV for the pooled portion is 89%, including rakes is 101%
and for the first mortgage is 119%. Moody's current
credit estimate for the pooled portion is B1.
The Longhouse Hospitality Pool Loan ($150 million, or 10%
of pooled balance plus $15 million of rake bonds within the trust)
is secured by cross-collateralized and cross-defaulted 42
extended-stay hotel properties totaling 5,600 guestrooms.
The sponsor is JER Partners and Longhouse Hospitality Trust. The
loan was transferred to special servicing on October 26, 2010 due
to imminent default, and the special servicer is in their initial
stages of due diligence.
The portfolio's Net Cash Flow (NCF) during the trailing twelve month
period ending September 2010 was $11 million. There is additional
debt in the form mezzanine outside the trust. Moody's weighted
average LTV for the pooled portion is 107%, including rakes
is 118%. Moody's current credit estimate for the pooled
portion is Caa2.
There are currently six loans totaling 27% of pooled balance in
special servicing. However, two loans (Hudson Hotel Loan
and Mondrian Hotel Loan) totaling 8% of the pooled balance have
been modified and extended through October 12, 2011. The
rake bonds associated with these two loans (Classes HH-1 and MH-1)
were downgraded on October 21, 2010. Moody's does not
rate Classes HH-2 and MH-2.
Four Seasons Nevis Loan (3% of the pooled balance) has been in
special servicing since October 2008 when it was damaged by Hurricane
Omar. The property is currently in renovation, and is expected
to reopen on December 15, 2010. Moody's current credit
estimate for the pooled portion is Caa3. Classes H, J,
K, L, FSN-1 and FSN-2 have incurred interest
shortfalls as of November 2010 distribution date. Classes HH-2
and MH-2 have suffered losses totaling $41,993 as
of the same distribution date.
Moody's weighted average pooled LTV ratio is 92% and Moody's weighted
average stressed debt service coverage ratio (DSCR) for pooled trust debt
is 0.82X. Moody's weighted average LTV for the trust
including the rake bonds is 103% and Moody's weighted average
stressed debt service coverage ratio (DSCR) for the trust including the
rake bonds is 0.73X.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Eun Jee Park
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 Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Downgrades 11 and Affirms 4 CMBS Classes of WBCMT 2007-WHALE 8
