Approximately $3.6 Billion of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of 12 classes
and affirmed 12 classes of CD 2005-CD1 Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2005-CD1
as follows:
Cl. X, Affirmed at Aaa (sf); previously on Jan 13,
2006 Definitive Rating Assigned Aaa (sf)
Cl. A-2FL, Affirmed at Aaa (sf); previously on
Jan 13, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-2FX, Affirmed at Aaa (sf); previously on
Jan 13, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Jan 13, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed at Aaa (sf); previously on
Jan 13, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Jan 13, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Jan 13, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at Aaa (sf); previously on
Jan 13, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-J, Downgraded to A3 (sf); previously on
Dec 9, 2010 Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Baa1 (sf); previously on Dec 9,
2010 Aa2 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa3 (sf); previously on Dec 9,
2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Ba1 (sf); previously on Dec 9,
2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Ba3 (sf); previously on Dec 9,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to B3 (sf); previously on Dec 9,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to Caa2 (sf); previously on Dec 9,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Ca (sf); previously on Dec 9,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to C (sf); previously on Dec 9,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to C (sf); previously on Dec 9,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to C (sf); previously on Dec 9,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Dec 9,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Cl. N, Affirmed at C (sf); previously on Jan 6,
2010 Downgraded to C (sf)
Cl. O, Affirmed at C (sf); previously on Jan 6,
2010 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Jan 6,
2010 Downgraded to C (sf)
Cl. OCS, Affirmed at Baa3 (sf); previously on Jan 13,
2006 Definitive Rating Assigned Baa3 (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from realized and anticipated losses from specially serviced and troubled
loans.
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.
On December 9, 2010, Moody's placed 12 classes on review
for possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
7.1% of the current balance. At last review,
Moody's cumulative base expected loss was 5.1%.
Moody's stressed scenario loss is 18.9% 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 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 methodology used in this rating was "CMBS: Moody's
Approach to Rating Fusion Transactions" published on April 19, 2005.
In addition to methodologies and research available on moodys.com,
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 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 credit estimate 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 credit estimate level, is incorporated
for loans with similar credit estimates in the same 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 51
compared to 53 at Moody's prior 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 January 6, 2010.
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 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 6% to $3.6
billion from $3.9 billion at securitization. The
Certificates are collateralized by 216 mortgage loans ranging in size
from less than 1% to 8% of the pool, with the top
ten loans representing 34% of the pool. The pool includes
three loans with investment-grade credit estimates, representing
11% of the pool. Two loans, representing less than
1% of the pool, have defeased and are collateralized by U.S.
Government securities.
Fifty-five 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.
Six loans have been liquidated from the pool, resulting in an aggregate
realized loss of $17.4 million (57% loss severity
on average). The pool had experienced an aggregate $1.7
million loss at last review. Twenty-one loans, representing
10% of the pool, are currently in special servicing.
The master servicer has recognized appraisal reductions totaling $85.4
million for 16 of the specially serviced loans. Moody's has
estimated an aggregate $152.2 million loss (42% expected
loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for 12 poorly performing
loans representing 3.8% of the pool and has estimated a
$34.8 million loss (25% expected loss based on a
50% probability default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 96% and 33% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 103%, the same as at Moody's prior 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 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.41X and 1.0X, respectively,
the same as 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.
The largest loan with a credit estimate is the One Court Square Loan ($290.0
million -- 8.0% of the pool), which is secured
by a 1.4 million square foot Class A office building located in
Long Island City (Queens), New York. The property is also
encumbered by a $25 million B Note which secures non-pooled
Class OCS. The property is 100% leased to Citibank through
May 2020 (Citibank, N.A -- Moody's senior unsecured
rating A1, negative outlook). Moody's current credit estimate
and stressed DSCR of the pooled note are Baa2 and 1.04X,
respectively, compared to Baa2 and 1.03X at last review.
Moody's current credit estimate of the B Note is Baa3, the same
as at last review.
The second loan with a credit estimate is the 100 East Pratt Loan ($105.0
million - 2.9% of the pool), which is secured
by a 656,000 square foot office building located in Baltimore,
Maryland. The largest tenant is T. Rowe Price Associates,
which leases 58% of the premises through June 2017. Performance
has been stable. Moody's current credit estimate and stressed DSCR
are Baa3 and 1.33X, respectively, compared to Baa3
and 1.34X at last review.
The third loan with a credit estimate is the 220 East 67th Street Loan
($2.4 million - 0.1% of the pool),
which is secured by a 114-unit residential cooperative located
in Manhattan, New York. Moody's current credit estimate is
Aaa, the same as at last review.
The top three performing conduit loans represent 13% of the pool
balance. The largest loan is the Yahoo! Center Loan ($250.0
million - 6.9% of the pool), which is secured
by a 1.1 million square foot Class A office campus located in Santa
Monica, California. The largest tenant is Yahoo! Inc.
which leases 27% of the property through August 2015. Performance
has improved since last review. Moody's LTV and stressed DSCR are
74% and 1.24X, respectively, compared to 77%
and 1.20X at last review.
The second largest loan is the Main Mall Loan ($134.5 million
- 3.7% of the pool), which is secured by the
borrower's interest in a 1.0 million square foot regional mall
located in Portland, Maine. The loan sponsor is GGP.
The loan had been in special servicing due to GGP's bankruptcy filing
but has returned to the master servicer after being restructured.
The maturity was extended to December 2016. The property is also
encumbered by a $70.5 million B note which is held outside
the trust. Overall performance has declined since last review due
to increased expenses. Moody's LTV and stressed DSCR are 95%
and 0.99X, respectively, compared to 89% and
1.06X at last review.
The third largest loan is the TPMC Portfolio Loan ($102.9
million - 2.8% of the pool), which is secured
by several properties located in suburban Houston, Texas.
The properties include a 699,000 square foot office building,
a theater/commercial building and a parking garage. Performance
has improved since last review. Moody's LTV and stressed DSCR are
96% and 1.09X, respectively, compared to 103%
and 1.01X at last review.
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, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics, 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
Dariusz Surmacz
Asst Vice President - 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 Downgrades 12 and Affirms 12 CMBS Classes of CD 2005-CD1
