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Rating Action:

Moody's Downgrades 12 and Affirms Three CMBS Classes of MSC 2007-XLF9

17 Dec 2010

Approximately $1.5 Billion of Structured Securities Affected

New York, December 17, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of ten pooled and two non-pooled, or rake, classes and affirmed three pooled classes of Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series 2007-XLF9. Moody's rating action is as follows:

Cl. A-1, Affirmed at Aaa (sf); previously on Mar 19, 2009 Affirmed at Aaa (sf)

Cl. A-2, Affirmed at Aa3 (sf); previously on Mar 19, 2009 Downgraded to Aa3 (sf)

Cl. B, Downgraded to A2 (sf); previously on Nov 11, 2010 A1 (sf) Placed Under Review for Possible Downgrade

Cl. C, Downgraded to A3 (sf); previously on Nov 11, 2010 A2 (sf) Placed Under Review for Possible Downgrade

Cl. D, Downgraded to Baa1 (sf); previously on Nov 11, 2010 A3 (sf) Placed Under Review for Possible Downgrade

Cl. E, Downgraded to Baa2 (sf); previously on Nov 11, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade

Cl. F, Downgraded to Ba1 (sf); previously on Nov 11, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade

Cl. G, Downgraded to Ba3 (sf); previously on Nov 11, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade

Cl. H, Downgraded to B2 (sf); previously on Nov 11, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade

Cl. J, Downgraded to Caa1 (sf); previously on Nov 11, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade

Cl. K, Downgraded to Caa3 (sf); previously on Nov 11, 2010 B2 (sf) Placed Under Review for Possible Downgrade

Cl. L, Downgraded to C (sf); previously on Nov 11, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade

Cl. X, Affirmed at Aaa (sf); previously on Mar 19, 2009 Affirmed at Aaa (sf)

Cl. M-RND, Downgraded to C (sf); previously on Nov 11, 2010 B2 (sf) Placed Under Review for Possible Downgrade

Cl. N-RND, Downgraded to C (sf); previously on Nov 11, 2010 B3 (sf) Placed Under Review for Possible Downgrade

RATINGS RATIONALE

The downgrades were due to the deterioration in performance of assets in the trust, the significant concentration of loans secured by hotel or casino properties (45% of the pooled balance), the higher expected loss for the Reunion Land loan (2%) and the refinancing risk associated with loans approaching maturity in an adverse environment. 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 placed 12 classes on review for possible downgrade on November 11, 2010. This action concludes Moody's review.

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 these ratings was "CMBS: Moody's Approach to Rating Large Loan/Single Borrower Transactions" published in July 2000. 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 Large Loan Model v 8.0 which is used for both large loan and single borrower transactions. 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. The model also incorporates a supplementary tool to allow for the testing of the credit support at various rating levels. The scenario or "blow-up" analysis tests the credit support for a rating assuming that all loans in the pool default with an average loss severity that is commensurate with the rating level being tested. 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 19, 2009. The previous 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 received and took into account one or more third-party due diligence reports on the underlying assets or financial instruments in this transaction and the due diligence reports had a neutral impact on the rating.

DEAL PERFORMANCE

As of the December 15, 2010 distribution date, the transaction's certificate balance decreased by approximately 14% to $1.09 billion from $1.27 billion at securitization due to the payoff of one loan and principal pay downs associated with five loans. The Certificates are collateralized by 12 floating-rate loans ranging in size from 2% to 35% of the pooled trust mortgage balance. The largest three loans account for 61% of the pooled balance.

The pool has experienced $35,148 of losses to date. There are currently two loans in special servicing (4% of pooled balance) which are the Reunion Land loan (2%) and the Hyatt Place Portfolio loan (2%). The Reunion Land Development loan ($22.5 million; 2% of the pooled trust balance) is secured by 438 acres of a 2,300 acre master planned community known as Reunion Resort, located in Orlando, Florida. The loan was intended to fund pre-development of the remaining land in a master plan community to accommodate a mixed-use project encompassing condominiums, hotel and commercial space. Development did not progress as expected. The loan transferred into special servicing in August 2009 and is the land is being marketed for sale. The loan collateral was appraised in October 2009 for $4.2 million. Moody's credit estimate is C, compared to Ba1 at last review. Non-pooled Classes M-RND and N-RND are secured by the junior portion of the Reunion Land Development loan.

Moody's weighed average pooled loan to value (LTV) ratio is 106% compared to 96% at last review on March 19, 2009 and 66% at securitization. Moody's pooled stressed DSCR is 1.30X, compared to 1.04X at last review and 1.58X at securitization.

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. Large loan transactions generally have a Herf of less than 20. The pool has a Herf of 6, the same as last review.

The largest loan, MSREF Resort Portfolio ($381.5 million; 35% of the pooled trust balance) is secured by a portfolio comprised of three resort hotels totaling 2,532 rooms. Two of the properties, JW Marriott Grand Lakes and the Ritz-Carlton Grand Lakes, are located in Orlando, Florida on the same 325 acre grounds and represent 57% of the loan by allocated balance. The third property, the JW Marriott Desert Ridge is located in Phoenix, Arizona and represents 43% of the loan by allocated balance. Despite the relatively flat year to date Revenue per Available Room (RevPAR), performance of Phoenix and Orlando as reported by Smith Travel Research, the RevPAR for the portfolio has increased 12% for the Trailing Twelve Month period ending June 2010. Similarly, the portfolio's net cash flow has shown considerable improvement. Moody's pooled LTV is 72% and stressed DSCR is 1.63X. Moody's current credit estimate is Ba2, compared to B3 at last review.

The second largest pooled exposure is the 14 Wall Street Loan ($145.0 million; 13% of the pooled trust balance) which is secured by a 37-story office building in downtown Manhattan directly across the street from the New York Stock Exchange. The total collateral square footage is 1,009,806 SF consisting of 985,106 SF of office space and 24,700 SF of retail space, which includes an Equinox fitness club. Per the December 2010 rent roll, the property was 75% leased, up from 64% at securitization. Though the net cash flow for the property has increased, it has not achieved the upside that was anticipated at securitization. Moody's pooled LTV is 84% and stressed DSCR is 1.19X. Moody's current credit estimate is Ba3, compared to Ba1 at last review.

The third largest loan is the 500 West Monroe loan ($140.0 million; 13% of the pooled trust balance), which is secured by a 46-story, class A office building in Chicago's West Loop office market. The property consists of 950,286 SF of office space and 13,533 SF of retail space and is located one block from both the Ogilvie Transportation Center and Union Station. The Property has the largest in-building parking structure in Chicago. Per the September 2010 rent roll, the property was 68% occupied down from 92% at securitization. The property's net cash flow has deteriorated since securitization. Moody's pooled LTV over 100% and stressed DSCR is 0.71X. Moody's current credit estimate is C, compared to B1 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, 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
Annelise Osborne
Vice President - Senior Analyst
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 12 and Affirms Three CMBS Classes of MSC 2007-XLF9
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. 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 or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

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