Approximately $3.22 Billion of Structured Securities Affected
New York, December 17, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of 14 and affirmed
ten classes of Bear Stearns Commercial Mortgage Securities Trust Commercial
Mortgage Pass-Through Certificates, Series 2007-PWR16
as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Jul 6, 2007 Definitive Rating Assigned Aaa (sf)
Cl. X, Affirmed at Aaa (sf); previously on Jul 6,
2007 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Downgraded to Aa1 (sf); previously on
Dec 2, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-J, Downgraded to Baa3 (sf); previously
on Dec 2, 2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to B1 (sf); previously on Dec 2,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to B3 (sf); previously on Dec 2,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Caa1 (sf); previously on Dec 2,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Caa2 (sf); previously on Dec 2,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to Caa3 (sf); previously on Dec 2,
2010 B1 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to Ca (sf); previously on Dec 2,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Ca (sf); previously on Dec 2,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to Ca (sf); previously on Dec 2,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to C (sf); previously on Dec 2,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to C (sf); previously on Dec 2,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Dec 2,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Cl. N, Downgraded to C (sf); previously on Dec 2,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Cl. O, Affirmed at C (sf); previously on Oct 8,
2009 Downgraded to C (sf)
Cl. P, Affirmed at C (sf); previously on Oct 8,
2009 Downgraded to C (sf)
Cl. Q, Affirmed at C (sf); previously on Oct 8,
2009 Downgraded to C (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 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 2, 2010 Moody's placed 14 classes on review for possible
downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of 9.0%
of the current balance. At last full review, Moody's cumulative
base expected loss was 4.5%. Moody's stressed scenario
loss is 19.5% 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 these ratings was "CMBS: Moody's
Approach to Rating U.S. Conduit Transactions" published
in September 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 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 underlying rating 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 underlying rating 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 20
compared to 26 at Moody's prior full 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 October 8, 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 by 2% to $3.25
billion from $3.31 billion at securitization. The
Certificates are collateralized by 256 mortgage loans ranging in size
from less than 1% to 15% of the pool, with the top
ten loans representing 42% of the pool. The pool does not
contain any defeased loans or loans with credit estimates.
Seventy-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.
Four loans have been liquidated from the pool, resulting in an aggregate
realized loss of $11.9 million (63% loss severity
overall). At last review the pool had not experienced any realized
losses. Twenty loans, representing 20% of the pool,
are currently in special servicing. The largest specially serviced
loan is the Beacon Seattle & DC Portfolio Loan ($485.5
million -- 14.9% of the pool), which represents
a 18% pari passu interest in a $2.7 billion first
mortgage loan. The loan is secured by 20 office properties located
in Washington, Virginia and Washington, DC. The buildings
range from 103,000 to 1.1 million square feet (SF) and total
9.8 million SF. The loan was transferred to special servicing
in April 2010 for imminent default. The portfolio was 88%
leased as of June 2010. The loan is current. The servicer
and borrower recently completed a modification that includes a five-year
extension and a coupon reduction along with an unpaid interest accrual
feature. The modification also included a waiver of the yield maintenance
period in order to permit property sales.
The remaining 19 loans are secured by a mix of property types and each
loan represents less than 1.0% of the outstanding pool balance.
The master servicer has recognized an aggregate $68.2 million
appraisal reduction for 14 of the specially serviced loans. Moody's
has estimated an aggregate loss of $167.5 million (25%
expected loss on average) for all of the specially serviced loans.
Moody's has assumed a high default probability for 38 poorly performing
loans representing 12% of the pool and has estimated a $58.3
million loss (15% expected loss based on a 30% probability
default) from these troubled loans.
Based on the most recent remittance statement, Classes M through
S have experienced cumulative interest shortfalls totaling $2.9
million. Effective January 2011, the modification of the
Beacon Seattle & DC Portfolio Loan will result in additional interest
shortfalls. Moody's anticipates that the pool will continue to
experience interest shortfalls because of both the high exposure to specially
serviced loans and the modification. Interest shortfalls are caused
by special servicing fees, including workout and liquidation fees,
ASERs and extraordinary trust expenses.
Moody's was provided with full year 2009 and partial year 2010 operating
results for 93% and 67% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 110% compared to 114% at last full 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 9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.32X and 0.96X, respectively,
compared to 1.27X and 0.93X at last full 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 top three performing conduit loans represent 17% of the pool
balance. The largest loan is the 32 Sixth Avenue Loan ($320.0
million -- 9.8%), which represents a 89%
pari passu interest in a $360.0 million first mortgage loan.
The loan is secured by an office and telecommunications building totaling
1.1 million square feet located in Lower Manhattan's Tribeca District.
The largest tenants are Qwest Communications Corporation (15% of
the Net Rentable Area (NRA); lease expiration August 2020) and AMFM
Operating, Inc. (11% of the NRA; lease expiration
September 2022). The property was 99% leased as of June
2010, the same as at last review. The loan has 17 months
remaining in a 60-month interest-only period and will then
amortize on a 360-month schedule maturing in April 2017.
Moody's LTV and stressed DSCR are 103% and 0.92X,
respectively, compared to 108% and 0.90X at last full
review.
The second largest loan is The Mall at Prince Georges Loan ($150.0
million -- 4.6%), which is secured by a 920,801
square foot regional mall located in Hyattsville, Maryland.
The mall is anchored by Macy's, J.C. Penney,
and Target. As of June 2010, the property was 94%
leased compared to 96% at last review. Property performance
has declined since last review as the property's cash flow has declined
due to a drop in revenues and increased expenses.. The loan
is interest-only throughout its entire 10-year term maturing
in June 2017. Moody's LTV and stressed DSCR are 134% and
0.69X, respectively, compared to 146% and 0.67X
at last full review.
The third largest loan is the Kalahari Waterpark Resort Loan ($89.2
million -- 2.7% of the pool), which is secured
by a 380-room indoor water park resort hotel located in Wisconsin
Dells, Wisconsin. Property performance has declined as the
resort has been impacted by the downturn in the tourism industry.
As of the second quarter 2010, however, property performance
has been improving. The loan is amortizing on a 300-month
schedule and matures in May 2017. The loan has paid down 2%
since last review. Moody's LTV and stressed DSCR are 85%
and 1.43X, respectively, compared to 82% and
1.48X 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
Tiffany Putman
Associate 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 14 and Affirms Ten CMBS Classes of BSCMS 2007-PWR16
