Approximately $2.59 Billion of Structured Securities Affected
New York, December 10, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of 16,
confirmed one class and affirmed eight classes of Wachovia Bank Commercial
Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 2006-C25 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on
Jul 26, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Jul 26, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-PB1, Affirmed at Aaa (sf); previously on
Jul 26, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-PB2, Affirmed at Aaa (sf); previously on
Jul 26, 2006 Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Jul 26, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-5, Affirmed at Aaa (sf); previously on
Jul 26, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Jul 26, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Confirmed at Aaa (sf); previously on
Oct 20, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-J, Downgraded to A3 (sf); previously on
Oct 20, 2010 A1 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Baa1 (sf); previously on Oct 20,
2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Baa2 (sf); previously on Oct 20,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Baa3 (sf); previously on Oct 20,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Ba1 (sf); previously on Oct 20,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to Ba3 (sf); previously on Oct 20,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to B3 (sf); previously on Oct 20,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Caa1 (sf); previously on Oct 20,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to Caa2 (sf); previously on Oct 20,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to Caa3 (sf); previously on Oct 20,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to Ca (sf); previously on Oct 20,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Oct 20,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. N, Downgraded to C (sf); previously on Oct 20,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. O, Downgraded to C (sf); previously on Oct 20,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. P, Downgraded to C (sf); previously on Oct 20,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. Q, Downgraded to C (sf); previously on Oct 20,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. IO, Affirmed at Aaa (sf); previously on Jul 26,
2006 Definitive Rating Assigned Aaa (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 and confirmation 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 October 20, 2010 Moody's placed 17 classes on review for possible
downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of 6.3%
of the current balance. At last full review, Moody's cumulative
base expected loss was 4.6%. Moody's stressed scenario
loss is 20.8% 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 Fusion Transactions" published in April 2005.
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 26
compared to 51 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 January 16, 2008.
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 8% to $2.63
billion from $2.86 billion at securitization. The
Certificates are collateralized by 142 mortgage loans ranging in size
from less than 1% to 12% of the pool, with the top
ten loans representing 44% of the pool. Three loans,
representing 0.5% of the pool, have defeased and are
collateralized with U.S. Government securities, compared
to 1.4% at last review. Two loans, representing
3% of the pool, have investment grade credit estimates.
At last full review, the Westfield Gateway Loan ($83.0
million -- 3.2% of the pool) had an investment grade
credit estimate. Due to declined performance and increased leverage
the loan no longer has a credit estimate and is analyzed as part of the
conduit pool.
Forty-one loans, representing 37% 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.
Three loans have been liquidated from the pool since securitization,
resulting in an aggregate $1.6 million loss (6% loss
severity on average). Currently seven loans, representing
4% of the pool, are in special servicing. The master
servicer has recognized an aggregate $46.8 million appraisal
reduction for the specially serviced loans. Moody's has estimated
an aggregate loss of $45.5 million (48% expected
loss on average) for all of the specially serviced loans.
Moody's has assumed a high default probability for 10 poorly performing
loans representing 7% of the pool and has estimated a $46.8
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 99% and 80% of the performing pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 106% compared to 102% 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 9.1%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.27X and 0.97X, respectively,
compared to 1.35X and 0.99X 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 largest loan with a credit estimate is the Paramount Building Loan
($39.5 million -- 1.5% of the pool),
which is secured by a 639,000 square foot (SF) office building located
in New York City. The property was 95% leased as of June
2010. The loan is interest-only during its entire 10-year
period maturing in April 2016. Moody's current credit estimate
and stressed DSCR are Aaa and 3.17X, respectively,
compared to Aaa and 2.98X at last full review.
The second loan with a credit estimate is the Wyndham Hotel Greenspoint
Loan ($33.3 million -- 1.3% of the pool),
which is secured by a 472-room hotel located in Houston,
Texas. The loan had a 36-month interest-only period
and is now amortizing on a 360-month schedule maturing in March
2016. The loan has paid down 2% since last full review.
Moody's current credit estimate and stressed DSCR are Baa1 and 1.87X,
respectively, compared to Baa1 and 1.94X at last full review.
The top three performing conduit loans represent 25% of the pool
balance. The largest loan is the Prime Outlets Pool Loan ($303.5
million -- 11.5% of the pool), which is a 50.0%
participation interest in a $606.7 million loan secured
by 10 retail centers located in eight states, including Texas,
Pennsylvania, Florida, and Ohio. The total gross leasable
area is 3.5 million SF. The loan had a 24-month interest-only
period and is now amortizing on a 360-month schedule maturing in
January 2016. The loan has paid down 4% since last full
review. Property performance remains stable. Moody's LTV
and stressed DSCR are 99% and 0.99X, respectively,
compared to 110% and 0.89X at last full review.
The second largest loan is the Marriott-Chicago Loan ($192.5
million -- 7.3% of the pool), which is secured
by a 1,192-room full service hotel located in Chicago,
Illinois. The loan has a non-pooled junior component of
$24.8 million. The loan had a 42-month interest-only
period and is now amortizing on a 360-month schedule maturing in
April 2016. The loan has paid down 1% since last full review.
Property performance has declined since last review as the hotel has been
impacted by the downturn in the tourism industry. Further,
the loan is currently on the master servicer's watchlist due to low DSCR.
RevPAR for 2009 was $129.95 compared to $140.25
at last full review. Moody's LTV and stressed DSCR are 115%
and 0.99X, respectively, compared to 89% and
1.28X at last full review.
The third largest loan is the 530 Fifth Avenue Loan ($174.0
million -- 6.6% of the pool), which is secured
by a 500,000 SF office property located in New York City.
The property is also encumbered by a $24.9 million non-trust
junior component and $25 million of mezzanine financing.
Property performance has declined due to a decrease in occupancy and expense
reimbursements. As of June 2010, the property was 89%
leased, compared to 100% at last full review. The
loan had a 48-month interest-only period and is now amortizing
on a 360-month schedule maturing in May 2016. The loan has
paid down 1% since last full review. Moody's LTV and stressed
DSCR are 103% and 0.89X, respectively, compared
to 90% and 1.00X 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
Keith Banhazl
Vice President - Senior Analyst
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 16, Confirms One and Affirms Eight CMBS Classes of WBCMT 2006-C25
