Approximately $3.32 Billion of Structured Securities Affected
New York, December 10, 2010 -- Moody's Investors Service (Moody's) downgraded the ratings of 16 classes
and affirmed seven classes of Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2006-C29
as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on
Dec 21, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on
Dec 21, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on
Dec 21, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-PB, Affirmed at Aaa (sf); previously on
Dec 21, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on
Dec 21, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on
Dec 21, 2006 Definitive Rating Assigned Aaa (sf)
Cl. A-M, Downgraded to Aa2 (sf); previously on
Nov 11, 2010 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-J, Downgraded to Baa3 (sf); previously
on Nov 11, 2010 A2 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to Ba3 (sf); previously on Nov 11,
2010 A3 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to B3 (sf); previously on Nov 11,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Caa1 (sf); previously on Nov 11,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Caa2 (sf); previously on Nov 11,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to Ca (sf); previously on Nov 11,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to C (sf); previously on Nov 11,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Cl. H, Downgraded to C (sf); previously on Nov 11,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Cl. J, Downgraded to C (sf); previously on Nov 11,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Cl. K, Downgraded to C (sf); previously on Nov 11,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. L, Downgraded to C (sf); previously on Nov 11,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to C (sf); previously on Nov 11,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Cl. N, Downgraded to C (sf); previously on Nov 11,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. O, Downgraded to C (sf); previously on Nov 11,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. P, Downgraded to C (sf); previously on Nov 11,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. IO, Affirmed at Aaa (sf); previously on Dec 21,
2006 Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool resulting
from anticipated losses from specially serviced and troubled loans and
interest shortfalls.
The affirmations are due to key parameters, including Moody's
loan to value (LTV) ratio, the Herfindahl Index (Herf) and Moody's
stressed DSCR, 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 November 11, 2010 Moody's placed 16 classes on review for possible
downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
8.8% of the current balance. At last review,
Moody's cumulative base expected loss was 3.6%.
Moody's stressed scenario loss is 23.3% 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 in April
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 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 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 February 10, 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 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by less than 1% to
$3.36 billion from $3.37 billion at securitization.
The Certificates are collateralized by 142 mortgage loans ranging in size
from less than 1% to 10% of the pool, with the top
ten loans representing 46% of the pool. There are three
loans, representing 12.7% of the pool, with
investment grade credit estimates. At securitization, the
Centro Syndicate 2 Pool Loan and Westfield Fox Valley Loan also had credit
estimates. However, due to a decline in property performance
and increased leverage, these loans are now analyzed as part of
the conduit pool.
Thirty-nine loans, representing 25% 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. Moody's
has assumed a high default probability for 18 of the watchlisted loans
as well as one additional loan that matures within the next 24 months
and has a Moody's stressed DSCR less than 1.0X. Moody's
has estimated a $80.3 million loss (19% expected
loss based on an 50% default probability) from these troubled loans.
The pool has not experienced any realized losses. Sixteen loans,
representing 8% of the pool, are currently in special servicing.
The largest specially serviced loan is the Hilton -- Providence,
RI Loan ($48.5 million -- 1.4% of the
pool), which is secured by a 274-room full-service
hotel located in Providence, Rhode Island. This loan was
transferred to special servicing in September 2009 due to imminent default.
The remaining 15 specially serviced loans are a mix of self storage,
multifamily, office, industrial and hotel properties and each
represent less than 2% of the pool. Moody's estimates an
aggregate loss of approximately $140.1 million (55%
expected loss on average) for the specially serviced loans.
Based on the most recent remittance statement, Classes J through
Q have experienced cumulative interest shortfalls totaling $4.9
million. The servicer has recognized appraisal reductions totaling
$103 million on 11 specially serviced loans. Moody's
anticipates that the pool will continue to experience interest shortfalls
because of the high exposure to specially serviced loans. Interest
shortfalls are caused by special servicing fees, including workout
and liquidation fees, appraisal subordinate entitlement reductions
(ASERs) and extraordinary trust expenses.
Moody's was provided with full year 2009 operating results for 94%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 111% compared to 108%
at securitization. Moody's net cash flow reflects a weighted
average haircut of 9% 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 1.45X and 0.94X, respectively,
compared to 1.34X and 0.89X at securitization. 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.
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 69 at securitization.
The largest loan with a credit estimate is the Galleria at Tyler Loan
($205 million -- 6.1% of the pool), which
is secured by a 1.2 million square foot (SF) regional mall located
in Riverside, California. The mall is anchored by JC Penney,
Macy's and Nordstrom, which are not part of the collateral.
The property was 98% leased as of June 2010 compared to 91%
at securitization. The loan was proforma at securitization and
has performed in-line with the projections at securitization.
This loan is also encumbered by a $45 million B-note held
outside of the trust. Moody's current credit estimate and stressed
DSCR are Baa3 and 1.15X, respectively, compared to
Baa3 and 0.96X at securitization.
The second loan with a credit estimate is the Centro International Wholesale
Pool Loan ($161 million -- 4.8% of the pool),
which is secured by 13 cross-collateralized and cross-defaulted
retail properties located in Connecticut, Florida, Massachusettes,
Mississippi, New Jersey, New York and North Carolina.
The properties were 97% leased as of December 2009 compared to
99% at securitization. Property performance has been stable
since securitization. Moody's current credit estimate and stressed
DSCR are Baa2 and 1.28X, respectively, compared to
Baa2 and 1.31X at securitization.
The third loan with a credit estimate is the Deer Park Town Center Loan
($60 million -- 1.8% of the pool), which
is secured by a 340,369 SF retail center in Deer Park, Illinois.
Property performance has improved since securitization. Moody's
current credit estimate and stressed DSCR are A3 and 1.32X,
respectively, compared to A3 and 1.28X at securitization.
The top three performing conduit loans represent 21% of the pool
balance. The largest loan is the Duke Realty Industrial Pool Loan
($318.9 million -- 9.5% of the pool),
which is secured by 27 cross-collateralized and cross-defaulted
industrial properties located in five submarkets in Indiana and Georgia.
Property performance has improved since securitization. However,
Moody's valuation reflects concerns about potential increased vacancy
due to near-term rollover risk. Moody's LTV and stressed
DSCR are 109% and 0.89X, respectively, compared
to 106% and 0.91X at securitization.
The second largest loan is the Centro Syndicate Pool 2 Loan ($234
million -- 7% of the pool), which is secured
by 16 cross-collateralized and cross-defaulted retail properties
located in 12 different states. The portfolio was 91% leased
as of March 2010 compared to 97% at securitization. The
portfolio performance has declined since securitization due to the drop
in occupancy. Moody's LTV and stressed DSCR are 76% and
1.28X, respectively, compared to 67% and 1.37X
at securitization.
The third largest loan is the Westfield Fox Valley Loan ($150 million
-- 4.5% of the pool), which is secured by a 1.4
million SF regional mall located in Aurora, Illinois. The
mall is anchored by Sears, Macy's and JC Penney, which
are not part of the collateral. The property was 81% leased
as of June 2010 compared to 86% at securitization. Moody's
value reflects concerns over the decline in occupancy. Moody's
LTV and stressed DSCR are 93% and 1.05X, respectively,
compared to 89% and 1.28X at securitization.
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
Christie Edwards
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 and Affirms Seven CMBS Classes of WBCMT 2006-C29
