Approximately $6.4 Billion of Structured Securities Affected
New York, February 24, 2011 -- Moody's Investors Service (Moody's) downgraded the ratings of eight classes,
confirmed two classes and affirmed 17 classes of CD2007-CD4 Commercial
Mortgage Trust Commercial Mortgage Pass-Through Certificates,
Series 2007-CD4 as follows:
Cl. A-2A, Afffirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-2B, Afffirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-3, Afffirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Afffirmed at Aaa (sf); previously on
Apr 10, 2007 Definitive Rating Assigned Aaa (sf)
Cl. XC, Afffirmed at Aaa (sf); previously on Apr 10,
2007 Definitive Rating Assigned Aaa (sf)
Cl. XP, Afffirmed at Aaa (sf); previously on Apr 10,
2007 Definitive Rating Assigned Aaa (sf)
Cl. XW, Afffirmed at Aaa (sf); previously on Apr 10,
2007 Assigned Aaa (sf)
Cl. A-4, Confirmed at Aaa (sf); previously on
Feb 3, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-1A, Confirmed at Aaa (sf); previously on
Feb 3, 2011 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-MFX, Downgraded to A1 (sf); previously
on Feb 3, 2011 Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. A-MFL, Downgraded to A1 (sf); previously
on Feb 3, 2011 Aa1 (sf) Placed Under Review for Possible Downgrade
Cl. A-J, Downgraded to B1 (sf); previously on
Feb 3, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. B, Downgraded to B3 (sf); previously on Feb 3,
2011 Ba2 (sf) Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Caa2 (sf); previously on Feb 3,
2011 B2 (sf) Placed Under Review for Possible Downgrade
Cl. D, Downgraded to Ca (sf); previously on Feb 3,
2011 Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. E, Downgraded to C (sf); previously on Feb 3,
2011 Caa3 (sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to C (sf); previously on Feb 3,
2011 Ca (sf) Placed Under Review for Possible Downgrade
Cl. H, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. J, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. G, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. K, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. L, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. M, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. N, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. O, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. P, Afffirmed at C (sf); previously on Mar 4,
2010 Downgraded to C (sf)
Cl. Q, Afffirmed at C (sf); previously on Mar 4,
2010 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 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 February 3, 2011 Moody's placed 10 classes on review for
possible downgrade. This action concludes our review.
Moody's rating action reflects a cumulative base expected loss of
11.3% of the current balance. At last review,
Moody's cumulative base expected loss was 9.3%.
Moody's stressed scenario loss is 25% 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 sluggish macroeconomic
environment and varying performance in the commercial real estate property
markets. However, Moody's expects to see increasing or stabilizing
property values, higher transaction volumes, a slowing in
the pace of loan delinquencies and greater liquidity for commercial real
estate in 2011 The hotel and multifamily sectors are continuing to show
signs of recovery, while recovery in the office and retail sectors
will be tied to recovery of the broader economy. The availability
of debt capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "CMBS: Moody's
Approach to Rating Fusion Transactions" published on 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 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 4th, 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 January 31st, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 3% to $6.4
billion from $6.6 billion at securitization. The
Certificates are collateralized by 375 mortgage loans ranging in size
from less than 1% to 6% of the pool, with the top
ten loans representing 34% of the pool. The pool contains
two loans with investment grade credit estimates, representing 12%
of the pool.
One-hundred-two loans, representing 26% 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.
One loan has been liquidated from the pool since Moody's last review,
resulting in an aggregate realized loss of $3.3 million
(63% loss severity overall). Forty loans, representing
19% of the pool, are currently in special servicing.
At last review 13% of the pool was in special servicing.
Moody's has estimated an aggregate $568 million loss (45%
expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for 14 poorly performing
loans representing 5% of the pool and has estimated a $43
million aggregate loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 77%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 108% compared to 124%
at Moody's prior review. Moody's net cash flow reflects
a weighted average haircut of 10% 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 1.38X and 0.94X, respectively,
compared to 1.32X and 0.91X 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.
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 48,
essentially the same at last review.
The largest loan with a credit estimate is the 9 West 57th Street Loan
($400 million -- 6.2%), which is secured
by a 1.6 million square foot Class A office building located in
the Plaza District office submarket of Manhattan. The property
is 50% leased, compared to 53% at last review and
81% at securitization. The decline in occupancy is largely
attributed to Bank of America vacating 37% of the net rentable
area (NRA) at the expiration of its lease in October 2008. Despite
the recent occupancy decline, Moody's has a positive outlook for
this property due to the strong market and the quality of the asset.
The loan sponsor is Sheldon H. Solow and the loan is interest only
for its entire five-year term. Moody's current credit estimate
and stressed DSCR are Baa3 and 1.17X, respectively,
compared to Baa3 and 1.24X at last review.
The second loan with a credit estimate is the Ala Moana Portfolio ($355
million -- 5.5%), which represents a pari passu
interest in a $1.4 billion loan. The loan is secured
by a 2 million square foot mixed use retail and office property located
in Honolulu, Hawaii. The loan sponsor is General Growth Properties
(GGP). The property had been included in GGP's bankruptcy filing.
The bankruptcy plan resulted in a loan modification which included a loan
extension to June 2018 from September 2011 and amortization based on a
25 year-year schedule commencing February 1, 2010.
In addition GGP was required to make a $150 million prepayment.
Performance has been stable and in line with last review. Moody's
current credit estimate and stressed DSCR are A3 and 1.31X,
respectively, compared to A3 and 1.1X at last review.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the Mall of America Loan ($306
million -- 5%), which is secured by the borrower's interest
in a 2.8 million square feet regional mall/entertainment center
located in Bloomington, Minnesota. The mall is anchored by
Macy's, Bloomingdales, Nordstrom and Sears, as well
as a variety of entertainment venues. The property was 92%
leased as of September 2010, which is in line with last review.
Performance has improved since securitization. Moody's LTV
and stressed DSCR are 89% and 0.94X, respectively,
compared to 97% and 0.89X at last review.
The second largest loan is the One World Financial center Loan ($257
million -- 4%), which represents the pooled portion
of a $297.5 million first mortgage loan. The junior
portion of the loan is held within the trust and secures the non-pooled,
or rake, Classes WFC-1, WFC-2, WFC-3
and WFC-X. The loan is secured by a 1.6 million square
foot office building located in the Battery Park office submarket of Manhattan.
The property was 100% leased as of September, 2010,
similar to last review. The property's largest tenant is Cadwalder,
Wickersham & Taft, which leases 35% of the NRA through
January 2025. Although the property's performance has been stable
since securitization, it has not achieved the higher rent levels
projected at securitization. The loan sponsor is Brookfield Financial
Properties, LP. The loan is interest only for its entire
ten-year term. Moody's LTV and stressed DSCR are 101%
and 0.88X, respectively, compared to 87% and
1.09X at last review.
The third largest loan is the CGM AmeriCold Portfolio ($180 million
- 3%), which represents a pari passu interest in a
$325 million loan. The loan is secured by 15 cross-collateralized
and cross-defaulted cold storage properties located in ten different
states. The portfolio's performance has improved since last review.
Moody's LTV and stressed DSCR are 113% and 0.99X,
respectively, compared to 130% and 0.9X 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 purpose 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
Brad Kamedulski
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 Eight, Confirms Two and Affirms 17 CMBS Classes of CD 2007-CD4
